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2020 (3) TMI 1110

..... e find that the issue in dispute in the present appeal before us is squarely covered by the aforesaid order of Co-ordinate Bench of ITAT, Mumabi in the case of Heddle Knowledge Pvt. Ltd. vs. ITO [2018 (3) TMI 208 - ITAT MUMBAI] held that the fact that the amended Sec. 140A(3) w.e.f. 01.04.1989 does not envisage any penalty for non-payment of self-assessment tax, the Assessing Officer was not justified in levying the impugned penalty by making recourse to Sec. 221(1) of the Act. Sec. 221 of the Act remains unchanged, both during the pre and post amended Sec. 140A(3) of the Act and even in the pre-amended situation, penalty u/s 221 of the Act was not attracted for default in payment of self-assessment tax, which was expressly covered in pre 01.04.1989 prevailing Sec. 140A(3). Thus, without there being any requisite corresponding amendment to Sec. 221 of the Act in consonance with the amendments carried out in Sec. 140A(3) of the Act w.e.f. 01.04.1989, the Assessing Officer erred in levying the impugned penalty. Thus, on this aspect, we hereby set-aside the order of CIT(A) and direct the Assessing Officer to delete the penalty imposed u/s 140A(3) r.w.s. 221(1) of the Act. - Decided in .....

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..... g the course of penalty proceedings. I, N. K. SEHGAL, the appellant do hereby declare that what is stated above is true to the best of my information and belief. 2. Vide impugned order dated 28.07.2016 u/s 221(1) r.w.s.140A(3) of Income Tax Act, 1961, the Assessing Officer imposed penalty of ₹ 8,85,730/- u/s 221(1) of I.T. Act. 3. Aggrieved, the assessee filed appeal before the learned Commissioner of Income Tax (Appeals). Vide impugned appellate order dated 04.09.2017 the learned Commissioner of Income Tax (Appeals) [ CIT(A) for short] dismissed the assessee s appeal. The relevant portion of the aforesaid impugned appellate order dated 04.09.2017 of learned CIT(A) is reproduced as under: 5. I have considered the facts of the case and written submissions of the appellant, The return of income for A.Y.2014-15 was filed by the appellant on 31.03.2015, which was return u/s 139(4) of the Act, declaring total income of ₹ 85,11,630/- with the following particulars of tax liability. Total Income: ₹ 85,11,630/- Net Tax payable: ₹ 26,30,094/- Less TDS: ₹ 8,40,000/- Balance payable: ₹ 17,90,094/- Interest payable: ₹ 4,24,230/- Total tax & interes .....

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..... cease to be liable to penalty under this section merely by reason of the fact that before the levy of such penalty he has paid the tax. A still another plea taken during appeal is that the penalty has been unjustly levied without taking cognizance of the appellant s request to Ld. AO that the unpaid tax u/s 140A may be adjusted out of the refund due to a sister concern, Kapson Industries Ltd, in A.Y. 2013-14, which refund was more then the tax due u/s 140A and for which a no- objection was also filed from the sister concern. The plea does not held the appellant. All refunds issued by the department are A/c payee and go directly to the bank a/c furnished by an assessee in its return of income and there is no provision to adjust refund of one PAN against the demand in the case of any other PAN. Refund adjustment is possible only against the demand outstanding in the case of the assessee itself. The only course open for the appellant was to withdraw the refund money from the bank a/c of the sister concern and deposit it against the liability payable in its own case. During the year, the appellant has received rental income ₹ 84,00,000/- on which TDS was made @ 10% and also had o .....

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..... Officer reported at (2018) 169 DTR 396. 3. That the worthy CIT (A) and Assessing Officer both have been wrong and unjustified in sustaining/imposing penalty u/s 221(1) of the Act, and the said imposition of the penalty u/s 221(1) cannot be an automatic consequence of default for non payment of tax as prayed and in view of the legal citations placed on record, which also have summarily been ignored. 4. That the assessee craves to add, modify, alter, delete any grounds of appeal during the course of penalty proceedings. I, N. K. SEHGAL, the appellant do hereby declare that what is stated above is true to the best of my information and belief. 4.1 Further, in the course of appellate proceedings in ITAT, the following papers/documents were filed from the assessee s side. • Written submission vide letter dated 10.07.2019 • Copy of the order u/s 139(9) of the Income Tax Act by CPC Cell • Copy of the reply submissions for notice u/s 221(1) of the Act dated 18th July, 2016. • Copy of the no objection to adjust the due refund of the Associate entity dated 18th July, 2016. • Written submissions vide letter dated 10.07.2019. 5. At the time of hearing before us, the l .....

