|
According to the provisions of the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, no penalty is imposed under various provisions of Section 271 and Section 272 of the Income Tax Act, 1961, if the assessee can establish that there was reasonable cause for his or her failure to declare total income. Meaning of the term “sufficient cause”: The term “reasonable cause” has nowhere been defined in the Income Tax Act, 1961. But it has been interpreted by the courts in different cases which differ from each other. What constitutes reasonable cause cannot be provided with precision. Every case is to be adjudicated upon its merits by the Income Tax Authorities or the Courts, for drawing a conclusion that there are sufficient grounds for not imposing a penalty for the failure by the assessee to furnish the total income. The meaning of the term “reasonable cause“has been established through the judgment of many courts. As laid down by the Michigan State University, there is no particular definition of the term “reasonable cause”. The concept is a very flexible one. The cases are decided on the basis of its facts and circumstances. The concept is supposed to exist where the facts and circumstances are enough for a man of reasonable prudence to believe that proof of an offence will be found. For better understanding of the concept of “Reasonable Cause”, the University has provided that the main component of determining reasonable cause is the facts and circumstances leading to the test for the assessee, and then to decide whether those facts as observed by any prudent person, amount to reasonable cause. Such person may draw conclusion on the basis of his own experience in determining whether really any reasonable cause exists. The standard of reasonableness of the reason cited by the assessee is given upon the level of understanding of a prudent man of average intelligence. On whom does the onus of proof lie? The onus of proving the presence of reasonable cause for the failure on the part of the assessee to furnish his or her total income is shifted upon the assessee by the Income Tax authorities. The explanation to the above provision stated that a reason for the unsatisfactory performance on behalf of the Department in imposing penalty and in punishing the defaulters is that, the appellate Authorities and the Courts have imposed on the Income Tax Department a very tough burden of proving a state of mind on the part of the asses-see. The Supreme Court in a leading case has held that the burden lies upon the Department to prove that the assessee has willfully concealed the details of his income or purposely furnished incorrect particulars and the Department has to prove these ingredients for imposing a penalty. Through the judgment of many courts the assessee got relief from paying penalty for establishing that there was reasonable cause for the failure. ITR Today is growing as a leading website to provide updates on filing taxes online, income tax Penalty act and penalties for tax evasion. Get your tax related queries answered by our income tax consultants.
Related Articles -
no penalty, Section 271, Section 272, reasonable cause,
| 
