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Delay in filing of Income Tax Return due to Financial Difficulties: ITAT quashes Penalty
April, 19th 2021

The Income Tax Appellate Tribunal (ITAT), Bangalore bench, upheld an order of the first appellate authority where the CIT(A) deleted a penalty order imposing Rs. 5000 on a Company for non-furnishing of income tax returns within the prescribed time. The authority found that the reason for delay was financial difficulties which constitute a reasonable cause to avoid penalty under section 271B of the Income Tax Act, 1961.

Earlier, an order was passed against the assessee-company under section 271F of the Act for failure to furnish the return of income by the end of the relevant assessment year in consideration. It was contended that the assessee has not responded to the notice under section 271F issued by the Assessing Officer and as per section 271F sum of Rs. 5000/- has been levied as penalty for non-furnishing of return of income by the end of the assessment year. However, the CIT(A), on first appeal, deleted the penalty order.

While considering the departmental appeal, the Tribunal bench comprising Judicial Member Beena Pillai and Accountant Member B R Bhaskaran noted that the Ld.CIT(A) while considering this issue has verified the bank statements of assessee in the preceding as well a subsequent financial years. “It is also been verified by him as to whether assessee has utilised the money for any other purpose other than meeting the urgencies is or other than for survival of business itself,” the Tribunal observed.

While upholding the order of the first appellate authority, the bench concluded that “there is a categorical finding returned by Ld.CIT(A) that assessee was unable to get loan from Citibank for meeting the expenses and Citibank also refused to extend the loan. Subsequently assessee was waiting for funds from the principle which was received only after 31/03/2013 by issue of series of 3 preferred stock. It has been observed by Ld.CIT(A) that the funds have been raised by assessee from issue of stock by the principle to the subsidiary, out of which the taxes were paid immediately and IT returns were furnished. We observe that Ld.CIT(A) has considered the financial difficulties faced by assessee in a very practical manner thereby deleting the penalty of Rs.5000/- levied under section 271F of the act.”

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