2002 (11) TMI 284 - AT - Income Tax

Summary

Issues:
- Dispute over refusal to grant adjournment of hearing of appeal
- Sustenance of penalty levied by AO under section 221

Refusal to Grant Adjournment:
The appeals were inter-related and disposed of together for convenience. The first ground in both appeals disputed the refusal of the CIT(A) to grant an adjournment, but the authorized representative did not raise any contention during arguments, leading to the dismissal of this ground in both appeals.

Sustenance of Penalty under Section 221:
The main issue revolved around the sustenance of penalties levied by the Assessing Officer (AO) under section 221. The authorized representative of the assessee argued that no outstanding tax demand existed on the dates of penalty imposition, as the demands had been paid off. However, the Departmental Representative contended that tax demands were still pending and that even installments were not paid by the assessee.

Upon review, it was found that the assessed income was substantially reduced due to relief granted by the Tribunal. The final tax liability was determined to be Rs. 1,88,593. The authorized representative provided details of tax payments made by the assessee, showing that the tax had been paid before the dates of penalty imposition. The Tribunal held that the assessed tax after the Tribunal's order should be the basis for determining default, not the originally assessed tax.

As per section 221(2), if the tax amount is wholly reduced due to a final order, the penalty levied shall be canceled, and the penalty amount paid shall be refunded. In this case, since the assessed tax had already been paid, the penalties imposed on the assessee were canceled as there was no justification in law for their imposition.

In conclusion, both appeals of the assessee were allowed, and the penalties levied under section 221 were canceled based on the revised assessed tax amount after the Tribunal's order.