Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s Yamuna Agro Farms Pvt Ltd, M/s Wardha Greenfields Pvt Ltd, M/s Vindhya Greenlands Pvt Ltd, M/s Swarnamukhi Greenfields Pvt Ltd, M/s Swarnagiri Greenfields Pvt Ltd, M/s Vamsadhara Agro Pvt Ltd, M/s Uttarashada Bio-Tech Pvt Ltd Versus Deputy Commissioner of Income Tax

2015 (6) TMI 559 - ITAT HYDERABAD

Penalty under section 221(1) read with section 140A(3) - default in payment of the tax demand - Held that:- The common issue involved in the present appeals thus is squarely covered by the order of the Tribunal in other group companies involving materially the same facts (2014 (12) TMI 431 - ITAT HYDERABAD) and this position is not disputed even by the learned representatives of both the sides. We therefore respectfully follow the said order of the Tribunal wherein held perusal of the penalty or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nalty @ 5% of the admitted tax liability would be reasonable and meet the ends of justice. Accordingly, we direct AO to confine the penalty u/s 221(1) of the Act to 5% of the admitted tax liability in each case - Decided partly in favour of assessee. - ITA No. 675 to 681/Hyd/2014 - Dated:- 27-5-2015 - P M Jagtap, AM And Saktijit Dey, JM,JJ. For the Appellant : Mr S Rama Rao For the Respondent : Mr Rajat Mitra ORDER Per P M Jagtap, AM These seven appeals filed by seven assessees against seven sep .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

previous year relevant to A.Y. 2008-09, all these seven companies along with other group companies sold certain extent of land and the profit arising therefrom was declared as long term and short term capital gain. In the returns of income filed on 30.09.2008, tax payable on the income so declared was also arrived at by the assessee which was slightly increased by the A.O. while processing the returns of income filed by the assessees companies under section 143(1) on 27.08.2009. The details of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

warnamukhi Greenfields P. Ltd. 7,25,17,590 2,15,70,490 2,37,07,140 M/s. Swarnagiri Greenfields P. Ltd. 3,47,82,190 1,03,46,020 1,13,70,840 M/s. Vamsadhara Agro P. Ltd. 7,34,49,020 2,17,73,300 2,39,30,050 M/s. Uttarashada Bio-Tech P. Ltd. 5,17,36,320 1,53,89,100 1,69,13,470 2.1. As noticed by the A.O., the assessee companies however had not paid either any advance tax or even self assessment tax before filing their returns of income. Even after issue of intimations under section 143(1) resulting .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n of the A.O. for the default in payment of tax by the assessee companies. The assessee companies also filed their reply to the show cause notices in writing offering their explanation as under : "(i) At the outset it is submitted that there has been no willful of any kind by the assessee to evade payment taxes and the proposed initiation of penalty proceedings is unsubstantiated without cause. (ii) We further submit that as per the reasons mentioned in the earlier show cause notice there h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e the tax payment. All the properties were under attachment/restraint. We have no right to dispose of the assets and pay the taxes. (iv) In the absence of liquidity in view of what is stated above to charge us with the willful attempt in not discharging the taxes will not be justifiable int eh given facts of our case." 2.2. The above explanation of the assessees was also not found satisfactory by the A.O. for the following reasons given in the penalty orders. (i) "The assessee company .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ying out its business activities for a long time. It is properly supported by many professionals. Despite the well established business setup and professional support, it chose not to pay any amount during the period it derived income, thus violated all the provisions of advance tax. Subsequently, it got its books of account audited and arrived at taxable income. Despite this, it chose not to pay any self-assessment tax even while filing the return of income on 30.09.2008. Even after receiving t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2008 for tax payment is also examined carefully. The Department initiated proceedings on 17.11.2009 under sec.221(1) of the IT. Act, as the assessee company defaulted in making the tax payment. These penalty proceedings continued to exist. As there was change of incumbency of the office, a fresh opportunity of being heard was given. Hence, it is not correct to conclude that the earlier penalty proceeding has not established any willful intention of tax default by the assessee company. The submis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

