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of <h1>**Assessee liable for penalty under Section 221 for tax defaults despite subsequent payment**</h1> Section 221 of the Income Tax Act, 1961 prescribes penalties for tax defaults. When an assessee defaults in tax payment, they become liable for penalty in addition to arrears and interest under section 220(2). The Assessing Officer may direct penalty amounts, including additional amounts for continuing defaults, provided the total penalty does not exceed the tax arrears amount. Before imposing penalties, assessees must receive reasonable opportunity to be heard. No penalty applies if the assessee proves the default occurred for good and sufficient reasons. Payment of outstanding tax after default does not eliminate penalty liability. If final orders result in complete tax reduction related to the default, imposed penalties must be cancelled and refunded. The provision ensures procedural fairness while maintaining deterrent effect against tax defaults.
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