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2016 (5) TMI 1169 - ITAT AMRITSAR

2016 (5) TMI 1169 - ITAT AMRITSAR - TMI - Penalty levied u/s 221(1) - delay in payment of self assessment tax u/s 140A - Held that:- From the analysis of provisions of section 140A(1), we find that the section requires that assessee is liable to pay taxes on the total income on the basis of any return u/s 139 after reducing the advance taxes and tax deducted at source, if any and such return shall be accompanied with the proof of payment of such taxes and interest. Sub-section 3 of section 140A .....

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much prior to the due date of filing of return which happened to be 31/01/2011 and if the entire tax has been paid before the filing of due date of return there can not be said to be default u/s 140A(1) of the Act. The only default committed by assessee is that it had filed its return of income on 30.09.2010 and by the date of filing of return the taxes were not paid but the fact remains the due date of filing of return was extended to 31st January, 2011 and, therefore, technically the assessee .....

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e penalty in this case was not impossible - Decided in favour of assessee. - I.T.A No. 341(Asr)/2014, I.T.A No. 398(Asr)/2014 - Dated:- 13-4-2016 - Sh. A. D. Jain, Hon ble Judicial Member And Sh. T. S. Kapoor, Hon ble Accountant Member For the Appellant : Sh. Salil Aggarwal (Adv.) For the Respondent : Sh. Tarsem Lal (DR.) ORDER Per T. S. Kapoor (AM): These are cross appeals filed by the assessee as well as by the Revenue against the order of learned CIT(A) dated 31.03.2014 for Asst. Year 2010-11 .....

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case not in accordance with law since the entire self assessment tax alongwith interest was duly deposited within a period of two months from the filing of return of income by the appellant and return of income was filed before the due date u/s 139(1) of the Act. (iii) That the learned Commissioner of income Tax (Appeals) has also failed to appreciate that there was reasonable cause on the part of the appellant for delay in deposit of self-assessment tax and the alleged breach was at best a tec .....

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and sustained of ₹ 23,46,616/- may kindly be deleted and appeal of the appellant company be allowed. Whereas the following grounds of appeal has been taken by the Revenue in ITA No.398(Asr)/2014. (i) Whether the Commissioner of Income Tax (Appeals), Jammu was right in law in reducing the penalty u/s 221(1) of the I.T. Act., 1961 to 25%. (ii) Whether the Commissioner of Income Tax (Appeals), Jammu was right in law holding that the maximum penalty may not be levied in the first instance unle .....

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at the assessee filed return of income on 30/09/2010 declaring a profit of ₹ 10.34 crores, but did not file any evidence of payment of advance tax or self assessment tax. Out of total tax liability of ₹ 1,75,84,292/-, the assessee had paid only 25.20 lakhs (on account of TDS) leaving a balance demand of ₹ 1,50,55,026/-. The Assessing Officer observed that the said tax was payable under the provisions of section 140A which was not paid by assessee and therefore, the assessee was .....

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of self assessment taxes that assessee made such payments. The Assessing Officer in this respect observed that payment of taxes was made after November, 2010 whereas the penalty notice u/s 221(1) was issued by the Department on 28.10.2010. The Assessing Officer, therefore, held that assessee had defaulted on making payment of self assessment tax and assessee was also required to furnish cash flow statement to determine the availability of cash. From the perusal of cash flow statement, the Assess .....

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ppeal Nos.4 to 6, 8 & 9 related to the plea of the appellant that the appellant deposited the tax within two months of the filing of return and the delay was on account of reasonable cause. The appellant during the course of penalty proceedings argued that the tax could not be deposited on time because of shortage of funds. However, on verification of cash flow statement submitted by the appellant himself, it was observed by the AO that funds of ₹ 93,86,475/- was available with the app .....

