Compulsory deposit penalty is not automatic where reasonable cause and bona fide belief explain the delay.

Penalty for delayed compulsory deposit under section 10 of the Compulsory Deposit Scheme was not automatic merely because the deposit was late. The Tribunal stated that section 10(3) required a reasonable opportunity of being heard and could not be treated as a formality. It accepted that a bona fide belief about the due date, if genuinely held, could constitute reasonable cause for the delay. On the facts recorded, the assessee's explanation was accepted and the penalty was cancelled.

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Issues: Whether penalty for delayed compulsory deposit under section 10 of the Compulsory Deposit Scheme (Income-Tax Payers) Act, 1974 was automatic or could be avoided on showing reasonable cause.

Analysis: The delay in making the compulsory deposit attracted penalty proceedings, but the scheme of section 10(3) required a reasonable opportunity of being heard and could not be treated as a mere formality. The Tribunal held that the provision did not make penalty automatic merely because the deposit was late. It further held that the assessee's explanation that he bona fide believed the due date to be 31 December 1976 constituted reasonable cause, especially since no adverse finding had been recorded that such belief was not genuinely held.

Conclusion: Penalty was not automatic, reasonable cause could be shown, and the penalty was cancelled in favour of the assessee.

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