2015 (8) TMI 1023 - AT - Income Tax

Penalty u/s.140A(3) r.w.s. 221 - assessee failed to pay self-assessment tax - CIT(A) deleted the addition admitting additional evidences - Held that - In the instant case it is an undisputed fact that the assessee did not appear before the Assessing Officer despite repeated opportunities given by him. This act of assessee by ignoring the Assessing Officer is highly deplorable. However, considering the mishaps in the family caused due to the death of his parents within a very short span and the subsequent illness of his wife as stated before the CIT(A) and not controverted by the Revenue we are taking a liberal view of this action on the part of the assessee in not appearing before the Assessing Officer. However, it is also an admitted fact that the assessee before the CIT(A) has appeared and brought to his notice the chronology of events, i.e. the attachment of the accounts by the Assessing Officer and the sale of shares by the Assessing Officer held by the assessee in his demat accounts. From the various bank accounts produced by the assessee we also find that there is negligible or insufficient balances. Therefore, we find merit in the submission of the Ld. Counsel It has been held in various judicial decisions that levy of penalty by the Assessing Officer u/s.221(1) is discretionary and not automatic. Further, for levy of penalty u/s.221 such default must be wilful and not merely accidental. In the instant case, the assessee has proved beyond doubt that the default by him in not paying the self-assessment tax is not wilful and it was beyond his control as there was no sufficient money available with him to pay the self-assessment tax especially when the income is mainly from short term and long term capital gain. CIT(A) has not contravened any of the provisions by admitting any additional evidence. Further, it is the settled proposition of law that the powers of the CIT(A) are coterminous with that of the Assessing Officer. Since in the instant case the various documents produced before the CIT(A) were already before the Assessing Officer in the quantum proceedings, therefore, these documents in our opinion cannot per se be called as additional evidence. Therefore, the ground raised by the Revenue on this issue is dismissed. Thus the assessee has proved that the default was for good and sufficient reasons. Therefore, in view of the second proviso to section 221(1) this is not a fit case for levy of penalty u/s.140A(3) r.w.s. 221 of the I.T. Act. Accordingly, the order of the CIT(A) cancelling the penalty is upheld - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty levied under section 140A(3) of the Income Tax Act.
2. Admittance of additional evidence by the CIT(A).

Issue-wise Detailed Analysis:

1. Deletion of Penalty Levied under Section 140A(3) of the Income Tax Act:

The Revenue appealed against the CIT(A)'s order, which deleted the penalty of Rs. 42,16,773/- levied by the Assessing Officer (AO) under section 140A(3) of the Income Tax Act. The assessee had filed a return declaring a total income of Rs. 6,27,99,405/- but paid only Rs. 11,00,887/- against the tax liability of Rs. 53,17,680/-, resulting in a shortfall of Rs. 42,16,773/-. The AO issued multiple show cause notices, but the assessee did not respond, leading to the imposition of the penalty.

Before the CIT(A), the assessee argued that due to severe personal and financial hardships, including family deaths, illness, and financial losses due to market conditions, they could not pay the self-assessment tax. The CIT(A) accepted these explanations, noting that the assessee had demonstrated good and sufficient reasons for the default and thus deleted the penalty.

The Tribunal upheld the CIT(A)'s decision, acknowledging the assessee's financial hardships and mishaps, such as the fall in the stock market and the forced eviction from business premises. The Tribunal noted that the penalty under section 221(1) is discretionary and not automatic, and in this case, the default was not wilful but due to genuine financial constraints. Therefore, the Tribunal concluded that the assessee had provided sufficient reasons for the non-payment of self-assessment tax, justifying the deletion of the penalty.

2. Admittance of Additional Evidence by the CIT(A):

The Revenue contended that the CIT(A) admitted additional evidence without providing the AO an opportunity to examine it. However, the Tribunal found that the documents presented before the CIT(A) were already part of the assessment proceedings and not new evidence. The Tribunal emphasized that the CIT(A)'s powers are coterminous with those of the AO, and the documents in question were already available during the quantum proceedings. Therefore, the Tribunal dismissed the Revenue's objection regarding the admittance of additional evidence.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order to delete the penalty levied under section 140A(3) of the Income Tax Act. The Tribunal recognized the assessee's financial hardships and personal difficulties as valid reasons for the non-payment of self-assessment tax and found no contravention in the CIT(A)'s acceptance of the evidence presented.