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..... the time of insertion of the amended section 140A(3) makes it dear that the old provisions of section 140A(3)prescribing for levy of penalty for non-payment of self -assessment tax was no longer found necessary because the said default would henceforth invite mandatory charging of interest .Ostensibly, the legislature did not envisage that consequent to the amendment, the default in payment of self -assessment tax would hitherto to be covered by the scope of section 221(1). The emphasis of the revenue is to point out that the nonpayment of self-assessment tax renders the assessee "in default "in the amended provision which further prescribes that "all the provisions of this Act shall apply accordingly and therefore ,the default is hitherto(from 1st April ,1989) covered by section 221(1). the consequence of the aforesaid two expressions contained in section 140A(3) are also not of the type sought to be understood by the revenue, and rather the assessee is to be treated as an "assessee in default" for the limited purpose of enabling the AO to make recovery of the amount of tax and interest due and not for levy of penalty, an aspect which has been specificall .....

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..... the deductor or the collector under sub-section (1) of section 143 sub section (1) of section 200A or sub section (1) 2060(B), the intimation under those sub section shall be deemed to be a notice of demand for the purpose of this section". However, in view of the facts stated above no such order was passed u/s 143(1) or sub section (1) of section 200A of the Act and admittedly no such demand notice u/s 156 of the Act was issued/served on the assessee of any tax, penalty, fine or any other sum payable for the cited Asstt. Year 2014-15. ii) The aforesaid arguments & plea of the assessee that there was no order u/s 143(1) & not valid demand notice u/s 156 of the Act was not found sustainable in terms of opening para at page 7 of 9, of the orders of the worthy CIT (Appeals). iii) As regards provisions of section 156 of the Act vis a vis absence of valid demand, reliance is placed on the decision of the Hon'able Supreme Court in the case of Sri Mohan Wahi vs Commissioner of Income Tax as reported in (2000) 248 ITR 922 (SC) at Page 7 of 8 of the judgement, wherein the Hon'able Supreme Court have held ; In the present case, the plea as to non-service of demand notice .....

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..... y the Revenue to the effect that for having defaulted in payment of self-assessment tax within the stipulated period, assessee qualifies to be "an assessee in default" as prescribed in the amended Sec. 140A(3) of the Act and, therefore, if one is to read the same with Sec. 221(1) of the Act, the action of the Assessing Officer in imposing penalty is quite justified. In sum and substance, it is sought to be emphasised on the strength of Sec. 221(1) of the Act that the penalty is leviable so long as the default is in the nature which renders the assessee as an "assessee in default" for payment of tax. Sec. 221(1) of the Act prescribes for penalty when assessee is in default in making the payment of tax. On the face of it, the argument of the Revenue appears to be justified, so however, the same does not merit acceptance if one examines the issue in slight detail. Notably, the penalty envisaged Sec. 140A (3) in the unamended provision was on the statute alongwith the penalty envisaged u/s 221 of the Act. Once Sec. 140A(3) of the Act has been amended w.e.f. 01.04.1989, as we have seen earlier, there is no amendment of Sec. 221 of the Act and it continues to remain t .....

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..... t in consonance with the amendments carried out in Sec. 140A(3) of the Act w.e.f. 01.04.1989, the Assessing Officer erred in levying the impugned penalty. Thus, on this aspect, we hereby set- aside the order of CIT(A) and direct the Assessing Officer to delete the penalty imposed u/s 140A(3) r.w.s. 221(1) of the Act. Now, therefore, in view of the aforesaid facts, and in law as per relevant provisions and legal citations as relied upon, the assessee respectfully request and pray for due grant of relief as prayed. 6. At the time of hearing before us, the learned Authorized Representative of the assessee drew our particular attention to order of Co-ordinate Bench of ITAT, Mumbai in the case of Heddle Knowledge Pvt. Ltd. vs. Income Tax Officer [2018] 169 DTR 396 (Mum) and contended that the issue in dispute is squarely covered in favor of the assessee by this decision. 7. On the other side, the learned Departmental Representative relied upon the orders of the learned CIT(A) and the Assessing Officer dated 04.09.2017 & 28.07.2016. However, he did not dispute the contention of learned Authorized Representative of the assessee, that issue in dispute is squarely covered in favour of a .....

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..... he new provision. Therefore, considered in the aforesaid light, in our vi w, the fact that the amended Sec. 140A(3) w.e.f. 01.04.1989 does not envisage any penalty for non-payment of self-assessment tax, the Assessing Officer was not justified in levying the impugned penalty by making recouse to Sec. 221(1) of the * Act. Before parting, we may again emphasise that Sec. 221 of the Act remains unchanged, both during the pre and post amended Sec. 140A(3) of the Act and even in the pre-amended situation, penalty u/s 221 of the Act was not attracted for default in payment of self-assessment tax , which was expressly covered in pre 01.04.1989 prevailing Sec. 140A(3). Thus, without there being any requisite corresponding amendment to Sec. 221 of the Act in consonance with the amendments carried out in Sec. 140A(3) of the Act w.e.f. 01.04.1989, the Assessing Officer erred in levying the impugned penalty. Thus, on this aspect, we hereby set- aside the order of CIT(A) and direct the Assessing Officer to delete the penalty imposed u/s 140A(3) r.w.s. 221(1) of the Act. 9. At the time of hearing before us, neither side has brought any distinguishing facts or circumstances or legal provisions to .....

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