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TMI Blog2021 (12) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... ,43,263/- for F.Y. 2012-13. On such failure, the AO passed, orders u/s 201(1) and 201(1A) on 07.10.2013 treating the appellant as assessee in default. It did not file any appeal against the orders u/s 201(1) 86 201(1A) dated 07.10.2013. The appellant remitted the tax deducted at source along with the interest. The AO thereafter initiated penalty proceedings u/s 221 of the I.T. Act. The appellant's main arguments before the AO were that it was facing severe financial hardship and that the same constitutes a 'good and sufficient reason' for not levying the penalty. The AO after considering the appellant's submissions rebutted the same and held that financial hardship is not reflected in the appellant's books of account and that financial hardship cannot be taken as good and sufficient reason for not remitting the tax deducted at source. Referring also to the past conduct of the companies under the same management, he levied a penalty u/s 221 of Rs. 1,08,38,662/- for F.Y. 2013-14 and Rs. 29,06,500/- for A.Y. 2014-15. 3. Aggrieved, the assessee went in appeal before the CIT(A). The CIT(A) confirmed the levy of penalty u/s. 221 of the Act. Again the assessee is in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the financial position of the appellant. [vii]. It is submitted that the financial difficulties which -the appellant faced are for the following reasons: * Aviation Turbine Fuel [ATE] is one of the significant components of the operating expenditure for providing charter services. The ATF prices were very high and there was a steep increase in the price which badly affected the margins of the appellant. * The competition in the charter service business increased as new competitors entered in this particular service industry and started giving very - low prices which eventually forced the appellant even to revise its tariff and which resulted in very less margin in earning profits. * The appellant had started a project in the state of Gujarat and substantial amount of investments were made. Due to certain diverse reasons which included regulatory hurdles and certain political dispensations, the said project could not materialise. * The appellant was operating lucrative charter service contract between Katra and Shri Matha Vaishnodevi shrine. Due to aggressive undercutting by a competitive bidder the appellant -could not renew the contract. This resulted not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exercised their discretion and levied penalty as if it is automatic and on an erroneous appreciation of the fact as regard to the financial position of the appellant without properly appreciating that the appellant had infact was and is in the financial difficulty. The learned authorities below without looking into the facts and circumstances of the case and further not appreciating the fact that the penalty proceeding under section 221 is independent proceedings to that of the assessment proceedings without applying his mind, invoked and levied penalty under section 221 of the Act and failed to exercise the discretion provided in the statute. [iii] Reliance is placed on the parity of reasoning of the decision of the Hon'ble Jurisdictional High Court of Karnataka decision in the case of CIT Vs. Manjunatha Cotton Et Ginning Factory [2013] 359 ITR 565 [Kar], though the said decision is in the context of section 271[1][c] of the Act, wherein the Hon'ble Court has held that the penalty proceedings are not automatic and the learned assessing officer has got the power either to impose or not to impose penalty. The same analogy has to be applied to the case in hand before this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is submitted that the statute does not provide for distinguishing between penalty liveable when an assessee defaults in payment of his own taxes i.e. self assessment tax, advance taxes, etc., and the payment of TDS. It is submitted that the provisions of section 221 is applicable for all the cases irrespective of the fact whether the default is towards non-payment of self assessment tax, advance tax, etc., not even for default in payment of advance tax. Thus, there is no distinction as held by the learned Commissioner of Income-tax [Appeals] that the immunity provided in the second proviso to section 221 of the Act is not applicable is far from the right conferred in the statute. [vi] As contended and also submitted and demonstrated before the authorities below the financial difficulty .and paucity of funds as per the second proviso to section 221 of the Act amounts to "good and sufficient reason". [vii] The appellant places reliance on the parity of reasoning and also the principles as laid out or derived out from the decisions of various Hon'ble Court in the country: * CIT Vs. Chembara Peak Estates Ltd., [1990] 183 ITR 471 [Ker]; * CIT Vs. Jaipur Electro [P] Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Commissioner of Income-tax [Appeals] has stated that there was huge net cash generated from investing activities [sic] operational activities. In this regard the appellant wishes to state and submit that the appellant had made provisions towards its day to day activities and the same are recurring in nature for its operational activities and for the appellant to be a going concern. It is submitted that though there may be cash and bank balance as at 31/03/2013 the appellant for the purposes of operational cost has to have certain minimum amount to meet the operational cost and as could be seen from the ledger account of the appellant for the month of April there will be lot of disbursement of payments towards its operational cost, which fact has been completely ignored 'by the learned Commissioner of Income-tax [Appeals]. It is further submitted that amounts considered by the learned Commissioner of Income-tax [Appeals] i.e. Rs. 9,44,43,669/-in her appellate order as regard to the cash flow is at the end of the year and it is only a abstract of the cash flow of the appellant which has resulted in wrong appreciation of facts. Thus, the learned Commissioner of Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally traversed above and prays liberty to address the same if raised by revenue at the time of hearing of the appeal. 19. In view of the above, the learned Commissioner of Income-tax [Appeals] has erred in denying relief to the Appellant and consequently, has passed a perverse order and which requires to be set aside for substantial cause of Justice and Equity. 4. The Ld.AR of assessee submitted that there is reasonable cause for remitting the TDS amount to the government exchequer belatedly and assessee has already paid the tax and interest amount and penalty may be deleted. On the other hand, the Ld.DR submitted that financial stringency cannot be accepted as a good and sufficient reason in matters relating to levy of penalty u/s. 221 of the Act. The assessee already got deducted the TDS, the said amount belonged to the government and it should be deposited to the government account within the stipulated time and failure of such things should be viewed seriously. The question of financial stringency cannot come to the rescue of the assessee as the assessee in possession of the money belonging to the government in his hand and it has used the government money for its business p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sufficient reasons. The only reason now shown is financial difficulties which under these circumstances does not appeal to be sufficient. It is no doubt that a mere default is not sufficient for levy of penalty but as the lower authorities pointed out that the assessee has been using the deducted TDS amount for meeting various business commitments and assessee continuously default the payment of TDS to the government account which is very serious in nature. Being so, the assessee cannot escape its consequences, it had kept back the tax deducted at sources with it. One can understand the financial difficulties of assessee is facing, if it was in defaulter for a short period. But in the present case, conduct of the assessee is that it continuously defaulting the payment of TDS amount to the government account by one was other reasons without remitting the same to the government account and these action of defaulter cannot be condoned by deleting the penalty. Accordingly, levy of penalty is confirmed. However, the Assessing Officer levied penalty at very exorbitant rate that 5% pm for which there is no legal sanction when the department itself has paid interest at 6% pa to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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