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2015 (11) TMI 738 - ITAT CHANDIGARH

2015 (11) TMI 738 - ITAT CHANDIGARH - [2015] 43 ITR (Trib) 454 (ITAT [Chand]) - Penalty under section 221(1)- Held that:- Liability of the assessee has increased and that credit rating of the assessee has reduced but there was a profit in the assessment year under appeal as well as in subsequent assessment year 2011-12. May be the profit has reduced but it is not a case that the assessee has not earned any profit. Therefore, considering the material on record, we do not find it to be a case of g .....

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fficer was not justified in levying the penalty of 20 per cent. of the arrears of tax.

Considering the totality of the facts and circumstances as noted above, we hold that 20 per cent. of the penalty of outstanding demand was excessive, unreasonable and therefore, we modify the orders of the authorities below and direct the Assessing Officer to restrict the penalty under section 221(1) of the Act by restricting the penalty at 7.5 per cent. of the outstanding self-assessment tax of &# .....

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ppellant ORDER The order of the Bench was delivered by 1. Bhavnesh Saini (Judicial Member).-The appeal of the assessee as well as the cross-objection by the Revenue-Department are directed against the order of the learned Commissioner of Income-tax (Appeals) (Central) Gurgaon dated January 24, 2013. 2. Briefly the facts of the case are that the Assessing Officer found that assessment tax amounting to ₹ 8,14,66,981 in respect of the return filed by the assessee on October 14, 2010 for the a .....

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he Assessing Officer vide order under section 221(1) of the Act levied penalty of ₹ 1.62 crores, i.e., 20 per cent. of ₹ 8.14 crores under section 221(1) of the Act for failure of the assessee to pay assessment tax for the assessment year under appeal. 3. The assessee challenged the penalty order before the learned Commissioner of Income-tax (Appeals) and explained that the Assessing Officer had not acceded to the request of the assessee for adjustment of refund for the assessment ye .....

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vide letter dated March 11, 2011. Further, the balance of ₹ 14,67,981 had been deposited. However, the Department had adjusted the refund against the assessment year 2006-07 without intimating the assessee. Therefore, the assessee was under the bona fide belief that no assessment tax would be payable because the refund would be adjusted in the assessment year under appeal. The assessee in support of its submissions, relied upon several decisions. It was submitted that the refund should be .....

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ily over drawn and no further limit was available. (iv) Downward rating issued by CRISIL on review of the assessee's financial affairs. 4. The assessee also relied upon the decision of the Kerala High Court in the case of CIT v. Chembara Peak Estates Ltd. [1990] 183 ITR 471 (Ker) in which it was held that the assessee proved non-payment of tax stating paucity of funds and financial stringency due to unavoidable financial position. Therefore, penalty was cancelled. The assessee also relied up .....

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e impugned order. The assessee has challenged the adjustment of refund for the assessment year 2007-08 against the demand for the assessment year 2010-11. It is an undisputed fact that self-assessment tax to the tune of ₹ 8,14,66,981 was payable by the assessee for the assessment year 2010-11. As per the provisions of the Act, the assessee is considered to be in default for failure to pay the whole or a part of self-assessment tax payable under section 140A(1)(i) and thereby rendering itse .....

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at the Assessing Officer had clearly explained the position and the circumstances under which the adjustment was being made. Para 5 of the impugned order is reproduced below : '5. Vide this office letter dated March 15, 2011, it was brought to the notice of the assessee that it had claimed loss of ₹ 18,21,20,035 in its return of income for the assessment year 2006-07. This loss was disallowed by the Assessing Officer in the order dated December 30, 2008 passed under section 143(3) read .....

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ad with section 143(3) and also in pursuance of order of the hon'ble Income- tax Appellate Tribunal. It was found that ₹ 18,21,20,035 represented income for the assessment year 2006-07. Thus addition was made for the assessment year 2006-07 and the refund arose for the assessment year 2007-08. It was adjustable against the demand of assessment year 2006-07 and not from the self-assessment tax. It was further inti mated to the assessee by this letter that refund of ₹ 6,99,35,000 d .....

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time. These reasons were not placed before the Assessing Officer for his consideration. Be that as it may, as rightly stated in the impugned order, the recovery of self-assessment tax is not a consequence of any order passed by the Department but was a consequence to the return filed voluntarily under section 139(1). It is clear from section 140A that it is the duty of the assessee to self assess his income and pay the tax so calculated together with interest as payable under the provi sions of .....

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. Hence, I am inclined to confirm the penalty levied under section 221(1) by the Assessing Officer." 5. The assessee challenged the levy of penalty under section 221(1) of the Act. The Revenue filed the cross-objection challenging that since the assessee did not pay self-assessment tax on the returned income, therefore, the learned Commissioner of Income-tax (Appeals) has erred in admitting the appeal in contravention of the provisions of section 249(4)(a) of the Act. 6. The cross-objection .....

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onveyed by the Commissioner of Income-tax (ITAT)-II, Chandigarh to Commissioner of Income-tax (Central) Gurgaon vide letter dated March 28, 2014 and consequently same was conveyed to the Assessing Officer. Proposal was sent to the Additional Commissioner of Income-tax, Range Central, Chandigarh on May 1, 2014, for further direction and in the meantime certified copy of Form 36 was taken. Further approval of the Commissioner of Income-tax (Central) Gurgaon was sought which was conveyed vide lette .....

