Law:

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Section 140A of the Income-tax Act, 1961 - Assessment - Self assessment - Assessment year 1966-67 - Whether ITO has discretion not to impose penalty under section 140A(3) - Held, yes - Whether where assessee was not in position to deposit tax on basis of self-assessment, ITO accepting assessee's request made provisional assessment and assessee paid demand on basis of such provisional assessment, penalty was not justified - Held, yes FACTS The assessee, submitted its return of income on 27-9-1966. On the basis of its return the assessee should have deposited as tax under section 140A(3) by 27-10-1966. Instead of depositing the said amount the assessee wrote a letter to the ITO requesting the Ito to adjust the advance tax paid from the total amount of tax due. The officer was also informed that the assessee had difficulties in the matter of depositing the tax within time on account of the number of intervening holidays and also on account of the fact that the funds of the assessee had been depleted on account of payment of bonus to its staff and workers. The assessee sought permission to pay the balance in two equal instalments. The ITO was also requested to make a provisional assessment under section 141 and to issue necessary challan for payment of the balance-tax. The ITO did not accept the submissions of the assessee and levied a penalty. On appeal, the AAC held that there was no occasion for levy of any penalty on the assessee as no amount under section 140A(1) was payable on the date when such penalty was imposed. On the revenue's appeal, the Tribunal held that levy of penalty was not compulsory. That the section gave a right to the assessee to have reasonable opportunity of being heard before penalty could be levied. The Tribunal, accordingly, upheld the order of the AAC. On reference : HELD From the language of section 140A, and in particular sub-section (3) thereof it appears that the verb 'shall' governs the rest of the sub-section, namely, that the assessee shall be liable by way of penalty to pay such amount as the ITO may direct. Once the direction is given by the ITO for payment of such penalty no doubt the assessee is bound to pay the same. But the…

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