Penalty u/s 221(1) Valid for Non-Payment of Admitted Tax Liability: ITAT [Read Order]
Observing that the requirement of self-assessment tax payment was not obliterated even if the assessee subsequently gets relief, the Tribunal restored the penalty order.
Tax - liability - Taxscan
Tax - liability - Taxscan
The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) restored the penalty levied under Section 221(1) of the Income Tax Act, 1961, for the Assessment Year (AY) 2007-08 due to the non-payment of tax liability.
The case involved Sama Yashodha who was Legal Heir of Late Sama Ramachandra Reddy (assessee), against whom the Deputy Commissioner of Income Tax, had filed an appeal.
In the appeal concerning the penalty order passed under Section 221(1) of the Act , the Revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the penalty on the wrong assumption that the revised computation was a Return of Income.
The penalty was levied by the Assessing Officer (AO) for non-payment of tax on the income admitted in the Income Tax Return (ITR), not on the assessed income.
The counsel for the revenue contended that in the absence of a revised Return of Income and non-payment of self-assessment tax, the penalty levied under Section 221(1) of the Income Tax Act was valid.
The two-member bench comprising Vijay Pal Rao (Vice President) and Madhusudan Sawdia (Accountant Member) observed the orders and the contention of the counsel for the revenue.
The tribunal noted that the CIT(A) deleted the penalty during the appellate proceedings, a revised computation was admitted by the CIT(A) showing no tax payable, thereby implying that the provisions of Section 249(4) were not applicable and there was no default under Section 140A of the Income Tax Act.
The bench observed that the fact remained that the assessee had declared income in the Return of Income but did not pay the income tax on it.
The Tribunal held that even if the assessee subsequently succeeds in getting relief, the requirement of payment of self-assessment tax, as prescribed under Section 249(4), would not be obliterated.
The tribunal observed that If the assessee gets relief, it would result in a refund of tax and interest, if any, and the assessee cannot choose not to pay the self-assessment tax.
Following the decision of the Bombay High Court in the case of CIT Vs. Oryx Finance and Investment Pvt. Ltd., the Tribunal concluded that the assessee covered by the scope of the penalty under Section 221(1) for not having paid the admitted tax liability under Section 140A while filing the original return.
The tribunal set aside the order of the CIT(A) and restored the order of the Assessing Officer passed under Section 221(1) of the Act. The appeal filed by the Revenue was allowed.
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