2020 (12) TMI 180 - AT - Income Tax

Levying penalty u/s 140A(3) - tax was not paid till the date of finalisation of assessment under section 143(3) AO proceeded to levy penalty under section 140A(3) read with section 221(1) - scope of amendment - HELD THAT - In our view, the fact that the amended section 140(3) with effect from 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 section 221 of the Act. We, accordingly, direct the Assessing Officer to delete the penalty imposed under section 140A read with section 221(1) of the Act. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 140A(3) of the Income Tax Act, 1961 for A.Y 2010-11.

Analysis:
The appeal was against the order of the CIT(A) regarding the penalty under section 140A(3) of the Income Tax Act, 1961. The assessee filed a return of income showing tax payable, which was not paid till the finalization of assessment under section 143(3) of the Act. The Assessing Officer levied a penalty under section 140A(3) read with section 221(1) of the Act. The assessee contended that the Act was amended, providing for interest instead of penalty for delay in payment of self-assessment tax. The Circular dated 31.10.1989 highlighted the amendment, stating that penalty provisions were omitted, and interest was made mandatory for default in payment of tax. The Tribunal observed that the amended section 140(3) from 01.04.1989 did not include any penalty for non-payment of self-assessment tax, only mandatory interest. Therefore, the penalty imposed by the Assessing Officer was deemed unjustified, and the Tribunal directed the deletion of the penalty.

The Tribunal's decision was based on the legislative intent behind the amendment, which replaced penalty provisions with mandatory interest for default in payment of self-assessment tax. By considering the amended section 140(3) from 01.04.1989 and the explanatory notes, it was evident that penalty for default had been replaced by interest. The Tribunal emphasized that the Assessing Officer was not justified in levying the penalty under section 221(1) of the Act, as the amended provision did not allow for such penalties. As a result, the Tribunal allowed the appeal of the assessee and directed the Assessing Officer to delete the penalty imposed under section 140A read with section 221(1) of the Act.

In conclusion, the Tribunal's decision highlighted the significance of the legislative amendment in replacing penalty provisions with mandatory interest for default in payment of self-assessment tax. The Tribunal's analysis of the amended section 140(3) from 01.04.1989 and the corresponding explanatory notes formed the basis for overturning the penalty imposed by the Assessing Officer. The judgment underscored the importance of aligning tax penalties with the amended statutory framework, thereby providing relief to the assessee in this case.