1975 (12) TMI 68

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....ction 221(2) of the Income-tax Act is the order of assessment made for the assessment year 1968-69 and whether the penalty levied for that default should be cancelled on that basis ? Assessee is a firm and the relevant year of assessment is 1968-69. By notice under section 210 of the Income-tax Act (hereinafter referred to as the Act) served on the assessee on May 23, 1967, the assessee was called upon to pay advance tax for the assessment year 1968-69. There was default in compliance with the demand and accordingly the Income-tax Officer levied penalty of Rs. 3,400 under section 221(1) of the Act. Assessee challenged the imposition of penalty in appeal. In the regular assessment for the year no demand was raised against the assessee ....

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....e making of a regular assessment, in our opinion, cannot be considered as a final order within the meaning of section 221(2) of the Income-tax Act." For convenience, we may extract the provision in section 221 : " (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, and in the case of a continuing default, such further amount or amounts as the Income-tax Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears: P....

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....sted against the assessed tax, provision has been made in sub-section (2) requiring the Income-tax Officer to deal with the matter of penalty after the final order of assessment has been made. On the result of the assessed tax, the quantum of penalty requires reconsideration. Where there is no demand, penalty is to be reduced to nil. " Final order " within the meaning of sub-section (2) means an original order of assessment becoming final in the absence of an appeal, or an appellate order of the Appellate Assistant Commissioner when no further appeal is carried, or an appellate order of the Tribunal when no reference is carried or where a reference is taken, the result reached on the basis of the decision of the High Court or the Supreme....