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the appeal unless the self-assessment taxes on returned income have been deposited. 8. On the other hand, learned counsel for the assessee submitted that the Revenue-Department has not explained any sufficient cause for not filing the cross-objection within the period of 30 days from the receipt of the notice in appeal of the assessee. Therefore, cross-objection is time barred. He has relied upon the decision of the Kerala High Court in the case of Silver Star Engineers v. ITO [2004] 266 ITR 37 .....

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occasions. The Tribu nal after considering all the aspects took the view that the assessee had not satisfactorily explained the reason for the delay of six days. The Tribunal was justified in its refusal to condone the delay." 9. He has also submitted that the hon'ble Supreme Court had dismissed the special leave petition against this judgment reported in [2004] 266 ITR (St.) 2. 10. We have considered the rival submissions. Section 253(4) of the Income-tax Act provides that, "the .....

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ection after the expiry of the relevant period if it is satisfied that there was sufficient cause for not presenting it within that period. The appeal of the assessee in I. T. A. No. 348 of 2013 against the penalty order under section 221(1) was taken up for hearing by the Appellate Tribunal on July 4, 2013. On this date, Shri Sudhir Sehgal appeared for the assessee and Shri Manjit Singh, Departmental representative appeared for the Revenue-Department. The appeal of the assessee was adjourned ti .....

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March 28, 2014 the Commissioner of Income-tax (ITAT) Chandigarh conveyed the issue raised in the cross-objection to the Commissioner of Income-tax (Central) Gurgaon and thereafter the same proceedings were taken up by the Assessing Officer and the Commissioner of Income-tax (Central) also approved filing of the cross-objection vide letter dated May 7, 2014 and only thereafter, the cross-objection was filed in the office of the Tribunal on May 29, 2014. These facts clearly disclosed that prior t .....

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348 ITR 7 (SC) held as under (headnote) : "Held, dismissing the applications, the Department had itself mentioned in its affidavit and was aware of the date of the judgment of the Division Bench of the High Court as September 11, 2009. Even, according to the deponent, its counsel had applied for the certified copy of the judgment only on January 8, 2010, and the copy was received by the Department on the very same day. There was no explanation for not applying for certified copy of the judg .....

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Department or the person concerned had not evinced diligence in prosecuting the matter to the court by taking appropriate steps. The persons concerned were well aware or conversant with the issues involved including the prescribed period of limitation for taking up the matter by way of filing a special leave petition in the Supreme Court. In the absence of plausible and acceptable explanation, the delay could not be condoned mechani cally merely because the Government or a wing of the Governmen .....

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tion offered by the Department for the delay except mentioning of various dates, the Department had failed to give acceptable and cogent reasons sufficient to condone such a huge delay. By the court : Unless Government bodies, their agencies and instrumentalities have reasonable and acceptable explanation for the delay and there was bona fide effort, there is no need to accept the usual explanation that the file was kept pending for several months or years due to considerable degree of procedura .....

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ailed to disclose any sufficient cause for not filing the cross-objection from July 4, 2013 to March 28, 2014. In the absence of any explanation for non-action in the matter, it is difficult to believe that the Revenue-Department has any sufficient cause for not presenting the cross-objection within the period of limitation. The cross-objection of the Revenue is thus dismissed being time barred. 13. Now we take up the appeal of the assessee for levy of the penalty under section 221(1) of the Act .....

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eed the amount of tax in arrears. The second proviso to this provision provides that where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section. 14. From the facts of the case in the light of the findings of the authorities below, it is clear that self-assessment tax amounting to ₹ 8.14 crores in respect of the return filed by the assessee for the assessment year under appeal was .....

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enalty, however the penalty amount would not exceed the amount of tax in arrears. In the case of the present assessee, the Assessing Officer has levied penalty of 20 per cent. of the arrears of taxes, i.e., 8.41 crores and levied the penalty of ₹ 1.62 crores. Therefore, it is to be considered whether the assessee has any good and sufficient reasons for default in payment of taxes or whether the Assessing Officer has correctly levied the penalty of 20 per cent. of the arrears of taxes. 15. .....

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ax (Appeals) has quoted from the order of the Assessing Officer the reasons why the adjustment of taxes from the refund of the assessment year 2007- 08 were not given in the case of the assessee. The assessee further pleaded that there was a financial difficulty in paying the taxes. Learned counsel for the assessee reiterated the same submissions and submitted that financial condition of the assessee-company was in bad shape which is evident from the perusal of the balance-sheet for the financia .....

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s as on March 31, 2011, thereby increasing the liability by approximately 33 per cent. It would prove paucity of the funds in the case of the assessee. 16. Learned counsel for the assessee also submitted that these circumstances ultimately led to dip in the credit rating as is evident from pages 8 and 9 of the paper book which had also worsened financial condition of the assessee. Due to paucity of the funds and steep fall in the profit during the financial year 2010-11, during which self-assess .....

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iability of the assessee has increased and that credit rating of the assessee has reduced but there was a profit in the assessment year under appeal as well as in subsequent assessment year 2011-12. May be the profit has reduced but it is not a case that the assessee has not earned any profit. Therefore, considering the material on record, we do not find it to be a case of good and sufficient reasons for not paying the taxes as per law. Therefore, penalty shall have to be levied in the facts and .....

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