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2022 (7) TMI 544 - ITAT MUMBAIPenalty u/s 221 r.w.s. 140A - default of non-payment of taxes on due date - assessee submitted that there is no default as the self-assessment tax as determined in the return of income u/s 139(4) has been paid - HELD THAT:- We first find that assertion of the learned assessing officer that the return was revised on 19/1/2018 is a revised return is devoid of any merit. This is so because in the acknowledgement of return filed in 19/1/2018 assessee says it is still an original return. Based on that return i.e. filed on 17/10/2016, he proposes to levy the penalty u/s 221 holding assessee to be an ‘assessee in default’. We find that when the return filed on 17/10/2016 was held to be an invalid return, thus, deemed never to have been filed by the assessee or as if the assessee has failed to furnish the return, we failed to understand that how the penalty can be initiated stating that assessee has failed to pay tax according to the invalid return filed by the assessee. When a return of income is held to be invalid, it cannot be considered that such return has ever been filed u/s 139. Provisions of Section 140A (3) can apply only when there is a self-assessment tax payable with respect to the return filed u/s 139 of the act. Further, if there is a failure u/s 140 A (3) then only assessee can be held to be “assessee in default”. As in the present case there is no return of income filed u/s 139 of the income tax act, therefore any penalty based on that return, does not survive. There is one more aspect to the issue, on one hand Act treats defective return as ‘ Failure to furnish’ the return of income and on the other hand, AO initiates penalty based on that defective return for non payment of taxes. Thus , there is an apparent dichotomy in the action of the AO. Accordingly we find that the penalty levied by the learned assessing officer as per order dated 14/05/2018 u/s 221 (1) of the income tax act is not sustainable. Hence, orders of lower authorities are reversed. Ground no 1 to 4 are allowed.
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