1999 (10) TMI 100 - AT - Income Tax

Tribunal reduces penalty for late filing, aligns with tax deduction, rules against Rule 37 argument

The Tribunal partially allowed the appeal, reducing the penalty imposed on the assessee for delayed filing of the Annual Return. Emphasizing that the tax ... Penalty Issues:- Appeal against the imposition of penalty under section 272A(2)(c) of the Income-tax Act for delayed filing of Annual Return.Analysis:1. The appeal was filed by the assessee against the penalty imposed for a delay of 324 days in filing the Annual Return due on 30-4-1989, which was filed on 13-3-1990. The CIT(A) upheld the penalty but reduced it to Rs. 31,600 for a default of 316 days. The assessee contended that it was a technical default as tax was deducted at source under section 194A, with no mala fide intention. The argument was made that Rule 37 cannot supersede substantive provisions of the Act, and there was a reasonable cause for the delay. Additionally, the appellant argued that if a penalty is leviable, it should be restricted to the amount deductible/collectible, citing relevant case laws. The Department, however, supported the orders of the lower authorities.2. The Tribunal noted that while the tax was deducted at source, the only default was the non-filing of the return under section 206 and Rule 37 of the Income-tax Rules. It was emphasized that once tax is deducted and deposited, the legal obligations under section 194A/206 are presumed to be known. The Tribunal disagreed with the argument that Rule 37 supersedes the main provisions of the law under section 206, stating that the Rules are supplementary to the Act. The invocation of section 293B was deemed misplaced as the assessee did not seek condonation for the delay. The Tribunal held that the benefits under the proviso to section 272A(2) should apply, even though introduced later, as it aimed to remove anomalies and hardships for taxpayers.3. The Tribunal further explained that the amendment to section 272A(2) clarified the intention of the Legislature, aiming to relate the penalty to the amount of tax deductible or collectible, removing discriminatory and anomalous situations. The amendment did not alter the essence of the default under section 206, making it applicable to pending cases at the time of enforcement. Therefore, the penalty was restricted to the amount of tax deducted at source, in line with the proviso to section 272A(2). The appeal was partly allowed, granting relief to the appellant based on the amended provisions beneficial to taxpayers.