1995 (3) TMI 172 - AT - Income Tax

Tribunal Cancels Penalties, Allows Appeals Based on Appellant's Ignorance of the Law

The Tribunal held that penalties under s. 272A(2)(c) were not justified for the appellant, canceling the penalties and allowing the appeals. The ... - Issues Involved: The issues involved in this case are the delay in filing returns of tax deductions made by the appellant under s. 206 of the IT Act, 1961, and the imposition of penalties under s. 272A(2)(c) for such delays.Judgment Details:1. The appellant, responsible for deducting tax at source from employee salaries, failed to file returns of tax deductions made in 1987-88 and 1988-89 within the prescribed time, leading to penalties under s. 272A(2)(c). 2. The appellant challenged the penalties on merits and the validity of r. 37 of the IT Rules, which was dismissed by the CIT(A), upholding the penalties.3. The appellant argued that since tax was deducted and paid on time, penalties were not justified, citing ignorance of relevant provisions as a defense, which was rejected by the Tribunal.4. The Tribunal found no penalty exigible for the appellant for the two years in question.5. The appellant's failure to file returns by the prescribed time attracted penalties under s. 272A(2)(c) of the Act.6. Ignorance of law is not a valid excuse for default, but each case must be considered on its merits regarding knowledge of statutory obligations.7. The appellant, as a government office head, was aware of the obligation to deduct tax and file returns, thus ignorance of the law was not a valid defense.8. Section 272A(2) provides for penalties for failure to furnish returns under s. 206, with a proviso limiting penalties to the amount of tax deductible or collectible.9. The proviso to s. 272A(2) clarifies that penalties cannot exceed the amount of tax deductible or collectible, distinguishing between 'deductible' and 'collected' amounts.10. The proviso to s. 272A(2) applies to cases pending at the time of its enforcement, providing relief to taxpayers facing penalties.11. The amendment to s. 272A(2) aimed to remove discrimination and hardships in penalty imposition, applying to cases pending at the time of its enactment.12. The Tribunal held that penalties under s. 272A(2)(c) were not justified for the appellant, canceling the penalties and allowing the appeals.