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2016 (9) TMI 606 - ITAT MUMBAI

2016 (9) TMI 606 - ITAT MUMBAI - TMI - Penalty imposed u/s. 221(1) r.w.s. 201(1) - no reasonable and sufficient reason for delay in payment of the TDS - financial stringency - Held that:- What needs to be examined in the present case is as to whether there was any ‘good and sufficient reason’ with the assessee for having defaulted in the deposit of the requisite TDS into the Government exchequer within the stipulated period. Before us, assessee has pleaded good and sufficient reason for the dela .....

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574 - CALCUTTA High Court ) as held any loss or profit in the business of the assessee has nothing to do with the deposit of the TDS amount, therefore, the plea of financial stringency cannot be a ground to mitigate the rigors of section 221(1) of the Act.Therefore, following the aforesaid decision, we reject the plea of the assessee based on the financial stringency. - Second ground as canvassed as ‘good and sufficient reason' the Explanation below section 221(1) of the Act, in our view, i .....

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nsidering the penal nature of section 221 of the Act, it would be in the fitness of things to make a distinction between a case where the TDS is deposited suo-motu before any proceedings are initiated by the Assessing Officer and a case where the deposit of the TDS is made after initiation of proceedings by the Assessing Officer but before levy of penalty. Considered in the aforesaid light, in our view, the said Explanation would not militate against the assessee in the present case, because of .....

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r of assessee - ITA No. 4045/Mum/2015, ITA No. 4046/Mum/2015 - Dated:- 19-8-2016 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER For The Appellant : Shri Rakesh For The Respondent : Shri Javed Akhtar ORDER PER G.S.PANNU,A.M: The captioned appeals relate to the same assessee for two assessment years and involves a common issue, therefore, they have been clubbed together and a consolidated order is being passed for the sake of convenience and brevity. 2. ITA No.4045/Mum/2 .....

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following Ground of appeal. 1. That on facts and circumstances of the case and in law the Id. CIT. (Appeals) has erred in confirming the penalty imposed u/s. 221(1) r.w.s. 201(1) at ₹ 5,10,000/- by the Id. Dy. CIT (TDS)- 2(1), Mumbai in an ex-partee appeal order without appreciating the valid adjournment application filed one day before seeking the adjournment of hearing fixed on 16-04-2015. Appellant prays that the alleged penalty imposed being wrong on facts and bad in law, therefore sam .....

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t payments was not deposited with the State exchequer within the prescribed period. At the time of hearing, Ld. Representative for the assessee pointed out that the period prescribed to deposit the TDS with the State exchequer was 31st May, 2011, whereas assessee deposited it on 30/6/2011, alongwith requisite interest for late deposit. On 9/1/2013, the Assessing Officer issued a notice under section 221(1) r.w. 201(1) of the Act on the ground that assessee had not paid the requisite tax deducted .....

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adequate liquidity at the relevant point of time, but the delayed deposit was made along with applicable interest. The Assessing Officer was not satisfied with the explanation rendered by the assessee and held that there was no reasonable and sufficient reason for delay in payment of the TDS. Accordingly, he levied a penalty of ₹ 5,10,000/-, which was equivalent to around 3% of the defaulted amount of TDS. The said levy of penalty has been sustained by the CIT(A) by noticing that non-depo .....

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see also pointed out that even the interest payable, which was subject to TDS, was also not paid to the parties within the due date as assessee was facing a financial crunch. By referring page 11 of the Paper Book, it is pointed out that in almost all cases, the interest was paid to the respective parties after the deposit of requisite TDS into the State exchequer showing the bonafides of the assessee. The Ld. Representative for the assessee also pointed out that in the instant year assessee had .....

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r.w.s. 201(1) of the Act could not be deleted merely because of the financial crunch as held by the lower authorities, based on the decision of the Hon ble Calcutta High Court in the case of Jubilee Investments & Industries Ltd. vs. ACIT, 106 Taxman 210(Cal) as also the decision of the Amritsar Bench of the Tribunal in the case of M/s. Kapsons Industries Ltd. vs. ITO, in ITA Nos. 262/(Asr)/2012 & Others order dated 8/10/2012 and that of Delhi Tribunal in the case of ACIT vs. Catmoss Ret .....

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sing Officer to levy penalty in cases where an assessee is in default in making payment of tax deducted at source. In the present case, section 221(1) of the Act has been invoked by the Assessing Officer on the ground that assessee is in default for having delayed the deposit of TDS beyond the stipulated period. On this factual aspect, there is no dispute. The second proviso to section 221(1) of the Act prescribes that where the assessee proves to the satisfaction of the Assessing Officer that t .....

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quisite TDS into the Government exchequer within the stipulated period. Before us, assessee has pleaded good and sufficient reason for the delay in deposit of tax on two grounds. Firstly, it is sought to be made that there was absence of adequate cash liquidity at the relevant point of time, which lead to the delay in deposit of tax into the Government Exchequer. Absence of adequate cash liquidity or financial crunch, in our view, is not a good and sufficient reason to mitigate the rigors of sec .....

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levant:- 1O. If we read carefully the provisions of s.221. s. 221 provides that when assessee is in default or is deemed to be in default in making the payment of tax deducted at source he shall in addition to the amount of the arrears and the interest payable under subs.( 2) of s.220 be liable by way of penalty to pay such amount as the AO may direct. Therefore, whether assessee has paid the interest or not is immaterial. When he is found in default in depositing the amount of TDS within the ti .....

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t that once the TDS is deducted from the income of somebody, assessee is merely a custodian of that TDS amount. He cannot touch that amount. That amount to be deposited within the time prescribed in the Central Government Account and any loss or profit in the business of assessee has nothing to do with deposit of the TDS amount. In view of these aforesaid facts and relevant provisions discussed above, we do not find any merit in this appeal and no case is made out for interim order. 7.1 Therefor .....

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ditors. A pertinent point which also emerges is that such suo-motu deposit has been made by the assessee even before any proceedings under section 201(1) were initiated by the Assessing Officer. On this aspect, the Ld. Departmental Representative had referred to the Explanation below section 221(1) of the Act, which prescribes that an assessee shall not cease to be liable to penalty under sub-section (1) of section 221 of the Act merely by reason of the fact that before levy of such penalty, he .....

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ient reasons. In the present case, the bonafides of the assessee in complying with the requirements of depositing the tax into the Government Treasury stand established inasmuch as the tax has been deposited even before the corresponding interest amounts were paid to the respective creditors and also before any proceedings were initiated by the Assessing Officer. The Explanation below section 221(1) of the Act, in our view, is distinguishable, having regard to the facts of the present case. Nota .....

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