Law: Income Tax Ordinance, 1979

Section: 111,116,65(2)

wever, show-cause notice can be physically issued subsequent to the date of completion of proceedings--Penalty proceedings being quasi-criminal proceedings will not be levied, merely because it is lawful to do so. The use of the phrase, "in the course of any proceedings under this Ordinance" clearly indicates that the proceedings for the levy of penalty should be initiated before the conclusion of the proceedings in the course of which concealment or failure to declare true particulars of income are discovered by the assessing officer or other competent authority. The authority should be satisfied that concealment has taken place before the assessment proceedings are concluded or other proceedings are completed. Issuance of a show-cause notice under section 116 may take place later, but the direction to issue the same should be embodied in the assessment order itself to prove that the issuing authority is satisfied about the factum of concealment or other default attracting penalty proceedings. In other words, when the I.T.O. or other authority was in seisin, and not functus officio. However, the quantum of penalty would depend in certain cases on the final figure of assessment, which can be known on completion of assessment proceedings. Penalty proceedings should be initiated by a direction to issue a show-cause notice under Section 116 for levy of penaly before an assessment (or other) proceedings are concluded. However, show-cause notice may be physically issued subsequent to the date of completion of proceedings. Levy of penalty would not be automatic. The authority will have to examine the sufficiency of cause whether the assessee acted deliberately in defiance of the Law or was contumacious or dishonest or acted in conscious disregard of his obligations. Penalty proceedings are after all quasi-criminal proceedings and will not be levied, merely because it is lawful to do so. C.I.T. Lahore v. Freezit, Lahore and others 1975 PTD 56 ref. (b) Income-tax Ordinance (XXXI of 1979)-- ---Ss. 111 & 116--Imposition of penalty--Income-tax Authority has to be satisfied in the course of any proceedings under the Ordinance that a certain wilful default has occurred…

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