1979 (7) TMI 113 - AT - Income Tax

Summary

Issues:
- Appeal against penalty imposed under section 221 of the IT Act, 1961 for non-payment of advance tax within the specified timeline.

Detailed Analysis:
1. The appeal was filed against the penalty of Rs. 3,000 imposed by the ITO under section 221 of the IT Act, 1961, which was upheld by the AAC. The assessee company started its business in 1975 and filed an estimate for advance tax but failed to make the payment as per the estimate due to financial constraints. The ITO imposed the penalty despite the assessee's explanation and subsequent payment of the due amount.

2. Before the AAC, it was argued that the penalty was not justified as the assessee had genuine reasons for the delay in payment. However, the AAC upheld the penalty, stating that the financial difficulties of the assessee were not convincingly proven, leading to non-compliance with the advance tax payment requirement. The appeal was dismissed by the AAC.

3. The assessee appealed to the ITAT, reiterating that it had provided all relevant details to the authorities regarding the financial constraints faced and had paid the advance tax as soon as funds were available. The Departmental Representative supported the penalty imposed by the ITO, citing the admission of default by the assessee.

4. The ITAT considered the submissions and referred to the decision in Hindustan Steel Ltd. vs. State of Orissa, emphasizing that penalties should not be imposed unless there is deliberate defiance of the law or contumacious conduct. The ITAT observed that the assessee had made efforts to explain the non-payment, had paid the advance tax subsequently, and had not acted in defiance of the law. Therefore, the penalty was deemed unjustified, and the order of the lower authorities was quashed, directing a refund if the penalty was paid.

5. The ITAT allowed the appeal, concluding that the circumstances did not warrant the imposition of a penalty, as the assessee had eventually fulfilled its tax obligations, albeit with a delay due to genuine financial constraints.