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2020 (3) TMI 1110

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..... ce 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 favour of assessee - ITA No.696/Asr/2017 - Dated:- 17-3-2020 - Sh. N.K. Choudhry, Judicial Member And Sh. Anadee Nath Misshra, Accountant Member For the Appellant : Sh. S.K. Vatta, (Ld. CA) For the Respondent : Sh. Charan Dass (Ld. Sr. DR) ORDER PER ANADEE NATH MISSHRA, AM: The instant appeal has been preferred by the Assessees against the order dated 04.09.2017 passed by the learned. CIT(Appeals), Jalandhar u/s 250(6) of the Income Tax Act, 1961 (hereinafter called as the Act ). The assessee has raised the following grounds of appeal. 1. Whether on the facts of the case and in law, in absence of any demand notice issued u/s 156 of the Act and also in view of the fact on record that the Return of Income for the cited Asstt. year 2014-15 was itself declared defective and non est u/s 139(9) of the Income Tax Act by CPC Cell and consequently there was no existing demand ou .....

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..... as 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 & interest payable: ₹ 22,14,320/- The sum of ₹ 22,14,320/- was required to be paid u/s 140A before the filing of the return. However, the assessee failed to deposit the tax on the returned income as per 140A of the Act, It has, therefore, been rightly deemed to be an assessee in default u/s 140A(3) of the Act. In response to the show cause notice issued by Ld.AO as to why a penalty u/s 221(1) be not imposed for the above default, the explanation of the assessee in its reply dated 22.07.2016 was that if had already paid the liability as under: Paid on 23.06.2016 ₹ 10,00,000/- Paid on 20.07.2016 ₹ 6,00,000/- Paid on 21.07.2016 ₹ 6,14,320/- Upon the consideration of the matter, its held that the above sums deposits more than one year after the filing of the return of income did absolve the assessee of the default committed u/s 140A(3). During ap .....

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..... e 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 other income. The argument of paucity of funds thus does not hold good. The assessee has not been able to prove that the default was for good and sufficient reason so as to fall within the proviso to section 221(1) of the Act. Hence, the penalty levied under section 221(1) is upheld. During appeal, Ld. AR could not inform as to how the sums of ₹ 22,14,320/- claimed to have been paid by the appellant and TDS have been accounted for to the credit of the assessee if there was no order of processing u/s 143(1). In case the original return u/s 139(4) has been treated as non-est and not processed u/s 143(1) and no subsequent regular assessment u/s 143(3) has been made, return of income for A.Y.14-15 may be called u/s 148 of the Act and the TDS/amount of ₹ 22,14,320/- paid subsequently adjusted against the taxes and interest u/s 234 A,B,C etc. of the regular .....

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..... e 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 learned Authorized Representative of the assessee placed reliance on the aforesaid written submissions vide letters dated 22.11.2018 and 10.07.2019. For the sake of reference the relevant portions of the aforesaid written submissions are reproduced as under: Letter dated 22.11.2018. 1) Scope and Application of section 140(A)(3) of the Act, post Amendment of 1989 , the Intention of the Legislature, at the time of Insertion of the Amendment under section 140 (A) (3) makes it clear that the old provision of 140(A) (3) prescribing for levy of penalty for Non-payment of Self Assessment Tax was no longer found necessary because the said default would, after the said Amendment, invite Mandatory charging of Interest. Therefore, ostensibly The Legislature did not envisage that consequent of the said Amendment, the default in payment of self Assessment Tax would be covered .....

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..... n 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 specifically done away in the new provision . Therefore considered in the aforesaid light, the fact that the amended section 140A(3) w.e.f 1st April,1989 does not envisage any penalty for non-payment of self-assessment tax, the AO was not justified in levying the impugned penalty by making recourse to section. 221 in consonance with the amendment carried out in s. 140A(3) w.e.f 1st April ,1989, the AO erred in levying the impugned penalty, 3) And Since the return of income for the relevant Asst year 2014-15 as filed by the assessee on 31st March 2015 vide acknowledgement No.554990203310315 was itself declared an invalid nonest Return by the communication ref no.CPC 1/4/5/95/1509631219 dated 30/3/2016 (copy at page 10, of the paper books submission of 16th may 2018) and since no demand was raised under section 156 of the Act, which is mandatory condition of provisions, there .....

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..... 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 having been raised the High Court, in our opinion the High Court should not have adopted too technical a approach by refusing to deal with the plea because it was not raised in the manner in which the High Court thought it should have been raised. The plea went to the root of the matter. The plea was raised before the departmental authorities right from the ITO to the Tribunal and was not given up before the High Court also. It would not have been difficult for the High Court to ask the Income-tax Department to produce the record of the proceedings and to show if the demand notice was at all served on the assessee. A little more sensitive approach is required to be adopted in the process of dispensing justice when it is found that valuable property of a person was sought to be sold away for recovery of such arrears as did not exist at all. 2. Pursuing the amende .....

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..... 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 the same. What we are trying to emphasise is if the piea of the Revenue is to be accepted, based on the amendment to Sec. 140A(3) of the Act, it would mean that prior to 01.04.1989 the same default invited penai provisions under two sections, namely, Sec. 140A(3) as well as Sec. 221(1) of the Act, which would appear to be peculiar and unintended. Furthermore, the intention of the legislature at the time of insertion of the amended Sec. 140A(3) makes it dear that the old provisions of Sec. 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 be covered by the scope of Sec. 221(1) of the Act. T .....

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..... on. 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 assessee by aforesaid order in the case of Heddle Knowledge Pvt. Ltd. vs.ITO (supra). 8. We have heard both sides and perused the material available on record. We 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 (supra). The relevant portion of the order in the said case is reproduced as under: …...Notably, the penalty envisaged Sec. 140A (3) in the unamended provision was on the statute aiongwith 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 the same. What we are trying to emphasise is if the piea of the Revenue is to be accepted, based on the amendment to Sec .....

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..... d 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 our notice to persuade as to take a view different from the view taken by Co-ordinate Bench of ITAT Mumbai in the aforesaid case of Heddle Knowledge Pvt. Ltd. vs. ITO (supra). There is no dispute between the two sides that the issue as raised in the present appeal is squarely covered in favour of the assessee by aforesaid order in the case of Heddle Knowledge Pvt. Ltd. vs. ITO (supra) passed by Co-ordinate Bench of ITAT, Mumbai. 9.1 Respectfully following the decision of the ITAT, Mumbai Bench, in the aforesaid case of Heddle Knowledge Pvt. Ltd. vs. ITO (supra), we also decide the issue in dispute in the present appeal in favour of the assessee and set aside the aforesaid orders dated 04.09.2017 & 28.07.2016 of learned CIT(A) and the Assessing Officer. The aforesaid penalty amounting to ₹ 8,85,730/- is hereby cancelled. 10. In the result, the appeal fi .....

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