1993 (6) TMI 29 - HC - Income Tax

Summary

Issues involved: Interpretation of penalty under section 140A(3) of the Income-tax Act, 1961 based on conflicting High Court judgments.

Summary:
The High Court of Gujarat was tasked with deciding whether the penalty imposed by the Income-tax Officer under section 140A(3) of the Income-tax Act, 1961, for non-payment of self-assessment tax was valid. The assessee had not paid the self-assessment tax of Rs. 20,028 until October 23, 1976, resulting in a penalty of Rs. 5,500 being imposed by the Income-tax Officer. The Appellate Assistant Commissioner reduced the penalty to Rs. 4,500, but the Tribunal, influenced by conflicting High Court judgments, ultimately quashed the penalty. The Department sought clarification from the High Court on the matter.

The Revenue argued that the Tribunal erred in its decision as, by the time of the Tribunal's ruling in 1976, the Andhra Pradesh High Court had upheld the validity of section 140A(3). The Revenue contended that the Tribunal should have considered this judgment along with the Madras High Court's ruling. The legal position was clarified by the Punjab and Haryana High Court, stating that a provision of the Act should be considered valid unless declared ultra vires by the Supreme Court or the High Court of the State concerned.

The High Court of Gujarat opined that a Tribunal from another State could only consider a provision as non-existent if there was evidence of the decision being accepted by the Department. The Court emphasized that the legal position at the time of deciding the reference should be taken into account, not at the time of the Tribunal's decision. Consequently, the High Court held that the penalty imposed under section 140A(3) was indeed sustainable, ruling in favor of the Revenue and against the assessee. The reference was disposed of with no order as to costs.