Penalty for non-payment with return is confined to the post-filing default period, not any earlier interval.

Penalty under section 17A(3) is discretionary and arises only when a return is filed without proof of payment of the admitted tax. The default period is confined to the interval between filing the return and actual payment, because section 17A(1) requires payment before filing and section 17A(3) contemplates recovery only for continuing default after that point. A levy for any earlier period is outside the scope of the provision and without jurisdiction. The assessee therefore succeeded to that extent.

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Issues: Whether penalty under section 17A(3) could be levied only for the period after the return was filed and before tax was actually paid, and whether the levy for the earlier period was without jurisdiction.

Analysis: Section 17A(1) requires a person liable to furnish a return to pay, before furnishing the return, the tax on the admitted income and to accompany the return with proof of payment. Section 17A(3) authorises recovery of a sum equal to 2% of such tax for every month during which the default continues, but the use of the word "may" and the proviso requiring a reasonable opportunity of being heard show that the levy is discretionary and not automatic. The default contemplated by section 17A(3) arises only when a return is filed without proof of payment of the admitted tax, and the period of default is therefore confined to the interval between filing of the return and actual payment of tax. The assessing authority had treated an earlier period as the period of default, which was not permissible under the scheme of the provision.

Conclusion: Penalty under section 17A(3) could be levied only for the period from the date of filing of the return to the date of payment of tax, and the levy for the earlier period was without jurisdiction. The assessee succeeded to that extent.

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