Reasonable cause can justify cancellation of penalty for delayed compulsory deposit payment under tax law.

Penalty for delayed payment of compulsory deposit under the Compulsory Deposit (Income-tax Payers) Act, 1974 is not automatic; it is imposed only after hearing the defaulter, and the appeal provision indicates that the levy may be reviewed where reasonable cause is shown. The Tribunal applied the same principle reflected in penalty provisions for non-payment under the Income-tax Act, 1961, namely that a penalty can be cancelled when the delay is satisfactorily explained. On the facts, the assessee's explanation for the ten-day delay was accepted, and the penalty was cancelled.

---

---

Issues: Whether the penalty imposed for delayed payment of compulsory deposit under the Compulsory Deposit (Income-tax Payers) Act, 1974 could be cancelled when the assessee showed reasonable cause for the delay.

Analysis: The statutory scheme under section 10 of the Compulsory Deposit (Income-tax Payers) Act, 1974 provides for levy of penalty only after giving the person an opportunity of being heard, and section 12 makes orders imposing penalty appealable. The Tribunal held that the availability of appeal and the procedural safeguards indicate that the penalty is not automatic and may be set aside where reasonable cause for the default is established. The analogy of penalty under section 221 of the Income-tax Act, 1961 was applied, under which penalty for non-payment can be cancelled if reasonable cause is shown. On the facts, the assessee's explanation for the ten-day delay was accepted.

Conclusion: The penalty was rightly cancelled for reasonable cause, and the Revenue's appeal failed.

---