Penalty for delayed self-assessment tax payment was cancelled where demand adjustment failed and the department caused the delay.

Penalty for default in payment of self-assessment tax under section 140-A was considered unsustainable where the original demand notice failed to credit tax already paid, the assessee did not promptly seek rectification, and the demand was later corrected by the department. Because the balance tax was then paid within a reasonable time and the delay in proper adjustment was attributable to the tax department, the facts did not justify penal action. The penalty was cancelled in favour of the assessee.

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Issues: Whether penalty for default in payment of tax under section 140-A of the Income-tax Act, 1961 was justified in the circumstances of the case.

Analysis: The demand notice originally failed to give effect to tax already paid under section 140-A, and the assessee did not seek rectification or immediately pay the tax. The demand was later rectified by the Income-tax Officer, and the balance tax was paid within a reasonable time thereafter. The delay in correct adjustment of the demand was attributable to the department, and the default could not be treated as warranting penal action on these facts.

Conclusion: The penalty was not sustainable and was cancelled, in favour of the assessee.

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