Reasonable cause for non-payment of self-assessment tax defeated penalty where shortage of funds was shown.

Penalty for failure to pay self-assessment tax was held unsustainable where the assessee showed shortage of funds as a reasonable cause. The assessee had advanced monies to connected concerns, but the evidence did not establish effective control over those concerns, and the Revenue did not rebut the claim that business had to be closed for want of supplies and that recoveries came much later. As there was no material showing access to other funds for meeting the tax liability, the penalty was cancelled.

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Issues: Whether penalty levied for failure to pay self-assessment tax under section 140A(3) of the Income-tax Act, 1961 was sustainable when the assessee claimed shortage of funds.

Analysis: The assessee had advanced money to connected concerns, resulting in credit balances in its favour, but the evidence did not establish effective control over those concerns. The Revenue did not rebut the assessee's position that business had to be closed for want of supplies and that the amounts due were realised only much later. There was also no material to show that the assessee had access to other funds for meeting the self-assessment tax liability. On these facts, the shortage of funds was treated as a reasonable cause for non-payment.

Conclusion: The penalty was not sustainable and was cancelled.

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