1999 (11) TMI 871 - AT - Income Tax

Self-assessment tax shortfall from missed s. 80VVA deduction in return; s. 140A(3) penalty upheld but reduced amount.

Penalty under s. 140A(3) for non-payment of self-assessment tax turned on whether 'tax payable' in s. 140A(1) referred to tax on income required to be ... Levy of Penalty u/s 140A(3) - non-payment of self-assessment tax based on incorrect return - bona fide mistake in computation of income - provisions of section 80VVA - HELD THAT:- In our opinion, the correct interpretation that requires to be placed on the language used in section 140A(1) of the Act is that of the tax payable as per the income required to be returned by the assessee. In the instant case, the returned income clearly indicates, without any doubt, that the provisions of section 80VVA was not taken into consideration by the assessee. Such being the case, the assessee can be said to have committed a default in payment of self assessment tax. Admittedly, section 80VVA was introduced by the Finance Act, 1983. The assessee had not made out a case to show that there was no occasion for the assessee-company, in the earlier assessment years, to consider the provisions of section 80VVA of the Act. It is not the case of the assessee that the return was filed without the assistance of a Chartered Accountant. Neither an affidavit of the Chartered Accountant nor the affidavit of any other person concerned was filed before us to support his submission that the provisions of section 80VVA was overlooked on account of somebody's bona fide mistake for which the company should not be penalised. In fact, it appears that the assessee-company has not raised such an issue before the Assessing Officer which indicates that the explanation as to bona fide mistake of overlooking the provisions was an after-thought. Thus, looking at from any angle, the assessee has not given sufficient reasons for non-payment of self-assessment tax. We are concerned with the assessment year 1986-87 and default was committed on 30-7-1986, i.e., the date of filing the return. Therefore, the provisions applicable are those which are on the statute book as on the date of default. The Assessing Officer levied penalty @ 2 per cent per month by mistakenly taking into consideration the amended provisions. Penalty order was passed in 1991. However, as per section 140A(3), as it existed at the relevant point of time, i.e., at the time of default, penalty is not directly linked to the number of months and penalty is leviable at the discretion of the Assessing Officer subject to a maximum of 50% of the self-assessment tax payable. Admittedly, the Assessing Officer has not exercised his discretion in the instant case. Thus, we are of the opinion that penalty of ₹ 5,000 under section 140A(3) would meet the ends of justice. The appeal is partly allowed. Issues involved: Penalty u/s 140A(3) for non-payment of self-assessment tax based on incorrect return and applicability of section 80VVA of the Income-tax Act.Summary:The appeal before the Appellate Tribunal ITAT Mumbai involved a dispute regarding the penalty levied u/s 140A(3) for non-payment of self-assessment tax by the assessee for the assessment year 1986-87, based on the incorrect return filed. The Assessing Officer contended that the assessee avoided payment of self-assessment tax by not considering section 80VVA, limiting set off of unabsorbed depreciation to 70% of gross income. The penalty was imposed for default in paying tax on the income determined by the Assessing Officer. The CIT(Appeals) upheld the penalty, leading to the appeal before the Tribunal.The assessee argued that self-assessment tax is payable only on the returned income, not on the corrected income by the Assessing Officer. The Tribunal interpreted that tax is payable based on the income required to be returned, not just the income returned. Ignorance of law or bona fide mistake must be proven by the assessee to avoid penalty. The Tribunal found that the assessee failed to provide sufficient reasons for non-payment of self-assessment tax, especially regarding the oversight of section 80VVA.Regarding the reduction of penalty, the Tribunal noted the incorrect application of penalty provisions by the Assessing Officer, as the penalty was levied @ 2% per month, contrary to the applicable provisions at the time of default. The Tribunal exercised discretion and reduced the penalty to Rs. 5,000 u/s 140A(3) for the assessment year 1986-87, finding it appropriate to meet the ends of justice. The appeal was partly allowed, considering the circumstances of the case.