SAMA RAMACHANDRA REDDY,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, HYDERABAD

Coming to the assessee’s sole substantive grievance that both the learned lower authorities have erred in law and on facts in imposing section 221(1) penalty of Rs.6,36,450/-, we note that the corresponding lower appellate discussion to this effect reads as under :

Mr. Murali Mohan Rao vehemently contended that the impugned penalty is not sustainable in view of the fact that the CIT(A) had granted relief to assessee in quantum proceedings; which in turn, stands upheld upto “tribunal”. He has quoted this tribunal’s co-ordinate bench’s order in in preceding assessment year 2005-06 that the impugned penalty is 5 not maintainable once the corresponding quantum addition stands deleted in light of section 221(2) of the Act. His last plea in light of case law Heddle Knowledge (P) Ltd. Vs. ITO (2018) 19 taxmann.com 376 (Mumbai) is that amended provision of section 140A(3) with effect from 01-04-1989 does not envisage any penalty for nonpayment of self-assessment tax, which renders the entire section 221 penal mechanism invalid.

The Revenue has placed strong reliance on CIT(A)’s findings. Its specific case is that the impugned penalty pertains to self-assessment than any addition made in the quantum proceedings. 5. We have given our thoughtful consideration to rival pleadings and find prima facie merit in assessee’s case in light of the fact that the CIT(A) has not considered the tribunal’s quantum order declining the Revenue’s appeal on 26.08.2019 thereby upholding the corresponding lower appellate authorities’ action. Coupled with this, the fact that this tribunal yet another co- ordinate bench’s decision has already held that even non-payment of self-assessment tax does not attract section 271(1)(c) penalty (supra). 6. The fact also remains that the clinching issue as to whether the impugned pending penalties to quantum addition or self-assessment requires the Assessing Officer’s afresh adjudication not only in light of section 221(2) of the Act but also going by the tribunal’s co-ordinate bench’s order. It is made clear that the impugned penalty would not survive in case the corresponding quantum addition(s) stands deleted as well as on account of the fact that this tribunal has already held that section 140A(3) itself renders the foregoing penalty mechanism inapplicable. The Assessing Officer shall finalize his consequential proceedings within three effective opportunities of hearing. 7. This assessee’s appeal is allowed for statistical purposes in above terms.