2004 (8) TMI 358 - AT - Income Tax

Issues Involved:
1. Applicability of Section 140A(1) for self-assessment tax on returns filed under Section 158BC.
2. Retrospective or prospective operation of the amendment to Section 140A(1) by Finance Act, 1999.
3. Applicability of Section 140A(3) under Chapter XIV-B for block assessment.
4. Validity of penalty under Section 221(1) for non-payment of self-assessment tax.
5. Reasonable cause for non-payment of tax and its impact on penalty under Section 221(1).

Issue-wise Detailed Analysis:

1. Applicability of Section 140A(1) for self-assessment tax on returns filed under Section 158BC:
The Tribunal noted that the return for the block period was filed under Section 158BC on 13-11-1996. At that time, Section 140A(1) did not require an assessee to pay tax when filing a return under Section 158BC. The amendment to Section 140A(1) by the Finance Act, 1999, effective from 1-6-1999, incorporated Section 158BC, making it mandatory for assessees to pay tax before furnishing returns under Section 158BC. Thus, as of 13-11-1996, there was no requirement to pay tax under Section 140A(1) for returns filed under Section 158BC.

2. Retrospective or prospective operation of the amendment to Section 140A(1) by Finance Act, 1999:
The Tribunal examined the notes on clauses and the memorandum explaining the provisions of the Finance Bill, 1999. It was evident that the amendment was intended to introduce a new class of assessees (those filing returns under Section 158BC) into Section 140A. Since the amendment brought a new obligation, it was not clarificatory but substantive, thus having prospective operation. Consequently, the amended provisions of Section 140A(1) could not be applied retrospectively to returns filed on 13-11-1996.

3. Applicability of Section 140A(3) under Chapter XIV-B for block assessment:
The Tribunal found no provision in Chapter XIV-B that expressly applied Section 140A to block assessments. The absence of such a provision indicated that the Legislature did not intend for Section 140A to apply to Chapter XIV-B before 1-6-1999. The memorandum explaining the Finance Bill, 1999, confirmed this by stating that there was no existing provision for self-assessment tax in Chapter XIV-B. Therefore, Section 140A was not applicable to block returns filed under Section 158BC before the amendment.

4. Validity of penalty under Section 221(1) for non-payment of self-assessment tax:
For penalty under Section 221(1) to be valid, the assessee must be in default or deemed to be in default in payment of tax. Since there was no statutory requirement to pay tax under Section 140A(1) before filing the return under Section 158BC on 13-11-1996, the assessee could not be deemed in default. Penalty proceedings are quasi-criminal, requiring a clear violation of law, which was not present in this case. The Tribunal concluded that the amendment to Section 140A(1) had prospective operation, and thus, no penalty could be imposed for non-payment of self-assessment tax for the period in question.

5. Reasonable cause for non-payment of tax and its impact on penalty under Section 221(1):
The Tribunal considered the assessee's proposal for payment of tax in installments and the fact that the Department had seized the entire stock and liquid cash. The first appellate authority found a reasonable cause for the assessee's inability to pay the tax, a finding not challenged by the Revenue. Under the second proviso to Section 221(1), no penalty could be imposed if there was a reasonable cause for non-payment. The Tribunal upheld this finding, confirming that no penalty was warranted.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the first appellate authority's order canceling the penalty imposed by the Assessing Officer. The Tribunal found that the amended provisions of Section 140A(1) had prospective operation, and there was no statutory requirement for the assessee to pay self-assessment tax before filing the block return under Section 158BC on 13-11-1996. Additionally, the reasonable cause for non-payment of tax further precluded the imposition of a penalty under Section 221(1).

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