2013 (10) TMI 831 - AT - Income Tax

Penalty u/s. 221(1) r.w. Section 140A (3) assessee in default - Held that - Assessee did not file any reply before the AO and before the FAA it submitted that because of the mistake committed by the members of the staff tax could not be in time - FAA has clearly held that before him the assessee did not furnish any good or sufficient reason - Words Good and Sufficient reason have not been defined in the Act - beyond control of the assessee can be termed sufficient cause - the assessee had not shown any cause as why it could not pay taxes in time - Assessee is a corporate entity paying tax of lacs of Rupees every year - It is not functioning from a remote village - It is not the case that assessee was facing financial crunch and because of that it could not pay taxes in time. Penalty imposed/confirmed by the AO/FAA is in the nature of additional tax for securing compliance with the provisions of the Act - Penal provisions for non-payment of taxes have been incorporated in the Act, as stated earlier, so that the tax is paid, by the assessees, within the time allowed u/s.140A(1) of the Act - income of an assessee belongs to him, but his right is subject to payment of dues to the Sovereign i.e; taxes - State has all the rights to recover taxes and a make reasonable provision to secure payment of tax on due date - the assessee had not offered any good and sufficient reason for not paying taxes on due dates, so FAA was justified in rejecting appeal filed by it - payment of tax, along with interest, after due dates cannot be considered a sufficient cause for adhering to the provisions of section 140A of the Act - the order of the FAA upheld Decided against Assessee.

Issues Involved:
1. Levy of penalty under Section 221(1) read with Section 140A(3) of the Income-tax Act, 1961.
2. Opportunity of being heard before the levy of penalty.
3. Validity of the reasons provided by the assessee for non-payment of self-assessment tax (SAT) on time.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 221(1) read with Section 140A(3):
The primary issue revolves around the levy of penalty under Section 221(1) read with Section 140A(3) of the Income-tax Act, 1961. The assessee filed its return of income on 30.09.2009, declaring a nil income and computed the liability on account of self-assessment tax (SAT) at Rs. 10.70 lakhs. The Assessing Officer (AO) found that the SAT was not paid before the filing of the return of income under Section 139(1). Consequently, the AO levied a penalty of Rs. 1,07,019/- (10% of the SAT liability) under Section 221(1) of the Act, considering the assessee in default as per the provisions of Section 140A(3).

2. Opportunity of Being Heard Before Levy of Penalty:
The assessee contended that the Commissioner of Income-tax (Appeals) erred in confirming the penalty without providing any opportunity of being heard as required by the first proviso to Section 221(1). The AO issued a show-cause notice to the assessee, asking for an explanation as to why penalty should not be levied for default in payment of SAT. However, the assessee did not file any reply to the show-cause notice before the AO. The First Appellate Authority (FAA) also confirmed the penalty, stating that the assessee did not furnish any good or sufficient reason for the delay in payment of SAT.

3. Validity of Reasons Provided by the Assessee for Non-Payment of SAT on Time:
The assessee argued that the delay in payment of SAT was due to an oversight by the staff members of the accounts section, who were overburdened with work. The FAA rejected this explanation, stating that the submission could not be accepted as genuine because the payment of taxes is a regular and systematic activity undertaken by the assessee. The FAA held that the assessee-company had not advanced a good and sufficient cause for not paying SAT in time for the year under consideration.

The Tribunal reviewed the history, background, and principles governing Section 140A of the Act, highlighting that the section was introduced to ensure that the tax due on self-assessment is paid along with the return of income. The Tribunal emphasized that the liability to pay advance tax is based on the principle of "pay as you earn," and failure to do so can result in the assessee being treated as in default, leading to the levy of penalty.

The Tribunal noted that the AO has the discretion to levy penalty and is not compelled to do so in every case. However, the assessee must be given a reasonable opportunity of being heard before the levy of penalty. In this case, the AO followed the mandate of the Act by issuing a show-cause notice, but the assessee failed to provide a sufficient reason for the delay in payment of SAT.

The Tribunal concluded that the assessee did not offer any good and sufficient reason for not paying taxes on due dates. The penalty imposed by the AO and confirmed by the FAA was deemed justified as it was in the nature of additional tax for securing compliance with the provisions of the Act. The Tribunal upheld the order of the FAA, deciding the effective ground of appeal against the assessee-company.

Conclusion:
The appeal filed by the assessee was dismissed, and the order of the FAA confirming the penalty under Section 221(1) read with Section 140A(3) was upheld. The Tribunal emphasized the importance of timely payment of taxes and the discretionary nature of the penalty provisions, which require a reasonable opportunity of being heard and sufficient cause for any delay in payment.

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