2018 (3) TMI 208 - AT - Income Tax

Penalty imposed u/s 221(1) r.w.s. 140A(3) - non-payment of self-assessment tax - scope of amendment - Held that - The fact that the amended Sec. 140A(3) w.e.f. 01.04.1989 does not envisage any penalty for non-payment of self-assessment tax the Assessing Officer was not justified in levying the impugned penalty by making recourse to Sec. 221(1) of the Act. Sec. 221 of the Act remains unchanged both during the pre and post amended Sec. 140A(3) of the Act and even in the pre-amended situation penalty u/s 221 of the Act was not attracted for default in payment of self-assessment tax which was expressly covered in pre 01.04.1989 prevailing Sec. 140A(3). Thus without there being any requisite corresponding amendment to Sec. 221 of the Act in consonance with the amendments carried out in Sec. 140A(3) of the Act w.e.f. 01.04.1989 the Assessing Officer erred in levying the impugned penalty. Thus on this aspect we hereby set-aside the order of CIT(A) and direct the Assessing Officer to delete the penalty imposed u/s 140A(3) r.w.s. 221(1) of the Act. - Decided in favour of assessee

Summary

Issues: Penalty imposed under section 221(1) r.w.s. 140A(3) of the Income Tax Act, 1961 for failure to pay self-assessment tax within stipulated time.

Analysis:

1. Background of the Case:
The appellant-assessee filed a return of income for Assessment Year 2009-10 without paying the self-assessment tax of ?2,59,89,461. The Assessing Officer issued notices, and ultimately imposed a penalty of ?25,98,946 under section 221(1) r.w.s. 140A(3) of the Act. The appellant's defense of financial stringency and eventual payment of tax before penalty imposition was not accepted by the authorities.

2. Contention Raised Before ITAT:
The appellant contended before the ITAT that the provisions of Sec. 140A(3) of the Act for the relevant year did not allow for the penalty for delayed self-assessment tax payment. The ITAT analyzed the legislative history of Sec. 140A(3) and the amendments made, emphasizing the intent behind the changes.

3. Legislative Intent and Interpretation:
The ITAT highlighted the amendments to Sec. 140A(3) effective from 01.04.1989, which replaced the penalty provision with mandatory interest for default in tax payment. The ITAT examined the Revenue's argument that the appellant qualified as an "assessee in default" under the amended provision, justifying the penalty under Sec. 221(1) of the Act.

4. Decision and Rationale:
The ITAT disagreed with the Revenue's interpretation, stating that the amended Sec. 140A(3) did not envisage penalties for non-payment of self-assessment tax, focusing on recovery of tax and interest instead. The ITAT emphasized that the legislative intent was to replace penalties with mandatory interest, and Sec. 221(1) did not align with the amended provisions post-01.04.1989.

5. Conclusion:
The ITAT allowed the appeal, setting aside the penalty imposed under Sec. 140A(3) r.w.s. 221(1) of the Act, directing the Assessing Officer to delete the penalty. The judgment was pronounced on 19th January 2018.

This detailed analysis showcases the ITAT's interpretation of the legislative changes and their impact on penalty provisions for non-payment of self-assessment tax, ultimately leading to the decision in favor of the appellant.