which derived income for it. As mentioned above, the company had liquidity as per the Bank Statement and was having sufficient current assets to clear the tax dues. This dearly shows that the assessee company does not have good and sufficient reasons for non-payment of the tax. (iii) The submission that the subsequent events are well within the knowledge of revenue and all the properties are under attachment/ restraint and they do not have any right to dispose of any asset to pay the taxes is al .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tax dues. What were the efforts made by the assessee company prior to January, 2009 to clear the statutory tax payments? It failed to show the evidences of its efforts to mobilize the amount to meet the statutory payments. As mentioned above, the assessee company had liquidity and current assets also, to meet the statutory requirements but the same was not fulfilled by it. Simply stating that its properties are under attachment now, is not a sufficient reason to justify its continued default for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

7-08. The fact remains that the assessee company derived income and the present default of tax payments is, as a result of not honouring the provisions of advance tax while earning the income or not paying any self-assessment tax while filing the return of income despite having sufficient money and current assets at its disposal. Hence, the facts clearly show that there were no good and sufficient reasons for non-payment of the taxes by the assessee company." 2.3. For the reasons given abov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

,000 3. M/s. Vindhya Greenlands P. Ltd. Rs.52,00,000 4. M/s. Swarnamukhi Greenfields P. Ltd. Rs.47,00,000 5. M/s. Swarnagiri Greenfields P. Ltd. Rs.23,00,000 6. M/s. Vamsadhara Agro P. Ltd. Rs.47,00,000 7. M/s. Uttarashada Bio-Tech P. Ltd. Rs.34,00,000 3. The penalties imposed by the A.O. under section 221(1) read with section 140A(3) of the I.T. Act were challenged by the assessee companies in the appeals filed before the Ld. CIT(A) and elaborate submissions were made on their behalf during the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

OCs became 96% subsidiary companies of M/s Hill Country Property. The 14 LOCs were to receive 27% of income recognized by the developer. b. The 14 LOCs including the appellant accordingly recognized the income at mercantile basis being a corporate entity even though there was no tangible receipt of any income. The income was recognized by the appellant merely by passing journal entry wherein the developer's account was debited with ₹ 7,90,82,029/- and a liability was created as payable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he date of filing of tax returns. As per the Fstatutory obligation ROI was filed on 30.09.08. d. The AO listed out various deposits and bank balances but failed to mention that there was no balance "and funds were not available at the time of filing of return. e. The return was processed u/s 143(1) on 27.08.2009 and the problems for the flag ship company of the group M/s. Satyam Computer Services Ltd had started in December, 2008 culminating in the statement of Sri Ramalinga Raju in January .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s letter, the refund due from M/5 Maytas Properties Ltd for AYs 07-08, 08-09 and 09-10 amounting to ₹ 11.45 crores was requested to be adjusted against six companies - (a) Swarnamukhi Greenfields Pvt Ltd (b) Himagiri Biotech Pvt Ltd Cc) Sindhu Green lands Pvt Ltd (Goman Agro Farms Pvt Ltd) (d) Himagiri Greenfields Pvt Ltd were mentioned. It is noted that the appellant company is not among these six companies. h. In terms of the Company Law Board Order, dated 13.01.2011, M/s IL&FS was i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d sufficient reason in the appellant's case for non levy of penalty. CBDT circular no.119 dated 26.09.1973 was cited. The appellant also extracted clause B of Para 2 of the circular which reads as under :- "In cases where sale proceeds of the asset transferred have not been received for any reason, the income tax officer may not formally extend time for payment u/s.140(A) and 220 but may not impose penalty for non-payment of thee tax in view of the special circumstances due to which the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h attachment. The appellant also cited the following case laws governing the levy of penalty. The gist of the submissions inferred from the said case laws and my remarks are given in the findings. 3.1. The Ld. CIT(A) did not find merit in the submissions made on behalf of the assessee companies as above and rejecting the same, he proceeded to confirm the penalties imposed by the A.O. under section 221(1) read with section 140A(3) of the Act for the following reasons given in his impugned orders .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

