Recovery of tax u/s 140A of the Income-tax Act, 1961. - Income Tax - 1261/CBDT

INSTRUCTION NO. 1261/CBDT Dated : May 29, 1979 Section(s) Referred: 140A Statute: Income - Tax Act, 1961 Sub-section (3) of section 140A of the Income-tax Act, 1961 as amended by the Taxation Laws(Amendment) Act. 1975, provides that if any assessee fails to pay the tax on the basis of his return of income in the manner provided in sub-section (1), the Income-tax Officer may direct that a sum equal to 2% of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues. 2. A question arose as to whether penalty under sub-section (3) of section 140A can be imposed on an assessee more than once if the default in the payment of tax continues. The Board are advised that in the case of continuing default penalty can be levied by the Income-tax Officer more than once. This is because sub-section (3) provides for levy of penalty for every month of default. Moreover the Income-tax Officer would not know, when he passes the order of penalty, as to when the deficiency in tax, if any would be made good by the assessee. Therefore, in case of continuous default penalty may be levied more than once after giving a reasonable opportunity of being heard to the assessee as required under proviso to sub-section (3) of section 140A of the Income-tax Act, 1961.