ITAT rules ignorance of the law not a reason to reject a penalty

ITAT rules ignorance of the law not a reason to reject a penalty

The assessee exceeded the basic threshold limit and failed to file an audit report

The Hyderabad Branch of the Income Tax Appellate Tribunal (ITAT) has held that on the pretext of ignorance of the law, the penalty cannot be quashed for anyone under the Income Tax Act, 1961.

The assessee, an individual, had approached the tribunal with a grievance that the lower authorities had erroneously imposed a penalty of Rs.1,50,000 under the law.

He contended that he was drawing a regular salary and it was only in the impugned assessment year that he carried out corresponding transactions that required an audit report under the IT Act. He pleaded that the penalty be waived, as he was ignorant of the law.

The Coram of Judicial Member SS Godara and Accountant Member A Mohan Alankamony observed, "It is an admitted fact that the assessee's case is very well covered under the IT Act. His turnover has indeed exceeded the basic threshold limit of Rs.40 lakhs in the relevant previous year. There is further no dispute that the assessee had neither prepared the audit report nor was it furnished in time to the assessing authority."

"We, therefore, hold that mere ignorance of law pleaded herein at the assessee's behest hardly deserves to be treated as a reasonable cause for disturbing the impugned penalty as upheld in the Commissioner of Income Tax (Appeals) discussion," the bench added.