2003 (12) TMI 19 - HC - Income Tax

By the impugned order, the Tribunal has upheld the levy of penalty u/s 140A(3), for failure on his part to pay the self-assessment tax on the basis of the returned income - As regards the question whether the non-payment of tax stems from a reasonable cause or not is purely a question of fact. The Tribunal has found that a bare statement by the assessee that he did not have sufficient funds to make payment towards self-assessment tax, could not be believed as non-payment for 19 years was highly improbable for not arranging the funds - the question whether, there was a reasonable cause for non-payment of tax is essentially a question of fact. The impugned order does not involve any question of law, much less a substantial question of law. Assessee s appeal dismissed

Summary

Issues:
Levy of penalty under section 140A(3) of the Income-tax Act, 1961 for failure to pay self-assessment tax based on returned income.

Analysis:
The appellant challenged the order of the Income-tax Appellate Tribunal upholding the penalty under section 140A(3) of the Income-tax Act, 1961, for not paying self-assessment tax. The substantial question of law raised was whether the Tribunal was correct in imposing the penalty despite the non-availability of funds with the appellant. The appellant argued that the failure to pay self-assessment tax due to lack of funds should conclude the default, and subsequent non-payment should not matter. However, the court disagreed with this argument, stating that the provisions of sub-sections (1) and (3) of section 140A of the Act make it clear that non-payment of self-assessment tax is a continuing default. The court highlighted that the Assessing Officer must provide the assessee with a reasonable opportunity to be heard before imposing a penalty, allowing the assessee to explain the reasons for non-payment.

The court emphasized that as per sub-section (1) of section 140A, it is mandatory for the assessee to pay the tax before filing the return, considering taxes already paid. Sub-section (3) allows for the levy of a penalty for non-payment of self-assessment tax, with the default continuing until rectified. The court rejected the appellant's argument that the default was complete after initial non-payment due to financial constraints. The judgment clarified that the question of whether non-payment was due to a reasonable cause is a factual inquiry. The Tribunal found the appellant's claim of insufficient funds for 19 years of non-payment improbable, especially as there was no response to show cause notices. The Commissioner of Income-tax also noted the lack of liquid funds as a reason provided only during the appeal process.

In conclusion, the court held that the question of whether there was a reasonable cause for non-payment of tax is a matter of fact, not a legal issue. The court dismissed the appeal, stating that the impugned order did not involve any substantial question of law.