denced from subsequent court proceedings by the owners association of those properties. Thus, during the period 2007-08, neither the appellant nor the developer HCPL were short of funds. Yet, it chose not to pay any advance tax. It also chose not to pay any tax by way of self assessment tax even though it filed the tax return on 30.09.2008. 5.2. It is to be noted that the entire defense is built around the financial stringency and lack of funds and also the problems that the company along with o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch it very well knew, would arise. 5.3. The appellant had cited the following case laws governing the levy of penalty. The gist of the submissions inferred from the said case laws and my remarks are summarized below : Sn. Case Law Gist Remarks 1. Hindustan Steel Ltd vs State of Orissa (83 ITR 26)(SC) An Order imposing the. penalty for failure to carry out a statutory obligation is the result of quasi criminal proceedings. Penalty will not ordinarily be imposed unless the party obliged either act .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

old till February 2008, the appellant acted in conscious disregard of its obligation to pay the taxes (by way of advance tax) which is a statutory obligation. 2. CIT vs. Raunaq & Co. (P) Ltd. (140 ITR 407) (Delhi High Court). The A.O. did not levy the penalty in an automatic manner. He had issued show cause notices and passed the penalty orders setting forth facts and reasons for levy of penalty. 3. CIT vs Chembara Peak Estates Ltd (183 ITR 471)(Kerala High Court) 4. CIT vs Dadu Wala & C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a mechanism for payment of taxes by which, ideally, the entire tax liability is expected to be paid as the assessee earns during the previous year itself. Payment of self assessment tax itself is expected to be more of a final settlement of accounts with corrections if any and payment of residuary tax. Thus, Self assessment tax itself is a last resort. This is clear from the very opening sentence of Section 190 under the chapter XVII - "Collection and recovery of tax" which reads as u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to note is the requirement to pay as you earn by any means so that revenues keep coming at a steady pace and would not cause difficulty either to the tax payer or to the Govt. Section 191 - Direct payment [***] In the case of income in respect of which provision is not made under this Chapter for deducting income-tax at the time of payment, and in any case where income-tax has not been deducted in accordance with the provisions of this Chapter, income-tax shall be payable by the assessee direct .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ment of self assessment tax. This was also much before the appellant company got embroiled in the "Satyam fallout". 4. Aggrieved by the orders of the Ld. CIT(A) confirming the penalties imposed by the A.O. under section 221 (1) read with section 140A(3) of the Act, the assessee companies have preferred these appeals before the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that similar penalties imposed by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly applied our mind to the decisions relied upon by ld. AR. At the outset, it needs to be mentioned that there is no dispute to the fact that assessees have failed to pay self-assessment tax u/s 140A of the Act while submitting its return of income for the impugned AY. Therefore, assessees are to be treated as assessees in default u/s 140A(3) of the Act thereby making them amenable to imposition of penalty u/s 221(1) of the Act. Section 221(1) makes it clear that AO can impose penalty in a case .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssee proves to the satisfaction of AO that the default was for good and sufficient reasons, no penalty shall be levied. From the plain reading of the aforesaid provision, it becomes clear that imposition of penalty u/s 221(1) is not automatic or mandatory. AO has been given discretion to impose penalty in an appropriate case whereas assessee has also been given an opportunity to satisfy AO that there is good and sufficient reasons for default in making payment. 30. Keeping in view the aforesaid .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

₹ 16.67 crores on sale of land in June, 2007. On perusal of bank account copies submitted in the paper book, though it appears that the balance at the beginning of the year and at the end of the year is nil, but at the same time there are substantial transactions in between. In fact in case of one of the assessee on 24/10/07, an amount of ₹ 5 crores was received and the same was transferred to M/s Maytas on the very next day i.e. on 25/10/2007. The same is also the case with other as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or default, assessee has to be treated as assessee in default in terms with section 140A(3) of the Act and thereby liable to be visited with penalty u/s 221(1). Though, we fully agree with the principles laid down in the decisions cited by ld. AR, ratio laid down therein cannot be applied uniformly de hors the facts involved in a particular case. Having held so, we will now examine whether the quantum of penalty imposed by AO is reasonable. As stated earlier section 221(1) of the Act has not fix .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version