assessee filed return of income on 9-11-1979 but self assessment tax amounting to Rs. 9,172 payable under section 140A was not paid at time of filing return. assessment was completed on 4-3-1982 and tax demand of Rs. 9,536 was raised which was paid on 5-8-1982. Since self assessment tax was not paid Income tax Officer invoked provisions of section 140A (3) of Act. He levied penalty of rs. 4,914. assessee appealed to Appellate Assistant Commissioner. assessee urged before him that he did not have sufficient cash balance for payment of self assessment tax. Hence, there was sufficient reason for not paying same. Penalty under section 140A (3) should not have been levied. It was also pointed out to him that explanation was filed before Income tax Officer but same was not considered. Appellate Assistant Commissioner held that, assessee filed explanation on 19-3-1984 which was not considered by Income-tax Officer while passing penalty order on 22.03.1984. He held that it was obligation of assessee to pay income tax first and then liquidate his other liabilities. This is fit case for levying penalty. Accordingly he sustained penalty of Rs. 4,914 levied by Income tax Officer. Against same assessee has preferred this appeal. 2. learned counsel for assessee submitted that explanation was filed before Income-tax Officer which was not considered by him. He produced balance sheet and pointed out that cash in hand was Rs. 186 and bank balance was Rs. 520. Hence due to lack of funds self assessment tax could not be paid. Hence there was reasonable cause for not paying self assessment tax, and, no penalty should be levied. He drew our attention to order of Appellate Assistant Commissioner where penalty levied under section 15(B) (3) for no payment of self assessment tax under Wealth-tax Act was cancelled for very same reason urged by assessee. Learned departmental representative justified levy of penalty. He urged that, lack of funds cannot be ground for non payment of self assessment tax. 3. We have considered rival submissions. assessee has filed explanation on 19-3-1984 stating that due to lack of funds tax under section 140A could not be paid. This explanation was not considered by Income tax Officer, in penalty order dated 22-3-1984. We have gone through balance sheet for year ending Diwali 1979 and find that cash in hand was Rs. 186 and bank balance was Rs. 520. return was filed on 9-11-1979 around that time. Thus, in our view plea that, due to lack of funds self assessment tax under section 140A was not paid is bona fide one and thus there was sufficient cause for not paying self assessment tax under section 140A due to lack of funds. Hence levy of penalty under section 140A (3) is not justified. Under section 140A (3) Income tax Officer has discretion to levy penalty. But that discretion has to be exercised fairly and reasonably. When assessee does not have sufficient cash balance that is reasonable cause for not paying self assessment tax. Levy of penalty under section 140A (3) , in these circumstances, is not warranted. In Addl. CIT v. Sarvaraya Textiles Ltd. (1982) 137 ITR 369, A. P. High Court held that, Income Tax Officer has discretion under section 140A (3) to levy or not to levy penalty and that provision has to be taken aid of by Income tax Officer only in appropriate cases and not in each and every case where there is failure to pay tax within time. In that case Tribunal had accepted assessee's plea that due to lack of funds self assessment tax could not be paid and it cancelled penalty levied under section 140A (3). High Court upheld findings of Appellate Tribunal. In Addl. CIT v. Free Wheels India Ltd. (1982) 137 ITR 378 (Delhi), Tribunal accepted assessee's plea that due to financial difficulties self assessment tax could not be paid. Tribunal cancelled penalty levied under section 140A (3) of Act. Delhi High Court upheld findings of Appellate Tribunal. Thus in our view there was reasonable cause for non payment of self assessment tax under section 140A as assessee did not have liquid funds for paying same. Hence, in facts and circumstances of case, penalty levied under section 140A (3) is not justified. Accordingly we cancel penalty levied. 4. In result, Appeal is allowed. *** MADANLAL GUPTA v. INCOME TAX OFFICER