Arijit Pasayat, C.J.
1. The questions referred in these reference applications being identical this judgment shall govern both of them.
2. Pursuant to this court's directions in I. T. C.s Nos. 115 and 116 of 1976, under Section 256(2) of the Income-tax Act, 1961 (in short 'the Act'), the Income-tax Appellate Tribunal, Delhi Bench-D (in short 'the Tribunal'), has referred the following question, in each case, pertaining to the assessment year 1966-67, for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, was the Tribunal right in cancelling the penalty levied under Section 140A(3) ?'
3. The background facts, which are almost undisputed, are as follows :
For the assessment year 1966-67, the assessed, i.e., M. L. Narang and O. P. Narang, who were partners in the firm, Narang and Co., submitted their returns of income. As admitted income-tax in terms of Section 140A was not paid in each of the cases, notices were issued to the respective assessed to show cause why penal action as contemplated under Section 140A(3) should not be taken. The matter was adjourned from time to time at the request of the assessed and was posted on September 16, 1970, October 7, 1970, and October 12, 1970. On the last date, it was made clear that if no reply to the show cause is submitted, no further opportunity will he granted. Notwithstanding this clear indication, another opportunity was granted on April 14, 1972, and April 26, 1972, was fixed as the next date. On that date also there was an application for adjournment and the matter was adjourned to April 28, J972, with the clear stipulation that if the amount of tax due under Section 140A has already been paid, proof thereofshould be produced, otherwise it shall be presumed that the amount has not been paid. It was made clear that no further adjournment shall be allowed. However, on April 28, 1972, there was another request for adjournment which was turned down and by order dated May 1, 1972, penalty was imposed. The matter was carried in appeal before the Appellate Assistant Commissioner (in short 'the AAC'). Though if was held by the Appellate Assistant Commissioner that penalty was leviable, a direction was given to work out the tax payable and to reduce the quantum of penalty to 50 per cent, of the tax payable, if the calculations as given by the respective assessed were found to be correct. The matter was carried in further appeal by each of the assessed before the Tribunal. Referring to some other earlier decisions, the Tribunal was of the view that if on the date of imposition of penalty, no tax was due there is no scope for imposition of any penalty under Section 140A. It was noticed that the tax in fact was paid on April 29, 1972. Reference applications filed were turned down, But pursuant to directions given by this court the question as stated above has been referred for opinion.
4. We have heard learned counsel for the Revenue. There is no appearance for the assessed in spite of service of notices.
5. Section 140A was inserted by Section 34 of the Finance Act, 1964. The Section at the relevant time read as follows :
'140A. Self-assessment.--(1) Where a return has been furnished under Section 139 and the tax payable on the basis of that return as reduced by any tax already paid under any provision of this Act exceeds five hundred rupees, the assessed shall pay the tax so payable within thirty days of furnishing the return.
(2) After a provisional assessment under Section 141 or a regular assessment under Section 143 or Section 144 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards the provisional assessment or regular assessment, as the case may be.
(3) If any assessed fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), he shall, unless a provisional assessment under Section 141 or a regular assessment under Section 143 or Section 144 has been made before the expiry of thirty days referred to in that Sub-section, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, so however, that the amount of penalty does not exceed fifty per cent, of the amount of such tax or part, as the case may be : Provided that before levying any such penalty, the assessed shall be given a reasonable opportunity of being heard.'
6. The requirement was to pay admitted tax within thirty days of furnishing the returns. Admittedly, for the assessment year 1966-67, admitted tax was not paid in terms of Section 140A. The return was filed in each case onMarch 15, 1967, and tax under Section 140A became due on April 14, 1967. Though levy of penalty is not automatic as fairly accepted by learned counsel for the Revenue, yet the assessed has to show as to what was the reason for not making the payment within the stipulated time. For this purpose, an opportunity is granted to the assessed to place materials to substantiate the reasons for the delay in payment of the admitted tax, if any. This is clear from a proviso to Section 140A.
7. Prior to the amendment by the Taxation Laws (Amendment) Act, 1975, an assessed could file its return and then calculate the tax payable in accordance therewith. If he finds that such tax was in excess of Rs. 500, he was allowed to pay the same within thirty days of furnishing the return. The substitution made with effect from April 1, 1976, operative till March 31, 1989, required payment of tax before filing the return, as proof of payment of tax was required to be attached to the return itself. Payment of tax before the date on which penalty was levied per se does not constitute a reason not to levy penalty. The assessed is required to show reasonable cause as to why there was non-payment within the stipulated time.
8. In the instant case, the facts would go to show that several opportunities were granted to the assessed but they failed to indicate the reasons for not paying the admitted tax during the stipulated time. In fact, after the last date of hearing, tax is stated to have been paid. Merely because the order imposing penalty was not passed on that date and between the last date of hearing and the date of order the tax was paid, that does not dilute the consequences flowing from non-compliance with the requirements of Section 140A.
9. The Tribunal was, thereforee, not justified in its conclusion to hold that penalty was not imposable. That being the position, we answer the question referred in each case in the negative, i.e., in favor of the Revenue and against the assessed.