1991 (5) TMI 112 - AT - Income Tax

Summary

Issues:
1. Imposition of penalty under section 140A(3) of the Income-tax Act.
2. Interpretation of the expression "Where any tax is payable on the basis of any return" under section 140A.
3. Whether a penalty for failure to pay self-assessment tax is justified when no tax liability exists due to a mistake in the return filed.

Detailed Analysis:
1. The case involves an appeal against the imposition of a penalty under section 140A(3) of the Income-tax Act amounting to Rs. 5,760. The penalty was levied by the Income Tax Officer (ITO) as the assessee failed to pay the tax under self-assessment as required by section 140A(1). The assessee contended that after filing the return, the income decreased below the taxable limit, eliminating the tax liability. The ITO and the Appellate Assistant Commissioner upheld the penalty, leading to the appeal before the Appellate Tribunal ITAT Delhi-A.

2. The crux of the issue lies in interpreting the phrase "Where any tax is payable on the basis of any return" as per section 140A of the Income-tax Act. The Tribunal analyzed the purpose of self-assessment under section 140A, emphasizing the objective to expedite tax collection by ensuring timely payment based on the return of income. The Tribunal highlighted that the requirement to pay tax is contingent upon a correct return reflecting taxable income. It was emphasized that if no tax liability exists due to mistakes in the return, the imposition of penalties for non-payment would contradict the legislative intent of self-assessment tax provisions.

3. The Tribunal considered the scenario where the assessee mistakenly disclosed a higher income in the return, leading to a perceived tax liability. However, upon rectification, it was established that no tax was actually payable. The Tribunal emphasized that penalties for non-payment should only apply when a genuine tax liability exists based on a correct return. Relying on principles of statutory interpretation and the legislative intent behind section 140A, the Tribunal concluded that imposing a penalty in the absence of an actual tax liability would be unjust and contrary to the purpose of self-assessment provisions. Consequently, the Tribunal canceled the penalty and allowed the appeal in favor of the assessee.