Madhusudan Ltd. paid the tax of 5% on the supply of goods. Later on, while conducting the audit u/s 65, the proper officer pointed out in the observation letter that it was subject to 18%. The company has paid the difference of tax along with the interest and informed the proper officer. The proper officer has issued the notice to pay the penalty. Whether issuance of notice by the proper officer to pay the penalty is correct?
If it is the case of applicability of section 73, then it is not correct to demand the penalty.
It has to be established that tax has been short-paid for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax.