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Issues involved: Appeal against Tribunal's judgment on penalty u/s 221 of Income Tax Act, 1961.
Issue 1: Penalty under Section 221 of the Income Tax Act The Tribunal reduced the penalty imposed by the Assessing Officer on the assessee for default in payment of self-assessed tax. The Tribunal applied a formula to calculate the penalty at the rate of 15% per annum for every month of default till actual payment. The Revenue contended that the Tribunal erred in interfering with the Assessing Officer's discretion to impose penalty up to 100% of the principal tax due under Section 221 of the Act. The Revenue argued that the Tribunal wrongly incorporated provisions of Sections 215, 216, and 217 of the Income Tax Act in quantifying the penalty under Section 221. Issue 2: Discretionary powers in imposing penalty While Section 221 allows for penalties up to the total principal tax due, there is no minimum prescribed. The Assessing Officer imposed a penalty of Rs. 30 lakhs against a principal tax of Rs. 58.87 lakhs without providing reasons. The Tribunal's decision to reduce the penalty and apply a formula based on the length of default was challenged by the Revenue. The Court acknowledged that incorporating provisions of other sections into penalty proceedings may not be justified, but found that the Tribunal's quantification of the penalty based on the length of default was a discretionary exercise. The Court held that there was no question of law arising and dismissed the Tax Appeal. This summary provides a detailed overview of the issues involved in the judgment, the arguments presented by the parties, and the Court's reasoning in reaching its decision.
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