TMI Blog2013 (5) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... income, rather it is a case of wrong claim of exemption which was based on bona fide belief, thus this is not a fit case for levy of penalty - in favour of assessee. Penalty u/s. 221(1) r.w.s. 140A(3) - default in payment of self assessment tax - Held that:- Despite availing sufficient opportunity, the assessee in this case failed to make the payment of tax at the time of passing of penalty order of the AO. Even the assessee could not substantiate its contention of financial crunch with any supporting evidence. However, the fact which cannot be ignored is that the assessee made the entire payment of tax along with interest before preferring the penalty appeal before the CIT(A) i.e. within a very short period of 30 days. No doubt, while imposing penalty @100% on the defaulted amount the AO did not record his reasons for the same. Hence, levy of maximum penalty in this case @100% of the defaulted amount is not justifiable. But reducing the same to almost negligible amount will also be not justified in face of the statutory provisions of the Act. Thus in the interests of justice amount of penalty is reduced to 1/3rd of the amount imposed by the AO. Partly in favour of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct claim and to file the correct return of income and furnish correct particulars as per the amended provisions. The leaned CIT(A) did not accept the argument of the assessee that the tax was calculated in bona fide belief as per the certificate / computation of quantum of exemption u/s. 10B issued by the Chartered Accountant. He observed that the Chartered Accountant might have connived with the assessee in making the false claim and furnishing inaccurate particulars of claim. The learned CIT(A) thus held that the assessee was not entitled for exemption u/s. 10B for the relevant assessment year and he claimed the same wrongly. He confirmed the penalty levied by the AO. 2.2. Before us the learned AR has submitted that the Chartered Accountant of the assessee company while issuing the certificate in support of the book profits u/s. 115JB erroneously deducted the exempt income u/s. 10B under bona fide belief as he inadvertently failed to take note of the amendment brought in the relevant provisions of I.T.Act vide Finance Act 2007 w.e.f. 01.04.2008 whereby the exempt income u/s. 10B is not permissible for deduction while computing the book profits u/s. 115JB of the I.T.Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.01.2012 levied penalty equal to the defaulted amount of tax i.e. of Rs.87,18,548/- u/s. 221(1) of the Act. The assessee preferred appeal before the learned CIT(A). However, before filing of the appeal the assessee made all the payment of tax along with the interest due. The assessee submitted before the CIT(A) that there was shortage of funds due to devaluation of dollar and default by the buyers in payments due to the assessee and, therefore, the assessee could not make the payment of tax within the stipulated period. The assessee submitted before the CIT(A) that the default in making the payment of tax was not deliberate or intentional rather the same was for good and sufficient reasons i.e. paucity of funds and financial stringencies etc. It was further submitted that the AO was required to consider relevant factors like the period of delay, conduct of the assessee, past history of payment of tax by the assessee and other circumstances and further the levy of maximum penalty without stating any reason was not justifiable. The maximum penalty could have been imposed in exceptional cases of deliberate default. The failure of the assessee to pay tax was not deliberate rather i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat High Court styled as "CIT v. Prarthana Construction Pvt. Ltd." Appeal No.1672/2010 decided on 15.11.2011. In the said case penalty of Rs.30 lacs was imposed by the AO against the principal tax payment of Rs.58.87 lacs. However, the Tribunal was of the opinion that penalty of Rs.30 lacs was excessive and, therefore, reduced the penalty by providing formula to impose penalty @15% per annum for every month of default till the actual payment. In appeal, the Hon'ble Gujarat High Court observed that though as per the provisions of section 221 of the Act penalty amount can be levied on the assessee up to total principal sum of tax due and there was no minimum amount prescribed under the said section, but that itself does not mean that the penalty can be imposed without proper reasons at a rate that AO might impose. It was also observed that no reasons were indicated by the AO for imposing such penalty. However, Hon'ble High Court was in agreement with the counsel for the revenue in pointing out that such a formula adopted by the Tribunal incorporating the provisions of sections 215, 216 and 217 into penalty proceedings u/s. 221 would not be ordinarily justified. However, the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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