Penalty payable when tax in
default.
96221. 97[(1) When an assessee is in default or is deemed to be in default in making
a payment of tax, he shall, in addition to the amount of the arrears98 and the amount of interest payable under
sub-section (2) of section 220, be liable, by way
of penalty, to pay such amount as the 99[Assessing] Officer may direct1, and in the case of a continuing default, such further amount or
amounts as the 2[Assessing] Officer may, from time to time, direct, so, however, that
the total amount of penalty does not exceed the amount of tax in arrears :
Provided that before levying any such penalty, the assessee shall be given a
reasonable opportunity of being heard :
3[Provided further that where the
assessee proves to the satisfaction of the 4[Assessing] Officer that the default was for good and sufficient reasons5, no penalty shall be levied under this section.]
6[Explanation.—For the removal of doubt,
it is hereby declared that an assessee shall not cease to be liable to any
penalty under this sub-section merely by reason of the fact that before the
levy of such penalty he has paid the tax.]
(2) Where as a result of any final order the
amount of tax, with respect to the default in the payment of which the penalty
was levied, has been wholly reduced, the penalty levied shall be cancelled and
the amount of penalty paid shall be refunded.