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TMI Blog2004 (8) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... y the tax as per the block return in instalments. This request of the assessee was not disposed of by the revenue authorities. The Assessing Officer issued notice under section 221(1) of the Income-tax Act to show cause why penalty should not be levied for not paying the self-assessment tax as per the block return under section 140A(3). Thereafter, the Assessing Officer levied a penalty of Rs. 58,742 under section 221 of the Income-tax Act for the failure of the assessee to pay the tax as per the block return under section 140A(3). On appeal by the assessee, the first appellate authority cancelled the penalty levied by the Assessing Officer on the ground that the assessee requested the revenue authorities for payments of tax in instalments since the liquid sources of the assessee had already been in possession of the department. Since the proposal for payment of tax in instalment was not negativated by the department, the first appellate authority found that levy of penalty under section 221 for non-payment of taxes is not correct. Against this order of the CIT(A), the revenue filed the present appeal before this Tribunal. 3. Mr. C.R. Janardhan, the learned Departmental Represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to notice issued under section 158BC. 6. On the contrary, Mr. V.D. Gopal, the learned counsel for the assessee, submitted that admittedly the assessee filed the block return in response to a notice issued under section 158BC on 13-11-1996. The provisions of section 140A as it stood on 13-11-1996 does not provide for payment of any self-assessment tax when the return was filed under section 158BC for the block period. Section 140A was amended by the Legislature with effect from 1-6-1999 requiring the assessees who are filing the block return to pay the self-assessment tax in respect of return filed under section 158BC also. Even though section 140A(1) is a machinery provision, for collection of taxes, levy of penalty under section 221 for a default committed under section 140A cannot be construed as a machinery provision. According to the learned counsel, section 221(1) of the Income-tax Act which enables the Assessing Officer to levy penalty when the assessee was deemed to be in default for payment of taxes, has to be construed as a substantive provision. Therefore, according to the learned counsel for the assessee, the amendment carried out by the Legislature by Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the assessee has no liquid source and the proposal for payment of tax in instalment was not negativated. This finding of the first appellate authority was not challenged by the revenue before this Tribunal by raising any ground of appeal. Therefore, according to the learned counsel, it has to be presumed that the finding recorded by the first appellate authority was accepted by the revenue. Once the finding with regard to reasonable cause was accepted and it was not challenged before the Tribunal, no penalty could be imposed in view of second proviso to section 221(1) of the Income-tax Act. 9. We have considered the rival submissions on either side, and perused the material on record. The first issue arises for consideration is whether the assessee is required to pay self-assessment tax under section 140A(1) of the Income-tax Act when the return of income was filed in response to a notice issued under section 158BC. Admittedly, the return for the block period was filed under section 158BC on 13-11-1996. As on 13-11-1996, section 140A(1) does not require any assessee to pay tax when the return was filed under section 158BC. However, section 140A(1) of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the return and such tax is required to be paid before the return is furnished and the return is accompanied by the proof of such payment. The existing provisions of section 140A are not applicable to Chapter XIV-B relating to the assessment of the income of the block period in search and seizure cases. There is also no corresponding provision in Chapter XIV-B for payment of self-assessment tax at the time of filing the return. Therefore, the tax on the admitted income declared in the return cannot be collected till the assessment is completed. In view of the above, it is proposed to amend section 140A of Income-tax Act to provide for the requirement of payment of self-assessment tax at the time of filing the return under section 158BC relating to block assessment of search cases. The amendment will take effect from 1st day of June, 1999." 11. On examining the above notes on clauses and memorandum, it is very clear that the Legislature originally intended to make the assessee liable to pay taxes and interest when the return was filed under section 139 or under section 142 or under section 148. By the amendment, the Legislature proposed to make those assessees who are filing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a machinery provision for the purpose of collecting the revenue. Therefore, the amendment has to be treated as retrospective in operation. The question which arises for our consideration is whether a penalty can be imposed under section 221(1) of the Income-tax Act for failure of the assessee to pay the self-assessment tax under section 140A(1) of the Income-tax Act in respect of return filed under section 158BC on 13-11-1996. For the purpose of levying penalty under section 221(1) of the Income-tax Act, the assessee must be in default or deemed to be in default in payment of tax. Therefore, unless and until the assessee is liable to pay tax under section 140A(1) of the Income-tax Act before filing the return of income, in our considered opinion, the assessee cannot be treated as an assessee-in-default. Penalty proceedings are quasi-criminal in nature. Therefore, there must be a violation of law on the part of the assessee before levying any penalty. Section 140A(3) is a deeming provision to treat the assessee-in-default if the interest and tax are not paid under section 140A(1). From the memorandum explaining the amendment of section 140A(1) by including section 158BC, it is o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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