1982 (7) TMI 174 - AT - Income Tax

Partial Success in Tax Penalty Appeals Under Section 140A(3) - Mitigating Factors Considered

The tribunal partially allowed four appeals against penalties imposed under section 140A(3) for tax payment delays. The penalties were initially reduced ... - Issues:1. Penalties levied under section 140A(3)2. Proper initiation of section 140A proceedings3. Paucity of funds as a defense against penalties4. Ultra vires of section 140A5. Bona fide belief of the assessee6. Taxes paid before imposition of penalties7. Excessive penalties imposedAnalysis:1. The judgment deals with four appeals against penalties imposed under section 140A(3) for different individuals. The penalties were imposed based on delays in tax payments ranging from 34 to 51 months, with the ITO considering the delays until the imposition of penalties. The penalties were later reduced by the AAC, leading the assesses to appeal the decision.2. The first contention raised was regarding the initiation of section 140A proceedings. The counsel argued that without proper initiation, penalties should be deemed waived. However, the tribunal rejected this contention as there is no time limit for initiation during proceedings.3. The defense of paucity of funds was raised, citing a judgment from the Delhi Court. The Departmental Representative countered that paucity of funds is not a valid excuse, referring to a judgment from the Gauhati High Court. The tribunal noted the importance of considering reasons for non-payment before imposing penalties.4. The issue of the ultra vires of section 140A was raised, but the tribunal did not address it, stating that the tribunal cannot determine the vires of a section.5. The assessee argued a bona fide belief based on judgments from the Madras and Bombay High Courts, which influenced non-payment of taxes. The tribunal acknowledged the belief as a mitigating factor and considered the circumstances of each case, including health issues in one case.6. The contention that taxes were paid before the imposition of penalties was raised. The tribunal considered the circumstances and re-calculated the penalties based on the actual default periods, reducing the penalties significantly.7. Ultimately, the tribunal held that penalties were excessive and reduced them based on the actual default periods, considering the circumstances and mitigating factors presented by the assessee. The appeals were partly allowed based on these findings.