The Ahmedabad bench of the ITAT, in a significant ruling, held that penalty under section 221(1) of the Income Tax Act is leviable when the assessee has not paid the admitted tax liability under section 140A, while filing the original return of income, and subsequently pays the tax on the revised return of income, at the time of filing the revised return of income.
In the instant case, the assessee, Claris Life Sciences Limited failed to pay the amount of tax admitted by it in its self-returns. Assessee, admitted that non-payment of tax was due to financial stringency and liquidity crunch, at the time of filing of the return of income. Later, the assessee remitted tax by revising the returns.
The question before the Tribunal was that whether penalty u/s 221(1) of the Income Tax Act is justified in the above case?
After analyzing the provisions of section 221(1) of the Income Tax Act, the bench noted that the assessee committed a default in not paying the admitted tax liability when it filed the original income tax return, without payment of admitted tax liability.
“To this extent, there is no dispute or ambiguity at all. The question then arises as to what is the impact of filing a revised income tax return. To the extent it pertains to the assessment proceedings, undoubtedly inasmuch as it is the validly revised return is the starting point for the assessment of income, the original income tax return ceases to be relevant. However, that substitution of income tax return is only for the purposes of assessment of income. All the judicial precedents cited at the bar is on these lines.”
Confirming the penalty proceedings, the bench ruled that by paying the admitted tax liability at the time of filing revised income return, the lapse committed in not paying the admitted tax liability at the time of filing the original income tax return do not get obliterated or wiped out. In such cases, penalty can be imposed, the bench said.
“The payment of admitted tax liability, while filing revised return of income under section 139(5), does not affect the lapse committed at the time of filing the original return of income, even though claims made in such original income tax return stand supplanted by the claims made in the revised income tax return,” the bench added.
Read the full text of the Order below.
