2014 (5) TMI 1086 - AT - Income Tax

Penalty under section 221(1) - non deposit tax under section 140A - Held that - As per Explanation 221(1), the assessee shall not cease to be liable to any penalty merely by reason of the fact that before the levy of penalty he has paid to the tax. In fact, in the present case, the penalty u/s 221(1) of the Act was levied on 30.12.2009 on which date, the assessee was enjoying the money by investing the same in his sister concern in which he is stated to have incurred losses and by placing balance sheet of such company cannot help the assessee to prove good and sufficient cause and such action of investing money in the said concern M/s. Nijjar Agro Foods appears to be quite intentional for avoiding preferred liability of Income-tax. Therefore, there cannot be any good and sufficient cause established before any of the authorities below or even before us for not levying penalty. No infirmity in the order of the ld. CIT(A) who has actually confirmed the levy of penalty under section 221(1)of the Act - Decided against assessee Rectification of mistake - reversal of returned income claiming exempt LTC gain which has been erroneously shown - Held that - We concur with the views of the ld. CIT(A) that the AO is quite justified in rejecting the assessee s rectification application because the mistake sought to be amended is not a prima facie mistake. Secondly, the assessee is submitting corroborating evidence with the rectification application which requires investigations and verification and as such the same is outside the purview of provisions of section 154 of the Act. However, the correct course would have been by seeking remedy by moving revision application u/s 264 before the CIT II, Amritsar soliciting for revision of order passed u/s 143(1) of the Act or by filing revised return.- Decided against assessee

Summary

Issues Involved:
1. Confirmation of penalty levied under section 221(1) of the Income Tax Act for non-payment of tax due under section 140A.
2. Rejection of application under section 154 for rectification of an alleged mistake in the assessment order processed under section 143(1).

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied Under Section 221(1):

The appellant contested the penalty of Rs. 50,00,000 levied by the DCIT, Circle-5, Amritsar, and confirmed by the CIT(A), Amritsar, for non-payment of tax due under section 140A. The appellant argued that the financial stringency faced by them and their company, Nijjer Agro Foods Ltd., was not adequately considered. They also claimed that the delay in payment was unintentional.

The Tribunal found that the appellant had filed the return of income on 26.03.2009, declaring an income of Rs. 2,24,44,720, but had not paid the self-assessment tax of Rs. 63,71,260 as claimed in the return. The AO issued a notice under section 221(1) after finding that the appellant had filed incorrect particulars. Despite having sufficient funds from the sale of agricultural land, the appellant invested the proceeds in their family concern instead of paying the tax liability. The Tribunal concluded that the appellant's actions were intentional and without reasonable cause, justifying the penalty under section 221(1).

2. Rejection of Application Under Section 154 for Rectification:

The appellant also challenged the rejection of their application under section 154 for rectification of an alleged mistake in the assessment order processed under section 143(1). The appellant argued that the agricultural land sold was beyond the municipal limits and should not have been treated as a capital asset, making the long-term capital gain shown in the return erroneous.

The Tribunal noted that the appellant had not filed a revised return or a petition under section 264, which could have been appropriate remedies. The AO and CIT(A) found that the mistake claimed by the appellant was not apparent from the record and involved debatable issues requiring investigation and verification. The Tribunal agreed, stating that the matter was outside the purview of section 154, which is meant for obvious and patent mistakes. The Tribunal upheld the CIT(A)'s decision to reject the rectification application, as the issue was not a prima facie mistake apparent from the record.

Conclusion:

The Tribunal dismissed both appeals, confirming the penalty under section 221(1) and the rejection of the rectification application under section 154. The Tribunal emphasized that the appellant's failure to pay the self-assessment tax despite having sufficient funds and the debatable nature of the rectification claim justified the decisions of the lower authorities.