“83-Year-Old Widow’s Tax Battle: Victory Over Unfair Penalty!”
Mumbai: In a recent development, an 83-year-old widow who was not required to file her income tax return, secured a favorable ruling from the Income Tax Appellate Tribunal (ITAT), Delhi bench. The tax tribunal overturned the penalty imposed on her for her failure to file her tax return.
This elderly individual residing in Gurgaon, aged 83, who had never filed an income tax return before due to her status as a homemaker and her lack of taxable income, understandably found herself surprised by a request for Rs 5,000. This penalty was imposed under the former section 271F of the Income Tax Act for her failure to adhere to the tax return filing deadline for the fiscal year 2011-12. To compound the situation, the commissioner (appeals) failed to provide clear direction regarding this penalty.
It’s important to note that the provisions of section 271F were substituted with section 234F effective April 1, 2018. Presently, the penalty for late filing of an income tax return is Rs 5,000 (or Rs 1,000 for small taxpayers with total income not exceeding Rs 5 lakh).
Determined to address the issue, the elderly woman chose to stand her ground. Before the ITAT, she argued that the Income Tax officer erred in framing the assessment order under section 144 read with section 147 of the Income Tax Act. The proper procedure was not followed. Orders issued under this section are unilateral, and the assessment is conducted based on the I-T officer’s ‘best judgment’ using available information.
Even though she subsequently filed an appeal against the order, explaining that she wasn’t obligated to file a return for the disputed financial year, the Commissioner (Appeals) under the faceless appeal mechanism failed to acknowledge this aspect. Before the ITAT, she contended that this order was legally flawed on multiple grounds.
She highlighted that the penalty under section 271F is discretionary, not mandatory. As she had a ‘reasonable cause’ for not filing the income tax return, the penalty order was unjust, unlawful, and beyond the jurisdiction.
The two-member bench of the ITAT, consisting of C M Garg, a judicial member, and B R R Kumar, accountant member, examined the language of the order issued by the Commissioner (Appeals). It lacked clarity and stated that the I-T officer ‘may’ have waived the penalty under section 271F. The ITAT bench, in their order issued last month, annulled the Rs 5,000 penalty while remarking, “We find the order of the Commissioner (Appeals) to be inconsistent and illogical, lacking any basis.”