2017 (2) TMI 26 - AT - Income Tax

Quantum of penalty u/s 221(1) - CIT(A) reducing the quantum of penalty u/s 221(1) from 100% to 10% - AO concluded that assessee failed to pay demand before filing of return without reasonable cause - Held that - As noticed that there is no minimum penalty prescribed under the law on making the default in depositing the admitted tax, the AO levied the maximum penalty prescribed. The AO has not recorded his satisfaction as to why the maximum penalty of 100% of tax in arrear was levied. The AO further not recorded as to how much amount on account of arrears of tax was due on the date of passing of the order of penalty. CIT(A) observed that assessee has promised to pay outstanding self-assessment tax by 31.12.2012 and paid most of the amount by that date. Though, the assessee has not completed his entire liability by 31.12.2012, however, completed by 15.01.2013, therefore, the observations of AO that the assessee has not fulfilled his obligation to pay tax is not correct. The assessee has paid till 31.12.2012 an amount of ₹ 3,77,00,000/- and remaining balance of ₹ 47,76,310/- was paid on 15.01.2013. The ld. CIT(A) also considered the financial constraint of the assessee and observed that the contentions of the assessee that non-deposit of admitted tax liability due to the delay in receipt of payment from MCGM appears to be correct and the assessee tried his best effort to wipe out the tax liability. CIT(A) considered the totality of the fact and the case history related to the earlier years for AY 2010-11 and 2011-12 observed that such penalty was levied for those years and restricted the penalty to 10% of the total tax payable.

Summary

Issues:
1. Reduction of penalty under section 221(1) from 100% to 10%.

Detailed Analysis:

1. The appeal was directed by the Revenue against the order of the Commissioner of Income-tax-29 for the Assessment Year 2012-13. The main issue raised was whether the Commissioner erred in reducing the penalty under section 221(1) from 100% to 10%. The assessee, a proprietor, had not paid self-assessment tax before filing the return of income, leading to being deemed in default. The Assessing Officer directed the assessee to pay the tax and issued a show-cause notice for penalty under section 221(1). The assessee explained financial constraints due to non-payment by government agencies and assured payment by a certain date. The AO levied a 100% penalty, which was reduced to 10% by the Commissioner, leading to the Revenue's appeal.

2. The assessee filed a Cross Objection (C.O.) beyond the limitation period, seeking condonation of the delay. The delay was explained as due to consulting legal grounds and forming an opinion. The Tribunal, after hearing arguments, decided to condone the delay and proceed to decide on the merit of the case.

3. The Revenue argued that the assessee failed to pay due tax despite notices, while the assessee contended financial constraints due to non-payment by government agencies. The Commissioner had considered the circumstances and granted partial relief to the assessee. The AO did not record reasons for levying the maximum penalty of 100% and failed to specify the outstanding tax amount at the penalty order date. The Commissioner observed the efforts made by the assessee to pay the tax liability and restricted the penalty to 10% of the total tax payable.

4. The Tribunal considered the arguments and facts presented by both parties. It noted the explanations provided by the assessee regarding financial constraints and efforts to pay the tax liability. The Commissioner's decision to reduce the penalty to 10% was deemed reasonable and based on a thorough consideration of the case history and financial circumstances of the assessee. Consequently, the appeal filed by the Revenue and the Cross Objection filed by the assessee were dismissed.

In conclusion, the Tribunal upheld the Commissioner's decision to reduce the penalty under section 221(1) from 100% to 10% based on the assessee's financial constraints and efforts to fulfill the tax liability. The Tribunal found the Commissioner's order reasoned and did not see the need for further interference.