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2016 (5) TMI 1031 - ITAT CHENNAI

2016 (5) TMI 1031 - ITAT CHENNAI - TMI - Levy of penalty u/s.221(1) - default of non-payment of self-assessment tax - Held that:- Reading of Sec.221 of the Act shows that the Explanation wherein as “may” not “shall” which is subjective of the fact that imposition of penalty is neither automatic nor mandatory. The discretion is left with the A.O to decide whether to impose penalty or not, by considering the explanation of the assessee. This fact is evident from the provisions of section itself th .....

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nterest. The Ld. CIT(A) enhanced it to 25% of that one. The action of both the Authorities is not appropriate. Since the assessee show cause for delay in payment of self-assessment tax, accordingly, we delete the penalty u/s.221(1) of the Act. - Decided in favour of assessee - ITA No. 611/Mds/2014 - Dated:- 22-4-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For The Appellant by : Shri T. Banusekar, CA For The Respondent : Ms. Vijaya Prabha, JCIT .....

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penalty u/s.221(1) of the Act. The learned CIT(A) ought to have appreciated that after the order u/s.143(1) of the Act dated 26.07.2012 was passed there could not be any default of non-payment of self-assessment tax. 2.1 The assessee has filed petition for admission of additional ground that the above legal ground charging of levy of penalty was not raised on earlier occasion before this Tribunal die to lack of proper professional advice and the omission to include this ground on the part of th .....

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e ld. DR objected the admission of the additional ground. However, in our opinion, the issue raised by the assessee does not require any investigation of facts and the facts are already on record. As such, we do not agree with the argument of the ld. DR that it should not be admitted. Accordingly, relying on the decision of the Supreme Court in the case of National Thermal Power Co. Ltd cited supra, we admit the additional ground for adjudication, as the assessee is prevented by sufficient cause .....

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2/-. The return was processed on 26.7.2012 where the tax demand was raised at ₹ 4,69,71,250/-. 3.1 In the meantime, there was a survey u/s.133A of the Act at the business premises of the assessee on 5.12.2012. At the time of survey, Shri Om Prakash Agarwal, one of the partners of the firm admitted total income of ₹ 6,95,42,787/- for the asst. year 2009-10 and ₹ 17,58,90,439/- for the asst. year 2010-11. As the assessee failed to pay the demand raised, notice u/s.221(1) of the A .....

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observed that it is a fit case for not only levy of penalty but also for enhancing it . Accordingly, he confirmed the penalty and enhanced the penalty at 25% of selfassessment tax payable at ₹ 1,19,62,175/-. Aggrieved, the assessee is in appeal before us. 5. The primary objection of the ld. AR is that the notice dated 5.12.2012 issued by the AO to the assessee on 8.12.2012 mentioning the assessment year 2012-13 though the assessment involved was for the asst. year 2010-11. According to th .....

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2 11002 24,00,000/- 26.09.2012 11387 24,00,000/- 18.10.2012 10204 72,00,000/- 22.11.2012 10504 72,00,000/- 20.12.2012 10431 1,71,39,561/- 28,60,439/- 04.01.2013 14362 - 1,52,17,724/- Total 3,63,39,561/- 1,80,78,163/- Further, he submitted that the assessee received the following amounts on sale of deluxe apartment and building : 2008-09 ₹ 73,15,200.00 2009-10 ₹ 12,40,90,310.00 2010-11 Rs. 4,75,00,000.00 Total ₹ 17,89,05,510.00 5.1 The ld. AR has also filed details of payment ma .....

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on the judgment of the Rajasthan High Court in the case of CIT v. Munni Lal & Company (298 ITR 250), wherein it was held that : in order to levy penalty u/s.221 r/w.s.201, obligation is cast upon the AO to be satisfied that the default by the assessee was without good and sufficient reason; assessee-contractor having not deducted tax at source as required by s.194C(2) under bona fide belief that no tax was required to be deducted at source since the sub-contractors did not have taxable incom .....

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ne year, it is barred by limitation. He drew our attention to the sequence of events as follows : Date Particulars Remarks 31.07.2010 Due date for filing return of income for the AY 2010-11 u/s.139(1) 02.08.2011 Date of filing of return of income by the assessee for the AY 2010-11 31.03.2012 Due date for filing return of income for the AY 2010-11 u/s.139(4) 26.07.2012 Intimation u/s.143(1) for the AY 2010 11 26.09.2012 Date of issue of show cause notice u/s.221 (1) Default in payment of demand i .....

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341), for the proposition that the order passed by the AO treating the assessee is in default and without passing an order that the assessee is in default, penalty cannot be levied. 6. On the other hand, the ld. DR submitted that the first notice issued u/s.221(1) of the Act dated 26.9.2012 clearly shows the assessment year as 2010-11 and that notice was acknowledged by Shri Om Prakash Agarwal on 27.9.2012. In the notice u/s.221(1) of the Act dated 8.10.2012, it is also clearly stated the asst. .....

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sec. 220(2) of the Act to hold that any such clerical mistake to be rectified in the view of the provisions of the Act. Further, the ld. DR submitted that there is no merit in the contention of the ld. AR in stating that the assessee has not received the notice dated 26.9.2012, because the assessee has acknowledged the receipt of notice dated 26.9.2012. Regarding the merits of the case, he submitted that first show cause notice was issued on 26.9.2012 u/s.221(1) of the Act and before that the a .....

