Law:

Section:

Section 140A of the Income-tax Act, 1961 - Assessment - Self-assessment - Assessment year 1967-68 - Whether levy of penalty is not automatic on commission of default by assessee under section 140A - Held, yes - Whether, therefore, where assessee did not pay tax payable on self assessment within prescribed period but paid later on substantial part of tax levied, Tribunal was justified in holding that no penalty could be levied under section 140A(3) as Government suffered no loss - Held, yes FACTS For the relevant assessment year, the assessee-company filed its return of income but did not pay the tax, payable on self-assessment, nor did it subsequently, pay the tax when assessment was made on provisional basis, within the prescribed period. Later on, the assessee paid substantial part of the tax levied. Thereafter, the ITO levied the penalty under section 140A(3). This was reduced by the AAC on the ground that the assessee was in financial difficulties. The Tribunal deleted the penalty altogether on the ground that the assessee had ultimately paid the entire tax and the Government suffered no loss. On reference : HELD There is proviso to section 140A(3) expressly providing for reasonable opportunity being given to the assessee before the levy of any such penalty which would become meaningless if levy of penalty is automatic. The revenue stressed on the words "shall be liable to pay". But what the assessee is under an obligation to pay as penalty is such amount as the ITO may direct. That necessarily implies that it is open to the ITO to levy a penalty or not at all. Hence, the Tribunal was justified in deleting the penalty levied under section 140A(3). Note : The case has been decided in favour of the assessee. JUDGMENT Chinnappa Reddy, J.-The assessee filed a return for the assessment year 1967-68 declaring an income of Rs. 2,27,113. He did not pay the tax payable on self-assessment, nor did he subsequently pay the tax when assessment was made on provisional basis, within the…

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