Penalties
Penalties
Penalties
Introduction
Under the Income-tax Act, penalties are levied for various defaults committed by the
taxpayer. Some of the penalties are mandatory and a few are at the discretion of the tax
authorities. In this part, you can gain knowledge about the provisions relating to various
penalties leviable under the Income-tax Act.
Penalty for default in making payment of Self Assessment Tax
As per section 140A(1) any tax due (after allowing credit for TDS, advance tax, etc.)
along with interest under section 234A, 234B and 234C (if any) should be paid before
filing the return of income. Tax paid as per section 140A(1) is called „self assessment
tax‟.
As per section 140A(3), if a person fails to pay either wholly or partly self assessment tax
or interest, then he will be treated as assessee in default in respect of unpaid amount. As
per section 221(1), if a taxpayer is treated as an assessee in default, then he shall be held
liable to pay penalty of such amount as the Assessing Officer may impose and in the
case of a continuing default, such further amount or amounts as the assessing officer may,
from time to time, direct. However, the total amount of penalty cannot exceed the amount
of tax in arrears.
Before charging penalty under section 221(1), the tax authority shall give the taxpayer a
reasonable opportunity of being heard. No penalty is levied if the taxpayer proves to the
satisfaction of the tax authorities that the default was for good and sufficient reason.
Note: An assessee shall not cease to be liable to any penalty under section 221(1) merely
by reason of the fact that he paid the tax before the levy of such penalty.