2015 (10) TMI 2109 - AT - Income Tax

Penalty u/s 221(1) - outstanding demand on account of self assessment tax - CIT(A) reducing the penalty from 50% to 10% - Held that - The assessee has paid the entire demand along with interest thereon by 29.03.2012. We are aware that the payment of the entire tax with interest shall not absolve the assessee from penalty provided u/s 221(1) of the Act. However, the penalty imposed u/s 221(1) of the Act should be reasonable considering the facts and circumstances of each case. The CIT(A) has passed a detailed speaking order for reducing the penalty to 10% of the outstanding demand. We are of the view that in the facts and circumstances of the case of the assessee, the penalty imposed at 10% of the outstanding demand for both the assessment years u/s 221(1) of the Act read with Section 140A(3) of the Act was just and fair and no interference in the order of learned CIT(A) is called for. - Decided against revenue.

Summary

Issues:
Cross-appeals by Revenue and assessee against CIT(A) order for assessment years 2008-09 and 2009-10 regarding penalty reduction under Section 221(1) read with Section 140A(3) of the IT Act, 1961.

Analysis:
1. Assessee's Application for Adjournment: The assessee's request for adjournment was denied by the Bench, indicating that the case proceeded without delay.

2. Revenue's Grounds of Appeal for 2008-09: The Revenue contended that the CIT(A) erred in reducing the penalty from 50% to 10% of the outstanding demand for self-assessment tax. They argued that the penalty should be equal to the tax in arrears and cited various cases to support their position.

3. Assessee's Grounds of Appeal for 2008-09: The assessee challenged the restriction of the penalty to 10% of the outstanding tax demand, arguing that it was against the facts and circumstances of the case.

4. Revenue's Grounds of Appeal for 2009-10: Similar to the appeal for 2008-09, the Revenue contested the reduction of the penalty from 50% to 10% of the outstanding demand for self-assessment tax.

5. Assessee's Grounds of Appeal for 2009-10: The assessee, as in the previous year, objected to the penalty being limited to 10% of the outstanding tax demand.

6. Arguments of the Parties: The Revenue argued that the CIT(A) erred in reducing the penalty, emphasizing that the penalty should be commensurate with the tax in arrears. On the other hand, the assessee contended that since the entire demand was paid along with interest, no penalty should be imposed.

7. Judgment: After considering submissions and reviewing the orders of the Assessing Officer and CIT(A), the Tribunal noted that the assessee had not paid advance tax or self-assessment tax at the time of filing returns. The CIT(A) reduced the penalty to 10% of the outstanding demand, citing fairness and reasonableness, and referencing relevant case law. The Tribunal upheld the CIT(A)'s decision, stating that the penalty imposed was just and fair given the circumstances. Consequently, the appeals of both the Revenue and the assessee for both assessment years were dismissed.

In conclusion, the Tribunal affirmed the CIT(A)'s order, emphasizing the reasonableness of reducing the penalty to 10% of the outstanding demand in light of the specific facts and circumstances of the case.