Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (8) TMI 603 - ITAT HYDERABAD

2015 (8) TMI 603 - ITAT HYDERABAD - TMI - Penalty under section 221(1) read with section 140A(3) - assessee companies had not paid either any advance tax or even self assessment tax before filing their returns of income nor even after issue of intimations under section 143(1) resulting into raising of demand - Held that:- Similar penalties imposed by the Assessing Officer and confirmed by the learned CIT(A) in the cases of other group companies [2014 (12) TMI 431 - ITAT HYDERABAD] involving mate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at such a high figure at the first instance, in our view, is not justified. 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. 555/Hyd/2014, 557/Hyd/2014, 558/Hyd/2014, 559/Hyd/2014, 560/Hyd/2014, 561/Hyd/2014, 562/Hyd/2014 - Dated:- 5-8-2015 - SHRI P.M.JAGTAP and AND SHRI SAKTIJIT DEY, JJ. For The Appellant : Shri S.Rama Rao For The Respondent : Shri Solgy Jose T.Kottaram DR 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

re companies which belong to a group of companies established by Sri Ramalinga Raju and his family members. During the previous year relevant to A.Y. 2008-09, all these seven companies alongwith 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 slightly increased by the Assessing Offic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reenlands P. Ltd. 7,65,64,570 2,27,74,270 2,50,30,160 M/s.Nagavalli Greenlands P. Ltd. 7,21,89,450 1,93,36,232 1,93,36,232 M/s.Medravathi Agro Farms P. Ltd. 4,47,64,910 1,19,21,651 1,19,21,651 M/s.Himagiri Bio-Tech P. Ltd. 7,76,58,350 2,08,01,099 2,08,01,099 M/s.Himagiri Greenfields P. Ltd. 7,65,64,570 2,05,08,126 2,05,08,126 M/s. Goman Agro Farms P. Ltd. 7,65 64,570 2,05,08,126 2,05,08,126 2.1. As noticed by the Assessing Officer, the assessee companies, however, had not paid either any advance .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Directors of the assessee companies were also recorded by the Assessing Officer under section 131. They however could not offer any explanation to the satisfaction of the Assessing Officer 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 th propos .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

subsequent events are well within the knowledge of revenue including the periodical requests made to arrive at a suitable arrangement that shall enable us to discharge 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 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 expl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing the return of income on 30.09.2008 as self-assessment tax. The concept of advance tax payment is Pay as you earn . The assessee is a company and carrying 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that the earlier show cause notice could not establish any willful intention of tax evasion and the assessee company was not having any means on 30.09.2008 for tax payment is also examined carefully. The Department initiated proceedings on 17.11.2009 under sec.221(1) of the LT. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

port of many professionals. Hence, it is appropriate to conclude that it was well aware of the tax liability also when it entered into any transactions 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 k .....

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. Till that time all the properties were at the disposal of the assessee company only and nothing stopped it from liquidating its assets to clear the 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 sam .....

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 assessee company is simply highlighting the present liquidity problem without giving any reasons for its continued default from the F.Y. 2007-08. 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 .....

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 Assessing Officer on all the seven assessee companies as under : Sl. No. Name of the Assessee Penalty imposed by the Assessing Officer Rs. 1. M/s. Konar Agro Farms P. Ltd., 25,00,000 2. M/s.Sindhu Greenlands P. Ltd. 50,00,000 3. M/s.Nagavalli Green- lands P. Ltd. 35,00,000 4. M/s.Medravathi Agro Farms P. Ltd. 20,00,000 5. M/s.Himagiri Bio-Tech P. Ltd. 40,00,000 6. M/s.Himagiri Greenfields P. Ltd. 40,00,000 7. M/s. Goman Agro Farms P. Ltd. 40,00,000 3. The penalties imposed by the A.O. under s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

long with 14 other land owning companies (LOCs) through a development agreement dated 30.12.2005. The land transferred in all was about 85.36 acres (the appellant s share was 7 acres) and the 14 LOCs 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

realizing money from: HCPL due to the funds constraint experienced by the developer. The appellant could not also realize any money out of debit balances in its books even subsequent to the date of filing of tax returns. As per the •statutory 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. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Extract from the letter dated 15/01/10 filed before CIT© with a prayer for suitable arrangement for the payment of taxes in relation to demand raised u/s 143(1) was also given. In this 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 G .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

16/3/11 (50 lakhs), 16/3/11 (77.97 lakhs), 3/6/11 (75 lakhs) and 10/04/12 (23.59 lakhs). i. Imposition of penalty u/s 221 is only discretionary and not mandatory. j. There was good and 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 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

n of penalty. The appellant also stated that the paucity of funds is illustrated by subsequent attachment of accounts and the inability to recover any amount through such 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 learned CIT(A) did not find merit in the submissions made on behalf of the assessee companies as above and rejecting the same .....

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. HCPL had quite a good reputation as well as the hype and was quite in demand and there were a number of buyers who had deposited even advance monies to book a flat/villa as evidenced from subseque 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. et, it chose not to pay any advance tax. It also chose not to pay any tax by way of self assessment tax even though filed the tax return .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. The appellant d receive lot of funds and deployed them elsewhere as evidenced from the balance sheet (current assets) with ut bothering about the tax liability, which it very well new, 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 V/s. State of Orissa (83 ITR 26)(SC) An Order imposing the. penalty .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

authority to be exercised judiciously and on a consideration of all the relevant circumstances. In this case, in the period from June, 2007' when the lands were sold 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 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

appellant s references to situation after January, 2009 are of no help. 7. Bramha Bazaz Inns(P) Ltd Vs Jt. CIT (2003) (79 TTJ (Pune) 342. 5.3.1. The Income Tax Act sets out a mechanism for payment of taxes by which, ideally, the entire tax lia ity 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 ta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

se may be, in accordance with the provisions of this Chapter. 5.3.2. Section 191 provides for direct payment of taxes, if there was no TDS. The essential thing to not 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 1 9 1 - 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 pay .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ter 9/1/09 - nothing much is said about what prevented the appellant to pay in the period 2007-08 or up to the date on which the tax return was filed without payment 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 learned 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 Tribuna .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

V/s. ACIT (ITA.No.487,488,490, 491 and 494/Hyd/2014) which read as under : 29. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other material on record. We have also carefully 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 selfassessment tax u/s 140A of the Act while submitting its return of income for the impugned AY. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eft to the discretion of AO. However, the first proviso to section 221(1) provides that before imposition of penalty, assessee shall be given a reasonable opportunity of being heard. Whereas, second proviso provides that where assessee proves to the satisfaction of AO that the default was for good and sufficient reasons, no penalty shall 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 giv .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee that due to liquidity problem, it could not pay the tax liability on the date of filing return as assessee did not have sufficient funds with him. However, it is a fact on record that assessee has received about ₹ 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 same time there are substantial transactions in between. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tted tax liability could not be discharged due to liquidity problem or unavailability of funds is not acceptable. Considered in the aforesaid perspective, as assessee has failed to make out a case of reasonable cause for 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| 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