Tribunal limits penalties for late tax returns, allows appeals under Income-tax Act.

The Tribunal allowed the appeals concerning the delay in filing annual returns under section 206 of the Income-tax Act, 1961. It held that the penalty imposed should be limited to the amount of tax deductible or collectible at source, applying the amendment by Finance (No. 2) Act, 1991, retrospectively from 1-4-1989. The Tribunal accepted the plea of ignorance of law as a reasonable cause for certain assessment years, directing the re-computation of penalties for the period without reasonable cause. The appeals were allowed, reversing the order of the CIT(A).

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Issues Involved:
1. Delay in filing annual return u/s 206 of the Income-tax Act, 1961.
2. Penalty u/s 272A(2)(c) for failure to file annual return.
3. Plea of ignorance of law as a reasonable cause.
4. Quantum of penalty and its confiscatory nature.
5. Retrospective application of the amendment by Finance (No. 2) Act, 1991.

Summary:

1. Delay in Filing Annual Return u/s 206:
The appeals pertain to different assessment years for various assessees, involving a common issue of delay in filing the annual return u/s 206 of the Income-tax Act, 1961. The Dy. CIT (Admn.) issued show-cause notices for the delay, and penalties were imposed after considering the responses. The appellants argued that they were unaware of the requirement to file the annual return and had deducted and credited tax to the Government within time.

2. Penalty u/s 272A(2)(c):
The CIT(A) confirmed the penalties imposed by the Dy. CIT (Admn.) for the delay in filing annual returns. The CIT(A) rejected the plea of ignorance of law, stating that the default was admitted by the assessees, and no reasonable cause was shown for the delay. The penalty proceedings were considered civil in nature, and the penalty was seen as pecuniary compensation for non-compliance with tax laws.

3. Plea of Ignorance of Law:
The appellants contended that they were not aware of the requirement to file annual returns u/s 206 and that the delay was due to ignorance of law, which should be considered a reasonable cause. The Tribunal accepted this plea for certain assessment years, noting that the assessees were not aware of the provisions requiring the filing of annual returns until the new Form No. 16 was introduced with effect from 1-4-1989.

4. Quantum of Penalty and Its Confiscatory Nature:
The appellants argued that the penalty levied was excessive and confiscatory in nature. The Tribunal noted that the amendment by Finance (No. 2) Act, 1991, which restricted the penalty to the amount of tax deductible or collectible at source, was introduced to mitigate the hardship caused by the earlier provisions. The Tribunal held that the proviso should be applied retrospectively from 1-4-1989, the date when the increased scale of penalty was introduced.

5. Retrospective Application of the Amendment:
The Tribunal concluded that the amendment made by Finance (No. 2) Act, 1991, restricting the penalty to the amount of tax deductible or collectible at source, should be applied retrospectively from 1-4-1989. This decision was based on the reasoning that the amendment was intended to alleviate the hardship caused by the earlier provisions.

Conclusion:
The Tribunal reversed the order of the CIT(A) and directed the Dy. CIT (Admn.) to recompute the penalty for the period of delay not covered by reasonable cause, subject to the limitation of penalty to the tax deductible or collectible at source. The appeals were allowed as directed.

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