Gurukul Shiksha Sanstha Vs ITO (Exemption) (ITAT Pune)
Late Return Penalty Cannot Run Indefinitely: ITAT Reduces ₹2.86 Lakh Levy to ₹15,200
Summary: The Pune Bench of the Income Tax Appellate Tribunal (ITAT) reduced a ₹2,86,600 penalty under Section 272A(2)(e) to ₹15,200, holding that the period of default could not extend beyond the statutory window for voluntarily filing a belated return.
In Gurukul Shiksha Sanstha vs. ITO (Exemption), Ward-3, Nagpur, ITA No. 549/NAG/2026, concerning Assessment Year 2015-16, the Tribunal deleted ₹2,71,400 from the penalty. However, it rejected the institution’s primary contention that its belief about exemption justified complete relief.
Accountant Member Manish Borad pronounced the order on 14 October 2026, partly allowing the appeal.
Educational Institution Challenges Late Filing Penalty
The assessee, an educational institution situated in Chandrapur, Maharashtra, challenged the CIT(A)/NFAC order dated 30 March 2026, which arose from a penalty order dated 22 July 2024.
Its representative submitted that the institution’s income was exempt under Section 10(23C) and that it was also registered under Section 12A.
The institution had not filed income-tax returns in earlier years. According to its explanation, it believed that an exempt institution was not required to furnish a return.
Relying on Section 273B, the assessee argued that this bona fide belief constituted a reasonable basis for cancelling the penalty imposed for delayed filing.
Exemption-Based Explanation Rejected
The Tribunal found no merit in the institution’s primary explanation that exemption from tax meant it was not required to file a return.
Accordingly, the penalty was not cancelled on the ground of reasonable cause under Section 273B.
This finding is significant because the relief ultimately granted concerned the period for calculating the penalty, rather than acceptance of the institution’s understanding of its filing obligations.
The Revenue supported the CIT(A)’s order and sought to sustain the penalty.
Return Filed Only After Reassessment Notice
The Tribunal recorded 31 October 2015 as the return-filing due date. The institution did not furnish its return until a notice under Section 148 was issued.
In response to that notice, it filed the return on 5 September 2023. No addition was made in the assessment.
The Assessing Officer nevertheless imposed a penalty of ₹2,86,600 at ₹100 per day, treating the default as extending over 2,866 days.
The central alternative argument was whether the penalty could continue until the return was furnished in reassessment proceedings, even after the period available for voluntary belated filing had expired.
Chennai Tribunal Precedent Relied Upon
The assessee relied on Swamy Vivekanandha Vidhyala Trust vs. ITO (Exemption), Salem, ITA No. 2108/CHNY/2026, dated 11 August 2026.
That decision addressed whether penalty under Section 272A(2)(e) should run until the actual filing of a return in response to Section 148 or stop at the last date available under Section 139(4).
The Chennai Bench had held that the expression describing the period during which failure continues must be read within the statutory framework governing return filing.
Once the time permitted for a valid voluntary return expires, the assessee cannot independently discharge that obligation through the same statutory route.
Default Cannot Continue Beyond Ability to Comply
The reasoning reproduced in the Pune order distinguished voluntary filing under Section 139 from filing pursuant to reassessment under Section 148.
A return submitted after a reassessment notice belongs to an independent statutory mechanism. Its eventual filing does not necessarily mean that the original default continued throughout the intervening period for penalty purposes.
The Chennai decision reasoned that extending the daily penalty beyond the voluntary filing window would penalise an assessee for failing to perform an act that the statutory framework no longer permitted.
It applied the principle that the law does not compel performance of an impossibility.
The decision also referred to the Raipur Bench’s ruling in Bethany Seva Sangam and the Hyderabad Bench’s decision in G. Pulla Reddy, which supported restricting the period of default to the time limit under Section 139(4).
Tribunal Restricts Penalty to 152 Days
The Pune Bench held that the Chennai ruling applied to the institution’s circumstances.
