Self-assessment tax delay cannot attract penalty after the 1987 amendment, where default operates only for recovery purposes.

Penalty for delayed payment of self-assessment tax was considered unsustainable after the 1987 amendment to section 140A(3), which treats default primarily as a recovery mechanism for tax and interest. The analysis noted that, because the earlier penal consequence for non-payment was omitted and section 221(1) was not correspondingly amended, levy of penalty for such delay lacked legal basis. On that reasoning, the penalty was deleted and the assessee's challenge succeeded.

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Issues: Whether penalty under section 140A(3) read with section 221(1) of the Income-tax Act, 1961 can be sustained for delayed payment of self-assessment tax.

Analysis: The assessee had delayed payment of self-assessment tax on account of financial constraints and had already discharged the interest attributable to the delay. The issue was held to be covered by earlier coordinate bench decisions which examined the legislative history of section 140A(3), including the amendment brought by the Direct Tax Laws (Amendment) Act, 1987 and CBDT Circular No. 549 dated 31.10.1989. The amended provision treats the assessee as in default only for recovery purposes, while the earlier penal consequence for non-payment of self-assessment tax was omitted. In the absence of any corresponding amendment to section 221(1), recourse to that provision for levy of penalty for delayed self-assessment tax was held to be legally unsustainable.

Conclusion: Penalty under section 140A(3) read with section 221(1) could not be levied for delayed payment of self-assessment tax, and the penalty was liable to be deleted.

Final Conclusion: The appeal was allowed and the penalty sustained by the lower authority was set aside.

Ratio Decidendi: After the 1987 amendment to section 140A(3), default in payment of self-assessment tax is treated as a default only for recovery of tax and interest and does not, by itself, authorise levy of penalty under section 221(1).

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