TMI Blog1982 (11) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... year. The ITO thereupon issued a show-cause notice, calling upon the assessee to show cause why a penalty should not be imposed under s. 140A(3) of the Act. It would appear that the assessee did not file any explanation in reply. The officer accordingly proceeded under the section and levied a penalty of Rs. 4,800, even though, according to the officer, the maximum penalty leviable in the case would have been Rs. 47,525. This levy of penalty was cancelled by the AAC on the score that a Division Bench ruling of this court in A. M. Sali Maricar v. ITO [1973] 90 ITR 116, had struck down s. 140A as ultra vires the Constitution. Although the AAC relied on the above ruling, he also went into the merits of the levy of penalty. He held that, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing two questions alone have been directed to be referred by order of this court : " 1. Whether, on the facts and in the circumstances of the case, there is material to support the finding of the Tribunal that the financial position of the assessee-firm was not such as to enable it to pay the tax on self-assessment within 30 days from the date of filing of the said return ? 2. Whether, on the facts and in the circumstances of the case, there is material to support the conclusion of the Tribunal that there was reasonable cause for the assessee's failure to pay the tax on self-assessment under section 140A(3) of the Income-tax Act, 1961, within the prescribed time ?" The two questions seemingly are addressed only to the validity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent. of the amount of such tax or part, as the case may be : Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard. " The learned counsel for the Department stressed the use of the expression " shall " in the enacting part of s. 140A(3) and submitted that where there is a default in the payment of the tax within the time-limit, penalty must follow almost as a matter of course in every case. We do not accept this contention as well founded even on the language of the enacting part of s. 140A(3). Although the enacting part of the provision used the word " shall ", a reading of the entire provision shows that the penalty is neither imperative nor automatic. The section onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to the entire field of discretionary power granted to the ITO under the enacting provision. If the proviso is read in the way it is sought to be understood by the Department and the assessee is to be given no opportunity at all to address any contention against the levy of penalty as whole, the opportunity of being heard itself would be a mere eye-wash. We believe that while enacting the proviso Parliament seriously intended that the opportunity given to the assessee must be a real opportunity and not a fanciful one or an opportunity merely for the fun of it. Our attention has been drawn to three reported cases of three High Courts wherein s. 140A(3) has been the subject of judicial interpretation: CIT v. Wesman Engineering Co. (P.) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds on which the Tribunal had come to this conclusion. The learned standing counsel submitted that the mere want of liquid resources in the possession of the assessee or the fact that the assessee had already overdrawn from a concern which was its only financial prop cannot be a ground for urging that the default was not wilful or that it was excusable for any justifiable or reasonable cause. We do not wish to enter into the question whether want of liquid funds can, in all cases, be regarded as affording a lawful excuse for non-payment. We would rather decide the matter arising in this case on the usual touchstone in tax references which we apply to cases where discretionary orders are passed by the Tribunal or where findings of fact ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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