In its operative computation, the Tribunal adopted 1 November 2015 to 31 March 2016, identifying the latter date in the order as the belated-return deadline.
It calculated the default for that period at 152 days and sustained penalty at ₹100 per day, resulting in ₹15,200.
The balance penalty of ₹2,71,400 was deleted. The Tribunal itself quantified the relief rather than remanding the matter for another calculation.
Appeal Partly Allowed
The appeal was partly allowed, with the institution remaining liable for the reduced penalty.
The decision rests on two separate findings: the claimed belief that exempt income removed the filing requirement was rejected, while the challenge to an indefinitely continuing penalty succeeded.
The ruling therefore limits the duration of the daily levy in the circumstances considered. It does not treat exemption or registration as automatically dispensing with return-filing obligations, nor does it grant complete immunity merely because the assessment resulted in no addition.
List of Cases Discussed
- Swamy Vivekanandha Vidhyala Trust vs. ITO (Exemption), Salem — ITA No. 2108/CHNY/2026; ITAT Chennai; 11 August 2026 — Relied upon for restricting the period of penalty under Section 272A(2)(e) to the statutory belated-return filing window.
- Bethany Seva Sangam — ITAT Raipur — Referred to in the reproduced Chennai Bench reasoning for the proposition that the daily penalty does not extend beyond the period available under Section 139(4).
- G. Pulla Reddy — ITAT Hyderabad — Referred to in the reproduced Chennai Bench reasoning for calculating the default period only up to the time limit prescribed under Section 139(4).
FULL TEXT OF THE ITAT JUDGMENT/ORDER
This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi (for short, “CIT(A)”) dated 30.03.2026 passed u/sec. 250 of the Income Tax Act, 1961 (for short, “Act”) which is arising out of penalty order dated 22.07.2024 passed u/sec. 272A(2)(e) of the Act for the Assessment Year (A.Y.) 2015-16.
2. The sole grievance of the assessee is against the penalty levied u/sec. 272A(2)(e) of the Act at Rs. 2,86,600/- levied for delay in filing the income tax return.
3. At the outset, learned counsel for the assessee submitted that assessee is an educational institution located in Chandrapur, Maharashtra and the income earned is exempt u/sec. 10(23C) of the Act and that the assessee has also been registered u/sec. 12A of the Act. He submitted that assessee has not furnished income tax return in the past and was under bonafide belief that since its income is exempt, therefore, it is not required to file the return. Therefore, no penalty is leviable u/sec. 272A(2)(e) of the Act in the light of the provisions of section 273B of the Act. Further, an alternative contention has been made referring to the decision of Coordinate Bench of Chennai Tribunal in the case of Swamy Vivekanandha Vidhyala Trust vs. ITO (Exemption), Salem, in ITA No. 2108/CHNY/2026, dated 11.08.2026 where also the Tribunal dealing with the similar issue has restricted the penalty u/sec. 272A(2)(e) of the Act only for the period from the due date of filing the return to the last day by which the belated return could be filed.
4. On the other hand, Ld.DR supported the order of Ld.CIT(A).
5. I have heard the rival submissions and perused the material placed before me. So far as the first contention of the assessee that it was under bonafide belief that it is not required to file the return, I fail to find any merit. So far as alternative contention is concerned, I observe that the assessee is an educational institution and the due date for filing return is 31.10.2015 and that the assessee has not filed return of income till the issuance of notice u/sec. 148 of the Act, in compliance to which return has been filed on 05.09.2023. Admittedly, no addition has been made in the assessment order, however, Ld.AO subsequently levied penalty u/sec. 272A(2)(e) of the Act at Rs. 2,86,600/- @ Rs. 100/- for the delay of 2866 days calculated from the due date of filing of appeal i.e. 31.10.2019 till the date of filing return in response to notice u/sec.148 of the Act on 05.09.2023.
