Tribunal Cancels Rs. 5,000 Penalty for Late Income Return Filing Due to Bona Fide Belief in Refund Exemption.

The Tribunal annulled the Rs. 5,000 penalty imposed under Sec. 271F, determining that the assessee had a reasonable cause for the delayed filing of the income return. The Tribunal found the assessee's belief that a refund negated the filing requirement to be bona fide. Consequently, the appeal was allowed, and the penalty order was cancelled.

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Issues Involved:
1. Imposition of penalty u/s 271F for failure to furnish return of income within the due date.
2. Determination of "reasonable cause" for failure to file the return.
3. Applicability of penalty amount as per law prevailing on the date of default.

Summary:

1. Imposition of Penalty u/s 271F:
The assessee filed a return of income on 20th March 2002 for the assessment year 2000-01, showing a total income of Rs. 89,980. The due date for filing the return was 31st August 2000, and the last date was 31st March 2001. The AO imposed a penalty of Rs. 5,000 u/s 271F for failing to file the return before the end of the relevant assessment year. The CIT(A) upheld the penalty, stating that "Mens rea is not an essential ingredient of default in relation to filing of return of income."

2. Determination of "Reasonable Cause":
The Tribunal examined whether the cause pleaded by the assessee constituted a "reasonable cause" for avoiding the penalty. The assessee argued that the delay was due to the non-receipt of confirmation of transactions and that the entire tax liability was covered by TDS, resulting in a refund. The Tribunal noted that "reasonable cause" is not defined under the IT Act but should be interpreted similarly to "sufficient cause." The Tribunal found that the assessee's belief that she was not required to file the return before the end of the assessment year due to the refund was bona fide and constituted a reasonable cause.

3. Applicability of Penalty Amount:
The Tribunal also addressed the contention that the penalty should be restricted to Rs. 1,000 as per the law prevailing on the date of default (31st March 2001). The Tribunal held that the default u/s 271F is not a continuing default and that the liability for penalty arises as soon as the act of omission is completed. Therefore, the penalty should be imposed as per the law prevailing on the date of default.

Conclusion:
The Tribunal concluded that the penalty of Rs. 5,000 u/s 271F was not justified as the assessee had a reasonable cause for the delay in filing the return. The order imposing the penalty was cancelled, and the appeal filed by the assessee was allowed.

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