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TMI Blog2014 (2) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... en paying said liability in installments and in the process, it is possible that assessee may have forgotten to make the payment of self-assessment tax which was paid immediately when the fact regarding non-payment came to the notice of the assessee – thus, it cannot be said that the assessee's act was deliberate in defiance of law or assessee is guilty of a conduct which is contumacious or dishonest - assessee is not liable for penalty to be levied under section 221(1) of the Act – Decided in favour of Assessee. - I.T.A. No. 6911/MUM/2011 - - - Dated:- 4-9-2013 - I.P. BANSAL AND SHRI SANJAY ARORA, JJ. For the Appellant : M. Subramanium. For the Respondent : S.S. Rana. ORDER:- PER : I.P. Bansal This is an appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty proceedings should be dropped. It was further submitted that assessee was going through a rough phase due to the action of the Government regarding withdrawal of deduction under section 80HHC on DEPB from retrospective effect. However, AO did not accept such submission of the assessee on the ground that financial position of the assessee is sound and he proceed to levy the penalty, which is computed @10% of the amount payable under section 140A. Ld. CIT(A) has sustained such penalty. Assessee is aggrieved, hence, in appeal. 4. After narrating the facts it was submitted by Ld. AR that as a result of retrospective amendment the tax liability of the assessee in respect of assessment year 2000-01, 2001-02 and 2003-04 was cumulatively a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault or is deemed to be in default in making payment of tax, he shall, in addition to the amount of arrears and the amount of interest payable under sub-section (2) of section 220 be liable, by way of penalty, to pay such amount as the AO may direct, provided that the total amount of penalty in case of continuing default does not exceed amount of tax in arrears. In the present case, it is not a continuing default and penalty has been levied by AO @10% of the tax in arrears. The first proviso to section 221(1) provides that a reasonable opportunity of hearing should be given to the assessee before levying such penalty. Second proviso to section 221(1) describe that penalty shall not be levied in a case where the assessee is able to prove t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re breach flows from a bonafide belief the offender is not liable to act in the manner prescribed by the statute. 6.1 Looking into the facts of the present case in the light of aforementioned decision of Hon'ble Supreme Court, we are of the opinion that levy of penalty is not justified. Provisions of section 221(1) are not absolute as the words used in the provisions is not "shall" but "may". This give a discretion to the authority vested with the power of levy of penalty not to levy penalty also. The assessee was saddled with a tax liability of more than Rs.55.00 lacs in respect of earlier years in view of retrospective amendment into the statute. The assessee has been paying said liability in installments and in the process, it is possi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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