Issue: Whether penalty under Section 271(1)(c) of the Income Tax Act, 1961 can be levied when the assessee had paid self-assessment tax before the issue of notice under section 148.

BRIEF FACTS: The assessee failed to file the original return for the relevant year but paid self-assessment tax before a notice u/s 148 was issued for reassessment. The Assessing Officer (AO) completed the assessment under Section 147 and levied a penalty u/s 271(1)(c) for concealment of income.

ASSESSEE’S CONTENTIONS:
1. The assessee paid self-assessment tax voluntarily before the notice u/s 148.
2. The income declared in the return filed in response to the notice u/s 148 was accepted by the AO.
3. No addition was made by the AO in the assessment.
4. As per Explanation 4(c) of Section 271, when the assessee has already paid self-assessment tax and nothing was outstanding, then penalty u/s 271(1)(c) is not leviable.
5. In the case of the assessee, if the self-assessment tax paid prior to notice issued u/s 148 is taken into consideration then there is no amount remains as tax sought to be evaded and consequently, no penalty is leviable u/s 271(1)(c) of the Income-tax Act, 1961.
6. That the assessee has paid self-assessment tax voluntarily much prior to the notice issued u/s 148 and, therefore, there is no concealment of income or furnishing of inaccurate particulars of income on the part of the assessee.

DEPARTMENT’S CONTENTIONS:

1. The assessee did not file the original return.
2. The assessee filed the return and paid taxes only after the reassessment u/s 148.
3. Explanation 3 to Section 271 squarely applies to the assessee.

OBSERVATIONS OF THE HON. TRIBUNAL
1. There is no dispute that the assessee paid self-assessment tax prior to the notice issued u/s 148 and, therefore, the amount of tax sought to be evaded shall be determined in accordance with the formula provided in as per Explanation 4 to Section 271(1) (c).

2. Thus, the amount of tax sought to be evaded shall be determined by taking into consideration the amount of tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice u/s 148.

3. The case of the assessee is covered by this clause (c) of Explanation 4 to Section 271(1)(c) and, hence, when the AO has determined the total tax on the income assessed at Rs. 2,08,142/- whereas the self-assessment tax paid by the assessee before the notice u/s 148 was issued is Rs.2,16,470/-, then balance would be nil and ,consequently, there would be nil amount of tax sought to be evaded for the purpose of levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961.

4. Accordingly, when the amount of tax to be evaded is nil in the case of the assessee, then question of levy of levy of penalty u/s 271(1) (c) does not arise and hence, the penalty levied by the AO u/s 271(1) (c), of is not justified and the same is deleted.