1976 (2) TMI 19 - HC - Income Tax

Income-tax penalties upheld for late payment despite financial constraints.

The court upheld the penalties imposed by the Income-tax Officer under section 140A(3) of the Income-tax Act, 1961 for assessment years 1966-67, 1967-68, ... Levy Of Penalty Issues: Imposition of penalties under section 140A(3) of the Income-tax Act, 1961 for assessment years 1966-67, 1967-68, and 1968-69.Analysis:The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the imposition of penalties by the Income-tax Officer under section 140A(3) for the mentioned assessment years. The assessee failed to pay self-assessment taxes within the prescribed period after filing returns of income. The Income-tax Officer initiated penalty proceedings, leading to penalties of Rs. 1,500, Rs. 1,000, and Rs. 2,000 for the respective assessment years. Appeals were filed before the Appellate Assistant Commissioner, who upheld the penalties. Subsequently, appeals were made to the Income-tax Appellate Tribunal, which affirmed the penalties imposed by the Income-tax Officer.The primary contention raised by the assessee was that the Income-tax Officer erred in disregarding the reasons provided for non-payment of taxes, citing heavy construction works as the cause for financial constraints. The assessee argued that the authorities failed to consider the genuine reasons for the delay in tax payment. However, the court rejected this argument, emphasizing the provisions of section 140A of the Income-tax Act, 1961. The section mandates that an assessee must pay the tax within thirty days of filing the return; failure to do so may result in penalties at the discretion of the Income-tax Officer. Importantly, the section requires the assessee to be given a reasonable opportunity to be heard before levying penalties.In this case, the court found that the Income-tax Officer had the discretion to levy penalties but must afford the assessee an opportunity to present reasons for non-payment. The court noted that the assessee's explanation of financial constraints due to heavy construction works was considered by the Income-tax Officer. The court deemed the officer's decision to impose penalties as valid, as the reasons provided by the assessee were not sufficient to justify the non-payment of taxes within the specified period. Therefore, the court upheld the penalties imposed by the Income-tax Officer, as affirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.Ultimately, the court answered the question of law in the affirmative, supporting the department's decision to impose penalties under section 140A(3) of the Income-tax Act, 1961. The judgment was delivered by the judges M. C. PATHAK and BAHARUL ISLAM, with the latter concurring with the decision. No costs were awarded in the case.