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under rule 46A as there was no reasonable cause for not providing such evidences during penalty proceedings. Further, if the funds were borrowed by the appellant for running of business, the payment of income tax liability was also a part of business and priory in repayment of bank loan over income tax liability where there is nothing on record to show that there was undue pressure from bank authorities to liquidate the loan could not be considered as reasonable cause for non payment of tax. Ho .....

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fore passing of the order. I have considered the submission dated 19.03.2014 and 27.03.2014 of the appellant reiterating the liquidity crunch faced by the appellant. The appellant has pleaded that cash in flow was less than the cash out flow and the reasons given were that the huge inventory (24.13 crores) and sundry debtors (65.35crores) were financed out of borrowed funds of ₹ 86.81 crores. It was also pointed out that due to volatile condition in the State of J&K during the relevant .....

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s of various parties which were sent for collection. Out of sucn cheques deposited an amount of ₹ 61.08 lacs was received from the bank in the account only after closure of the financial year 2010. The argument of the appellant is considered and found that for advance tax payment this may 1 be of some relevance but does not explain as to why the deposit of tax was not made immediately after the close of the financial year and deferred till the first week of month of December, 2011. In CIT .....

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the maximum amount prescribed under the statute. As per scheme of Act, any number of penalties could be levied u/s 221(1) without any time limitation is suggestive of the fact that the maximum penalty may not be levied in the first instance unless situation warrants otherwise. The minimum and maximum penalty prescribed are such amount as the AO may impose for default or continuing default and amount of tax in arrear respectively. From facts and circumstances of the case the gravity of default di .....

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to expect that the entire amount available with the appellant should have been utilized for the tax payment and bringing the finances in the business to-a halt. The appellant has to see the business expediency, other pressing needs and what is the best for his business at that point of time. Nevertheless, the payment of Income Tax is also an integral part of the business liability. I am of the view that out of ₹ 93,86,475/- the appellant should have spared certain percentage towards the ta .....

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t that the appellant has deposited the tax voluntarily. The appellant has argued that the tax has been deposited before the order u/s 221(1) was passed by the AO and accordingly the penalty imposed by the AO is not justifiable. It is noticed that the tax was paid by the appellant after the show cause notice which was issued to the appellant for imposition of penalty for default in payment of self assessment tax. The explanation to the section 221(1) clearly covers such cases and provides that an .....

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provisions of section 140A, the assessee shall be liable to pay tax together with interest before furnishing the return and the return shall be accompanied by the proof of payment of such tax and interest. Therefore, the assessee is in default for making payment of tax, if he does not deposit self assessment tax before filing of return. Section 140 A talks about payment of tax before filing of return and not before due date of return. Therefore, the appellant could not take the benefit of extend .....

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the return is to be considered as defective and assessee cannot plead that the return cannot be treated as defective till the due of filing of return. This ground of appeal of the appellant is, accordingly, dismissed. 5. Aggrieved with the order both parties are in appeal before us. 6. The learned DR first took up appeal and inviting our attention to the facts and circumstances, he submitted that it was a case of a company and it was required to deposit advance tax in four quarterly installments .....

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had not paid any of the installments of advance tax which had become due to the Government and therefore, the assessee had used the Government money for its business operations which is not permitted. The learned DR further argued that the learned CIT(A) has relied upon cash flow statement as on 31.03.2010 for allowing relief and has ignored to verify the cash position of assessee between 1.4.2010 to date of filing of return i.e., 30.09.2010. Therefore, the learned CIT(A) has wrongly allowed re .....

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larly along with payment of taxes since 1989. The learned AR submitted that in none of the years the assessee had committed any default in payment of due taxes and therefore, the assessee cannot be branded as a willful defaulter. The learned AR submitted that for the year under consideration the date of filing of Income Tax Return was extended to 31st January, 2011 and in this respect our attention was invited to (PB- 83 & 84) where the orders u/s 119 extending the date of filing of return w .....

