2016 (6) TMI 800 - AT - Income Tax

Levy of penalty u/s 221(1) - default in payment of tax - Held that - We find that the assessee filed the return of income. However on the date of return of income filed the admitted tax is not paid. Subsequently within a month assessee has paid almost all the amounts which are payable on the date of the filing of the return of income. The A.O. was of the opinion that the assessee has violated the provisions of section 221(1) of the Act and accordingly levied the penalty at 100% of tax payable. On appeal the Ld. CIT(A) by considering the explanations given by the assessee he has restricted the penalty to 10% of tax payable with an observation that the assessee has paid the taxes even before the issue of the notice by A.O. u/s 221(1) of the Act and complied the tax demand voluntarily. We find that the assessee has not paid taxes which are payable along with a return of income however paid within a month even before the notice issued by the A.O. and the assessee complied the demand of tax voluntarily. Under these above facts and circumstances of the case it is not a fit case to impose penalty u/s 221(1) of the Act. - Decided in favour of assessee

Summary

Issues:
1. Penalty imposition under section 221(1) of the Income Tax Act, 1961 for failure to pay self-assessment tax in time.

Analysis:
The appeal was filed against the order of CIT(A) for the assessment year 2012-13. The assessee initially filed a return of income without paying the total tax due. Subsequently, the assessee paid off the balance amount after receiving a notice from the Assessing Officer (A.O.). The A.O. imposed a penalty of 100% of the tax payable for the delay in payment. The CIT(A) reduced the penalty to 10% after considering the explanations provided by the assessee and the voluntary payment made before the notice under section 221(1) was issued.

The assessee argued that due to fund unavailability, there was a delay in tax payment, but once funds were received, the dues were cleared within a month, even before the A.O. issued the notice. The Counsel for the assessee contended that since the tax was paid voluntarily, no penalty should be levied. On the contrary, the Departmental Representative supported the A.O.'s decision.

Upon review, the Tribunal noted that although the tax was not paid at the time of filing the return, the assessee made payments within a month of filing, even before the notice was issued. Considering the circumstances and the voluntary compliance of the assessee, the Tribunal held that this was not a suitable case for penalty imposition under section 221(1) of the Act.

The Tribunal cited precedents where penalties were not warranted when there were valid reasons for the delay in tax payment and the assessee had a genuine intention to fulfill their statutory obligations. Following these judicial precedents, the Tribunal concluded that the penalty imposed by the CIT(A) should be deleted entirely. Consequently, the appeal filed by the assessee was allowed, and the penalty was removed.

In conclusion, the Tribunal found that the assessee's timely payment of taxes, even before receiving the notice, and the genuine efforts to clear the dues within a month of filing the return demonstrated a lack of grounds for penalty imposition. The decision was made in line with established legal principles and precedents, resulting in the deletion of the penalty originally imposed.