Penalty Order not become Invalid for mere wrong quoting of section

During the assessment proceeding, the Assessing Officer observed that tax liability of Rs.1,09,71,691/- on the income declared in the return of income was shown payable under section 140A of the Act. In view of non-payment of admitted tax liability under section 140A(1) of the Act the Assessing Officer asked the assessee to furnish the evidence of tax paid as computed in the return of income and issued show cause that in absence of no such evidence as why the penalty might not be levied for non-payment of admitted tax. In the show cause notice, the Assessing Officer mentioned the section 140A(3) of the Act for levy of penalty.

In response, the assessee submitted the circumstances under which the admitted tax could not be paid including liquidity crunch. The assessee also referred to provision of section 221 of the Act, which says that if there is sufficient reason for non-payment of tax under section 140A, no penalty should be levied. But, the assessee also referred the relevant section of penalty as under section 140A(3) of the Act.

The Assessing Officer considered the submission of the assessee, however, in absence of any supporting documentary evidence of liquidity crunch, he was not satisfied with the reasons cited by the assessee for non-payment of admitted tax. The Assessing Officer held the assessee in default for not making payment of admitted tax liability of Rs.1 ,09,71 ,691/-and levied a penalty of an amount equal to admitted tax liability quoting section 140A(3) of the Act.

Before the Ld. Commissioner of Income Tax (Appeals), the assessee raised the ground that the order passed by the Assessing Officer was illegal and liable to be quashed as the penalty has been levied under section 140A(3) of the Act, whereas it should have been levied under section 221 of the Act. The Ld. CIT(A), however, held that the provisions of section 292B of the Act would cover such inadvertent mistake in quoting the correct section as the appellant had participated in the proceedings without rendering any objection.

Regarding the good and sufficient reason for non-payment of admitted tax liability, no submissions were filed by the assessee before the Ld. CIT(A). The Ld. CIT(A) observed that admitted tax liability was not paid even till the passing of the appellate order and therefore, he questioned the bonafides of the assessee in honoring his own commitment of tax payment on the returned income. Accordingly, he dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.

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