TaxTMI 
TaxTMI 
2026 (5) TMI 1264
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.... to change in provisions). 3. The CIT (A) failed to appreciate that The basic tax component of the Self Assessment Tax was paid within four months of filing the return of income. Much I wished, the payment of interest amount was delayed because of circumstances which beyond my Control. The Appellant had also started paying the installments of the interest component before this penalty order, clearly indicating her intention to pay up the interest dues. In the light of these. facts, the levy of such a heavy penalty of Rs. 53,97,010/- is very harsh and against the principles of natural justice. 4. Penalty u/s. 140A(3) r.w.s 221 cannot be levied after the amendment to the income tax act by the Direct Taxes Amendment Act of 1987 w.e.f. 01-04-1989. Before the amendment, section 140A(3) provided for levy of penalty at the rate of 2% for every month for which the default continued. After the amendment, this section was replaced by the new section 140A(3), wherein there is a provision for treating the assessee as an assessee in default for the failure to pay the self assessment tax. Simultaneously to the replacement by the new section 140A(3), provisions for the mandatory....
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....ciples of natural justice. 9. In view of the above unequivocal decisions of the jurisdictional ITAT, the levy of the penalty of Rs. 56,97,010/- u/s. 140A(3) r.w.s. 221(1) levied for A.Y. 2013-14 in the Appellant's case is bad in law and deserves to be cancelled." 2. The sole issue arising for consideration in the present appeal pertains to the sustainability of the penalty levied by the Assessing Officer on account of delay in payment of self-assessment tax. 3. Briefly stated, the facts borne out from the record are that the assessee filed its return of income on 31.03.2015 declaring total income of Rs. 26,21,48,820/-. The assessment came to be completed under section 143(3) of the Income-tax Act, 1961 (for short "the Act") on 29.12.2015 accepting the returned income. Upon examination of the return, it was noticed that the assessee had disclosed net tax payable of Rs. 5,39,70,100/- and total amount payable, inclusive of interest and after allowing credit of TDS of Rs. 1,91,936/-, at Rs. 7,94,30,348/-. However, the self-assessment tax was not discharged prior to filing of the return. Consequently, penalty proceedings under section 140A(3) read with section 221(1) ....
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.... return filed on 31.03.2015 for the AY 2013-14. Therefore, the AO initiated penalty proceedings u/s 140A(3) r.w.s 221(1) of the Act. The appellant submitted that failure to pay self-assessment tax was not willful and was beyond his control. The appellant also relied on various case laws the facts of which are distinguishable from the facts of the instant case. The AO considered the submissions of the appellant and levied penalty of 10% of self-assessment tax not paid amounting to Rs. 53,97,010/-. After careful consideration I am of the considered opinion that the action of the AO is reasonable and justified. Therefore, the ground raised on this issue is dismissed." 6. Before us, the learned counsel for the assessee reiterated the submissions made before the lower authorities and further relied upon the decision of the Coordinate Bench in the case of First Global Stock brokeing Private Limited in ITA Nos. 1786, 1951 & 1950/Mum/2024 for Assessment Years 2013-14, 2015-16 and 2017-18. 7. We have carefully considered the rival submissions and perused the material available on record. The short question that arises for adjudication is whether penalty levied under section 140A(3) re....
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....elied on the decision of the Co-ordinate Bench of the Tribunal in the case of Heddle Knowledge Pvt. Ltd. in ITA No. 7509/M/2011 for assessment year 2009-10 and submitted that in view of amended provision of section 140A(3) of the Act, no penalty was envisaged for delay in deposit of the self-assessment tax. The Ld. counsel also relied on the decision of the Tribunal in the case of M/s Sanghi Industries Ltd. in ITA No. 122 & 834/Hyd/2016 and CO No. 31/Hyd/2016 (ITA No. 122/Hyd/2016) for assessment year 2010-11 and ITA No. 6897 & 6898/Mum/2019 for assessment years 2011-12 and 2012-13, wherein the Co-ordinate Bench has followed the decision in the case of Heddle Knowledge Pvt. Ltd. (supra). The relevant finding of the Co-ordinate Bench of the Tribunal in the case of Heddle Knowledge Pvt. Ltd. (supra) is reproduced as under: "4. Sec. 140A(3) of the Act, as it stands for the year under consideration, reads as under :- "140A(3) If any assessee fails to pay the whole or any part of such tax [or interest or both] in accordance with the provisions of sub section (1), he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in de....
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.....f. 1.4.1989 alongwith the explanatory notes to the amendment conjointly, it is clear that the earlier provision prescribing for levy of penalty for default outlined in Sub-section (1) of Sec. 140A(3) has yielded place to mandatory charging of interest for such default. The aforesaid legislative intent also gets strength by the fact that simultaneously the legislature prescribed for mandatory charging of interest u/s 234B of the Act for default in payment of self-assessment tax w.e.f. 01.04.1989 onwards. 6. However, a contrary position is taken by the Revenue to the effect that for having defaulted in payment of self-assessment tax within the stipulated period, assessee qualifies to be 'an assessee in default' as prescribed in the amended Sec. 140A(3) of the Act and, therefore, if one is to read the same with Sec. 221(1) of the Act, the action of the Assessing Officer in imposing penalty is quite justified. In sum and substance, it is sought to be emphasised on the strength of Sec. 221(1) of the Act that the penalty is leviable so long as the default is in the nature which renders the assessee as an "assessee in default" for payment of tax. Sec. 221(1) of the Act p....
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....ssing Officer was not justified in levying the impugned penalty by making recourse to Sec. 221(1) of the Act. Before parting, we may again emphasise that Sec. 221(1) of the Act remains unchanged, both during the pre and post amended Sec. 140A(3) of the Act and even in the pre amended situation, penalty u/s 221 of the Act was not attracted for default in payment of self assessment tax, which was expressly covered in pre 01.04.1989 prevailing Sec. 140A(3). Thus, without there being any requisite corresponding amendment to Sec. 221 of the Act in consonance with the amendments carried out in Sec. 140A(3) of the Act w.e.f. 01.04.1989, the Assessing Officer erred in levying the impugned penalty. Thus, on this aspect, we hereby set-aside the order of CIT(A) and direct the Assessing Officer to delete the penalty imposed u/s 140A(3) r.w.s. 221(1) of the Act." 5.1 Thus the Co-ordinate Bench of the Tribunal referred to the Circular of the Central Board of Direct Taxes dated 31.10.1989 wherein it is pointed out that in view of the mandatory interest for failure to pay the self-assessment tax has now been increased, therefore levy of the penalty for non-payment of the self assessment t....