Case Law Details
Rasik Nemchand Pethad Vs DCIT (ITAT Mumbai)
Introduction: In the recent case of Rasik Nemchand Pethad Vs DCIT (ITAT Mumbai), it was determined that Section 271B penalty is not applicable when there’s a reasonable cause provided for the failure to comply with provisions. The case revolved around the belated submission of a tax audit report by the assessee.
Analysis Rasik Nemchand Pethad, an individual engaged in the retail and wholesale trading business, was subjected to a penalty under Section 271B of the Act due to the belated submission of the tax audit report. However, the appellant cited multiple reasons including a change in accounting software, relocation of the operation site, and abrupt departure of the accountant, leading to the delay in filing.
The ITAT Mumbai took into consideration the ‘reasonable cause’ clause under Section 273B, which implies that no penalty should be imposed if the assessee provides valid reasons for non-compliance. Given the rationale provided by Pethad, the ITAT deemed it reasonable and instructed the deletion of the imposed penalty.
Conclusion: The case sets an important precedent, clarifying that penalties under Section 271B should not be levied when there is reasonable cause for non-compliance. The assessee’s ability to substantiate their reasons for delay is crucial in these instances. This verdict underlines the principle of fairness in taxation law and establishes that penalties are not punitive but corrective measures.
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