2019 (8) TMI 399 - AT - Income Tax

Penalty u/s 221 - non payment of self assessment tax till the date of filling of return of income - sufficient and reasonable cause for not paying the admitted tax liability either at the time of filing of return of income or before the issue of notice u/s 221(1) - HELD THAT - Assessee could not pay the self assessment tax liability of ₹ 8,06,90,485/- at the time of return of income, however the same has been paid subsequently on installment over a period of time as per the details incorporated above. Assessee had given very elaborate reasons before the authorities below that due to huge financial crunch and hardships, assessee did not had any liquidity to pay the self assessment tax liability. All these facts and explanation have been duly incorporated before the CIT(A) as discussed above. There are umpteen number of judgments, wherein it has been held that financial stringency is considered to be good and sufficient cause for sufficiency of reason for not levying penalty u/s 221(1). AO has also not given any reasoning to controvert the assessee s reasons regarding paucity of funds and if Assessee Company had sufficient reasons for not paying the self assessment tax at time, then assessee could not be considered as willful defaulter on which no penalty should be levied. Apart from that, Ld. Counsel has pointed out that on the same reasons, the department has given the payment plan to the assessee for making the payments. CIT VI vide order dated 28.12.2012 on stay of collection of demand has given the direction for payment of installments though in some other matter. Now the entire self assessment tax has been paid and the entire liability has been discharged. Thus, order of the CIT(A) deleting the penalty is upheld. Consequently, the grounds raised by the revenue is dismissed.

Summary

Issues:
1. Challenge against deletion of penalty u/s 221(1) for assessment year 2007-08 due to non-payment of self assessment tax.
2. Condonation of delay in filing appeal before Ld. CIT(A).
3. Consideration of financial difficulties as a reasonable cause for non-payment of self assessment tax.

Analysis:
1. The appeal was filed by the revenue challenging the deletion of penalty u/s 221(1) for non-payment of self assessment tax by the assessee. The assessee, a Public Limited Company in hotel consultancy, faced financial difficulties leading to non-payment of tax. The AO levied a penalty of &8377; 40,34,524/-, which the Ld. CIT(A) deleted after considering the reasons for delay in payment. The assessee paid the tax in installments over time due to financial constraints arising from a failed investment in a hotel.

2. The delay in filing the appeal before Ld. CIT(A) was condoned due to the absence of malicious intent and the explanation provided by the assessee regarding the financial constraints faced. The Ld. CIT(A) detailed the sequence of events, including the failed investment in a hotel, financial difficulties, and efforts made to pay the tax liability over time, leading to the deletion of the penalty.

3. The Ld. CIT(A) upheld the deletion of the penalty, considering the sufficient and reasonable cause shown by the assessee for the non-payment of self assessment tax. Various judgments were cited to support the contention that financial stringency is a valid reason for not levying a penalty u/s 221(1). The AO failed to provide reasoning to counter the assessee's explanation for the delay in payment, leading to the dismissal of the revenue's appeal and upholding the deletion of the penalty.

In conclusion, the tribunal upheld the Ld. CIT(A)'s decision to delete the penalty, considering the financial difficulties faced by the assessee as a valid reason for the delay in payment. The appeal of the revenue was dismissed, and the entire self assessment tax liability was paid by the assessee, resulting in the discharge of the liability.