2014 (2) TMI 735 - AT - Income Tax

Penalty u/s 221(1) of the Act non-payment of self assessment tax while filing return - Held that - The decision in Hindustan Steel Limited Versus State Of Orissa 1969 (8) TMI 31 - SUPREME Court Followed - levy of penalty is not justified - Provisions of section 221(1) are not absolute as the words used in the provisions is not shall but may - This give a discretion to the authority vested with the power of levy of penalty not to levy penalty also - The assessee was saddled with a tax liability of more than Rs.55.00 lacs in respect of earlier years in view of retrospective amendment into the statute - The assessee has been paying said liability in installments and in the process, it is possible that assessee may have forgotten to make the payment of self-assessment tax which was paid immediately when the fact regarding non-payment came to the notice of the assessee thus, it cannot be said that the assessee s act was deliberate in defiance of law or assessee is guilty of a conduct which is contumacious or dishonest - assessee is not liable for penalty to be levied under section 221(1) of the Act Decided in favour of Assessee.

Summary

Issues:
- Delay in filing the appeal
- Levy of penalty under section 221(1) of the Income Tax Act, 1961

Delay in filing the appeal:
The appeal was filed with a delay of one day, and the assessee sought condonation of the delay. The delay was condoned after hearing both parties, and the appeal was decided on merits.

Levy of penalty under section 221(1) of the Income Tax Act, 1961:
The penalty was initiated due to the non-payment of self-assessment tax by the assessee. The Assessing Officer (AO) proceeded to levy a penalty of 10% of the amount payable under section 140A. The assessee argued that the non-payment was not deliberate, citing financial difficulties arising from a retrospective amendment. The AO and the Commissioner of Income Tax (Appeals) upheld the penalty.

The assessee contended that the non-payment was due to financial strain caused by retrospective amendments, leading to a cumulative tax liability of over Rs. 55 lakhs. The assessee had been paying this liability in installments. The argument was supported by a detailed chart showing payments made in installments for different assessment years.

The Tribunal analyzed the provisions of section 221(1) which allow for penalties in case of default in tax payment. It was noted that penalties are quasi-criminal in nature and should not be imposed for technical or venial breaches. The Tribunal referred to a Supreme Court decision stating that penalties should not be imposed unless the default was deliberate or contumacious.

After considering the facts and the Supreme Court decision, the Tribunal held that the levy of penalty was not justified in this case. The Tribunal exercised discretion under section 221(1) and concluded that the assessee's non-payment was not deliberate or contumacious. Therefore, the penalty under section 221(1) was deleted, and the appeal by the assessee was allowed.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and deleting the penalty imposed under section 221(1) of the Income Tax Act, 1961.