Inordinate delay in penalty proceedings for self-assessment tax can defeat the deterrent purpose and render the penalty unsustainable.

Penalty for non-payment of self-assessment tax under section 140A was held unsustainable where initiation and conclusion of proceedings occurred after several years. The delay defeated the deterrent and corrective purpose of the penalty regime, frustrated expeditious recovery of self-assessment tax, and was treated as inordinate and unreasonable. On those facts, the tribunal found that the assessee had been misled into believing that no penalty would follow, so the penalty was not exigible and relief was granted to the assessee.

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Issues: Whether penalty for non-payment of self-assessment tax under section 140A could be sustained when the penalty proceedings were initiated and concluded after considerable delay.

Analysis: The penalty provisions were treated as serving a deterrent and corrective purpose, which can be effectively achieved only if proceedings are commenced and concluded within a reasonable time. On the facts, the penalty orders were passed several years after the returns had been filed, and the delay was found to have frustrated the object of expeditious recovery of self-assessment tax and to have misled the assessee into believing that no penalty would follow. The delay was held to be inordinate and unreasonable.

Conclusion: The penalty was not exigible and the issue was decided in favour of the assessee.

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