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greement for sale entered into on 01.04.2009 between the appellant (vendor) and M/s. Deluxe Apartments and Building Company regarding the sale for a consideration of ₹ 17,87,06,700/-. It was mentioned in the agreement that the purchaser has already paid ₹ 83,15,050/- and the balance sale consideration ₹ 17,03,91,650/- within a period of 24 months and as per following schedule. On or before 30.06.2009 ₹ 50,00,000 On or before 30.09.2009 ₹ 2,00,00,000 On or before 31. .....

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nt tax, etc. in time. But the appellant for the reasons best to it chose to pay the taxes very late that too after the initiation of penalty proceedings u/s 221(1) of the Act. The above details reveals that there is no good and sufficient reasons for the delay in payment of taxes. It is a case where the assessee was deliberately failing to make the payment of tax. The default was willful, Explanation to sec.221 of the Act reads as under: For the removal of doubt, it is hereby declared that an as .....

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ntention that the notice was ignored because no proceedings were pending for AY 2012-13 becomes unbelievable because the firm having filed the return for AY 2012-13 with no tax payable. The appellant was certainly aware that the proceedings related to AY 2010-11 and not 2012-13 (since no demand was payable as per return for AY 2012-13). As on 31.03.201, the appellant had enough funds which are as under: 31.03.2010 31.03.2009 Mr. V. Kumaravel 4,50,00,000 Nil Mr. S. Umapathy 40,00,000 10,00,000 Ta .....

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reasons. Reliance was placed on the decision of Bombay High Court in the case of CIT vs Hydroflex Equipment Limited (2006) 282 ITR 418 wherein it was held that penalty could be levied when there was no sufficient cause for non-payment of tax for AY 1997-98. The Jurisdictional High Court in the case of CIT vs Smt. Vijayanthimdla (1977) 108 ITR 882, held that section 221 of the Act applies to a case of default in payment of advance tax also. The question referred to the Madras High Court was &quo .....

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ed the material on record. Sec. 140A (1) and the Explanation thereto read as follows: "140A. (1) Where any tax is payable on the basis of any return required to be furnished under s. 115WD or s. 115WH or s. 139 or s. 142 or s. 148 or s. 153A or, as the case may be, s. 158BC after taking into account- (i) the amount of tax, if any, already paid under any provision of this Act; (ii) any tax deducted or collected at source; (iii) any relief of tax or deduction of tax claimed under s. 90 or s. .....

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the return and the return shall be accompanied by proof of payment of such tax and interest. Explanation: Where the amount paid by the assessee under this sub-section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance if any, shall be adjusted towards the tax payable." 8. As evident, s. 140A provides that where any tax is payable on the basis of any return to be furnished, af .....

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rst adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. 9. Sec. 221 (1) and the Explanation thereto read as under : "221. (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-s. (2) of s. 220, be liable, by way of penalty, to pay such amount as the AO may direct, and in the case of a continuing default, .....

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it is hereby declared that an assessee shall not cease to be liable to any penalty under this sub-section merely by reason of the fact that before the levy of such penalty he has paid the tax." 10 Thus, in case of default in payment of self-assessment tax, the assessee would be liable to penalty. The Explanation to s. 221 (1) specifically provides that just because he had paid the tax before the levy of penalty under s. 221(1), his liability to pay penalty under s. 221(1) shall not cease. 1 .....

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essee has not paid the self-assessment tax of ₹ 4,78,48,708/-, the A.O levied penalty u/s.221(1) at 10% of ₹ 4,78,48,708/- worked out at ₹ 47,84,870/-. However, the same was enhanced by the Learned Commissioner of Income Tax(A) at 25% of that amount worked out ₹ 1,19,62,175/-. 12. The second proviso to Sec.221(1) of the Act provides that if the assessee proves to the satisfaction of the A.O that the default in making the payment of tax was for good and sufficient reason, .....

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planation of the assessee is that insufficient funds to pay the self-assessment tax and according to the assessee, payment of business commitment is far most important than the payment of tax, which was discharged with interest. 13. First of all, un-denyingly the assessee was in default for making the payment of tax as well as interest leviable u/s.234A, 234B & 234C of the Act for which reason only penalty u/s.221(1) of the Act has been levied by the Authority. In the case of Nachimuthu Indu .....

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l considerations are pitted against each other, the case of substantial justice deserves to be preferred for other side cannot claim to have vested right in injustice being done because of non deliberate delay as held by the Supreme Court in the case Culcutta, Land Acquisition, Anathnalh v. MST Kittji reported in AIR 1987 SC 1353. Further as held by Culcutta High Court in the case of Shreeniwas & Sons Vs. ITO reported in [1974] 96 ITR 562 (Cal) that Tax" and "interest" are dif .....

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of the Tribunal in the case of Ashaben Jayendrabhai Shah Vs. ITO reported in [1988] 31 TTJ 211 (ITAT[Ahm]) wherein observed that the word Tax should not be interpreted so as to include therein interest payable and that the amount of penalty should be worked out only on the amount of the tax remaining payable, as finally determined. Further, in the case of Hindustan Steel Ltd. Vs State of Orissa reported in 83 ITR 26(SC) wherein held that an order imposing penalty for failure to carry out a stat .....

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e above aspects of the matter, though they were put before the authorities below in detail as noted by the Learned Commissioner of Income Tax(A) in his order. 14. In the present case, the assessee s conduct, as discussed herein above, does not amount to the assessee either having acted deliberately in defiance of law or in conscious disregard of its obligation or to contumacious or dishonest conduct. The explanation given by the assessee that paucity of fund to make payment of selfassessment tax .....

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