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ons of this act and does not include advance tax as argued by learned DR. The learned AR in this respect invited our attention to (PB-70) where a copy of notice issued by Office of Assistant Commissioner of Income Tax was placed and submitted that the Department itself had issued notice for non payment of self assessment tax u/s 140A of the Act. The learned AR submitted that assessee had deposited interest under the provisions of section 234A to 234C of the Act which amounted to approximately &# .....

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ions of section 221(1). The learned AR submitted that section 140A(3) of the Act went through a change w.e.f. 1.04.1989. He submitted that before 1.04.1989 the penalty for non payment of tax or any part of tax was imposable for every month during which the default continued whereas after the amendment for non payment of tax and interest or any part of it the assessee is deemed to be an assessee in default. It was submitted that penalty under section 221(1) for violation of provisions of section .....

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ions of Income Tax Act gave Assessing Officer discretionary powers to charge interest and to levy penalty for the same default and therefore, with the amendment the payment of interest u/s 234A to 243C were made mandatory. Inviting our attention to para 4.17 of the said circular the learned AR submitted that the circular itself clarifies that since the rate of mandatory interest for failure to pay the tax has been increased, it was not necessary to retain this provision any more. The learned AR .....

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banks was placed. The learned AR submitted that there was no sufficient cash balance available with the assessee as per the fund flow statement read with break up of funds as per paper book page 85 and assessee had not diverted any of its funds for non business purpose, therefore, penalty u/s 221(1) was not imposable as there was reasonable and sufficient cause for non payment of taxes. Reliance in this respect was placed on the following case laws. (i) DCIT vs. Aanjaneya Life Care Ltd. 61 taxm .....

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so. Regarding the judgments relied upon by learned AR the learned DR submitted that these cannot be relied as the assessee had not been able to prove financial difficulties. He further submitted the assessee needed to file cash flow statement from June 2009 onwards on which date the first installment fell due. The learned DR further submitted that assessee had also not filed cash flow statement after 31st March, 2010, therefore, the learned CIT(A) has wrongly allowed relief to the assessee and k .....

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p; Kashmir to 31st January, 2011 is placed. It is also an undisputed fact that the assessee had filed return of income on 30.09.2010 which is a fact which Assessing Officer has noted in his order. It is also an undisputed fact that assessee had deposited the entire tax in installments on the following dates. (i) 15.11.2010 Rs.25,00,000/- (ii) 23.11.2010 Rs.25,00,000/- (iii) 30.11.2010 Rs.35,00,000/- (iv) 1.12.2010 Rs.65,55,026/- Total Rs.1,50,55,026 From the above dates of payment of taxes it is .....

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with the return of income and therefore, could have complied with the provisions of law. The penalty u/s 221(1) is attracted for violation of payment of tax u/s 140A of the Act. Therefore, it is important to go through the provisions of section 140(A)(1) and 140A(3) which reads as under: 140A (1) Where any tax is payable on the basis of any return required to be furnished under [section 115WD or section 115 WH or] section 139 or section 142 [ or section 148 or [ 153A or], as the case may be,sec .....

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with the provisions of section 115JAA [or section 115JD],] [the assessee shall be liable to pay such tax together with interest payable under any provisions of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing 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 subsection falls short of the aggregate of the tax and interest a .....

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rovisions of this Act shall apply accordingly.]***** From the analysis of above provisions of section 140A(1), we find that the section requires that assessee is liable to pay taxes on the total income on the basis of any return u/s 139 after reducing the advance taxes and tax deducted at source, if any and such return shall be accompanied with the proof of payment of such taxes and interest. Sub-section 3 of section 140A requires that if an assessee fails to pay whole or any part of any such ta .....

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the entire tax has been paid before the filing of due date of return there can not be said to be default u/s 140A(1) of the Act. The only default committed by assessee is that it had filed its return of income on 30.09.2010 and by the date of filing of return the taxes were not paid but the fact remains the due date of filing of return was extended to 31st January, 2011 and, therefore, technically the assessee was entitled to pay taxes before the due date of filing of return which happened to be .....

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