July 2026

This appeal by the assessee challenged the levy of penalty of Rs.53,97,010 u/s 140A(3) r.w.s 221(1) for delay in payment of self-assessment tax. The ITAT Mumbai held that post the amendment by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01.04.1989, penalty for non-payment of self-assessment tax is no longer contemplated; only mandatory interest is chargeable. The amended section 140A(3) merely treats the assessee as default for recovery purposes, not for penalty. Further, the absence of a corresponding amendment to section 221(1) means the AO cannot invoke it. Following the Coordinate Bench decisions in Heddle Knowledge Pvt. Ltd. and First Global Stockbroking Pvt. Ltd., the penalty was set aside and the appeal allowed.

This case involves a writ petition for refund of seized cash and interest. The petitioner was searched on 30.04.2019/01.05.2019 and Rs. 9,00,000/- seized. No assessment within 120 days. During the writ, cash was refunded on 5.6.2026 but no interest. The Court held that under Section 132B(4), interest at 6% per annum (one-half per cent per month) is payable from the expiry of 120 days from the last search (01.05.2019) until the date of refund (5.6.2026). The Court also noted that compensatory interest can be awarded under Article 226 if no assessment is made. The Revenue’s argument about a vigilance inquiry was rejected. The Court directed payment within six weeks, failing which interest at 12% per annum.