ITAT Raipur Restricts Section 272A(2)(e) Penalty Period to the Belated Return Deadline Under Section 139(4)

In a significant judicial determination, the Income Tax Appellate Tribunal (ITAT), Raipur Bench, has clarified the temporal limits for calculating penalties associated with the non-filing of income tax returns by charitable trusts. In the case of Bethany Seva Sangam Vs ITO, the Tribunal ruled that the penalty levied under Section 272A(2)(e) of the Income Tax Act 1961 cannot be extended indefinitely. Instead, the computation of the default period must be capped at the final date on which the assessee was legally permitted to file a belated return under Section 139(4) of the Income Tax Act 1961.

This comprehensive summary explores the factual matrix, the arguments presented by both the assessee and the Revenue, and the Tribunal's detailed legal reasoning that ultimately provided partial relief to the assessee.

Factual Matrix of the Dispute

The assessee, Bethany Seva Sangam, is a trust engaged in operating an educational institution named Bethany College & Nursing. The trust had been granted registration under Section 12A of the Income Tax Act 1961 vide an order dated 09.07.2001, with effect from 01.04.2001.

For the Assessment Year (A.Y.) 2012-13, the assessee was statutorily obligated to furnish its return of income by the due date of 30.09.2012. However, the assessee failed to file the return within this prescribed timeframe.

Subsequently, the Income Tax Department received information indicating that the assessee trust had made cash deposits into its savings bank account and had earned interest income during the relevant financial year. Due to the absence of a filed return, the Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Income Tax Act 1961.

A notice under Section 148 of the Income Tax Act 1961 was issued on 30.03.2019, directing the assessee to file its return. The assessee complied belatedly, filing a return on 24.07.2019 that declared a Nil income. This return, however, was flagged as invalid on the e-filing portal because the ITR-V/e-verification process remained pending. The AO eventually concluded the assessment on 31.10.2019, assessing the total income at Rs. Nil.

Initiation of Penalty Proceedings

Following the assessment, penalty proceedings were initiated under the Faceless Penalty Scheme, 2021. The AO issued a show-cause notice asking the assessee to explain why a penalty should not be imposed under Section 272A(2)(e) for failing to furnish the return of income as mandated by Section 139(4A) of the Income Tax Act 1961.

The AO, finding the assessee's explanations unsatisfactory, concluded that the trust had violated the provisions of Section 139(4A) without any plausible justification. Consequently, vide an order dated 19.01.2022, the AO imposed a penalty of Rs. 2,55,800. As per the order, this amount was calculated at the rate of Rs. 100 per day for a continuing default period of 2,558 days, reckoned from the original due date of 30.09.2012 up to the date of the assessment order.