6. I find that similar issue has been dealt with by the Coordinate Bench of Chennai Tribunal wherein the tribunal on due consideration of the provisions of section 272A(2)(e) has held as under:-
6. We have carefully considered the rival submissions and perused the material available on record. The only issue pressed before us is whether the penalty levied under section 272A(2)(e) of the Act could be computed till the date on which the assessee filed the return of income in response to the notice issued under section 148 of the Act, or whether such penalty is liable to be restricted only up to the last date available to the assessee for furnishing the return under the provisions of section 139. The fact that the assessee did not furnish its return of income within the time prescribed under section 139(4A) of the Act is not in dispute. However, the contention of the Ld. AR is that the default contemplated under section 272A(2)(e) cannot be regarded as continuing beyond the period during which the assessee could have legally furnished the return on its own. The Ld. DR, on the other hand, contended that the default continued till the return was actually filed in response to notice issued under section 148 and, therefore, the penalty has been rightly computed for the entire period. Section 272A(2)(e) provides for levy of penalty for every day during which the failure to furnish the return continues. However, the expression “during which the failure continues” has to be understood in the context of the statutory scheme governing the filing of returns. The obligation cast upon the assessee under section 139(4A) to furnish the return of income can be discharged only within the period prescribed under section 139. Once the time limit prescribed under section 139(4) expires, the assessee is no longer empowered under the Act to voluntarily furnish a valid return of income. Consequently, after the expiry of such statutory period, the obligation becomes incapable of voluntary compliance and the default, in our considered view, cannot be regarded as continuing indefinitely. Any return furnished thereafter is only in pursuance of proceedings initiated under section 148, which is an independent statutory mechanism.
7. We notice that an identical issue has been considered by the Raipur Bench of the Tribunal in the case of Bethany Seva Sangam (supra) where the Coordinate Bench, after examining the interplay between sections 139(4A), 139(4) and 272A(2)(e), has held that although section 272A(2)(e) obligates a charitable trust to furnish the return under section 139(4A), such obligation can be discharged only within the period prescribed under section 139(4). It was, therefore, held that once the period available for filing a belated return expires, the obligation to furnish the return on a suo motu basis becomes unworkable and penalty cannot be levied for the period falling thereafter. While arriving at the said conclusion, the Coordinate Bench also relied upon the decision of the Hyderabad Bench of the Tribunal in G. Pulla Reddy, wherein it was held that for the purpose of section 272A(2)(e), the period of default has to be reckoned only up to the time limit prescribed under section 139(4) of the Act. In our considered view if the interpretation canvassed by the Revenue is to be accepted then it would result in levy of penalty for a period during which the assessee had no statutory right to furnish a valid return voluntarily and that such an interpretation would amount to treating the default as continuing even when the Act itself did not permit the assessee to perform the statutory obligation. It is a well-settled principle that the law does not compel a person to perform an impossibility. Therefore, once the period prescribed under section 139(4) expires, the default contemplated under section 272A(2)(e) cannot be regarded as continuing merely because the assessee subsequently furnished the return in response to a notice issued under section 148. Therefore respectfully following the above judicial precedence we hold that the penalty under section 272A(2)(e) is liable to be computed only up to the last date prescribed under section 139(4) of the Act and not till the date of filing of the return in response to notice issued under section 148. We, therefore, remit the issue back to the AO for the limited purpose to re-compute the penalty by restricting the period of default up to the last date available to the assessee for furnishing the return under section 139(4) of the Act.
7. On going through the findings of Coordinate Bench of Chennai Tribunal in the above referred case, I find that the same is squarely applicable on the facts of the instant case and that the penalty could not have been levied only till the last day of filing of the belated return because beyond that date, even if intending the assessee could have filed the return. Therefore, respectfully following the above decision, penalty is computed from 01.11.2015 to 31.03.2016 (which is the last date to file the belated return) at Rs.15,200/- calculated @ Rs. 100/- for the delay of 152 days. I accordingly confirm the penalty of Rs. 15,200/- and delete the remaining amount of penalty at Rs.2,71,400/-. Grounds of appeal raised by the assessee are partly allowed.
8. In the result, appeal of the assessee is partly allowed.
Order pronounced in open Court on this 14th day of Oct., 2026
