2020 (1) TMI 330 - HC - Income Tax

Penalty u/s 221 - assessee in default under Section 201 - HELD THAT - In the penalty proceedings, assessee admitted that it was an assessee in default. However, a plea came to be raised that within four days of the order passed under Section 201 of the Act, amount which was required to be remitted along with interest had been remitted/paid and contended that delay of 15 months in not remitting the amount of tax to the tune of 2.05crores which was relatable to salary deductions, contract payments, professional fee, etc., paid or payable to parties during the year ending 31.01.2012 had not been remitted or assessee had failed to remit the said amount so deducted to the account of the Central Government was due to financial crisis. Only plea which was available to assessee in the penalty proceedings is to explain the cause for delay. It is in this background, Assessing Officer amongst several questions raised had called upon assessee to answer three pertinent questions which has been noticed by the Commissioner of Income Tax (Appeals) in Paragraph 3.1 of the order and a plain reading of the same would disclose that during the financial year ending in question, assessee was possessing surplus funds of ₹ 7,85,71,805/-. That apart, assessee had made three payments for purchase of sites, three payment for purchase of cars and as such, it was noticed that cars which were purchased was in addition to the existing four cars purchased in the earlier year and the reason of business expediency raised or pleaded by assessee was not suspectable as it was not in the proximity of truth. This finding of fact which had been recorded by the Assessing Officer when being set aside by the 1stappellate authority the least that was expected from Commissioner of Income Tax (Appeals) was to record a finding which would disprove said fact or in other words reasons had to be assigned. This exercise having not been undertaken by CIT (Appeals) and by a cryptic order as noticed herein, finding of the Assessing Officer having been set aside, this has persuaded the tribunal to reverse the finding of CIT (Appeals) and restore the finding of the Assessing Officer in part viz., affirming levy of penalty but reducing the quantum of penalty. We find from the order of tribunal that the finding recorded by the tribunal to arrive at a conclusion is based on sound appreciation of material available before it. In fact, a clear finding has been recorded by the tribunal that question of financial stringency pleaded by assessee was not proved. Even otherwise, it has been held that financial stringency would not justify the non-remittance of TDS to the Government, in as much as, it would amount to utilization of money payable to the appropriate government. As such, by extending its benevolence, tribunal has directed the Assessing Officer to restrict the levy of penalty to a sum of ₹ 20,55,573/- in substitution to ₹ 77,95,155/- levied by Assessing officer. This finding would not call for interference by us particularly when assessee having been declared as an assessee in default under Section 201 (1) of the Act by order dated 30.07.2013 and said order having not been challenged by the assessee. - Decided against assessee.

Summary

Issues:
1. Correctness and legality of the order passed by the Income Tax Appellate Tribunal regarding the penalty amount.
2. Initiation of penalty proceedings under Section 221 of the Income Tax Act due to non-remittance of TDS.
3. Assessment of financial difficulty as a defense against penalty imposition.
4. Appeal against the order of the Commissioner of Income Tax (Appeals) regarding penalty reduction.
5. Validity of the tribunal's decision to restrict the penalty amount.

Analysis:

1. The appellant challenged the order passed by the Income Tax Appellate Tribunal, which modified the penalty amount imposed by the Commissioner of Income Tax (Appeals). The tribunal reduced the penalty from ?77,95,155 to ?20,55,573 for the assessment year 2013-14.

2. The penalty proceedings were initiated under Section 221 of the Income Tax Act due to the non-remittance of TDS by the appellant. The appellant contended that the delay in remittance was due to acute liquidity crunch and not deliberate negligence. The Assessing Officer levied a penalty of ?77,95,155, which was later reduced by the tribunal.

3. The appellant raised the defense of facing genuine financial difficulties during the period in question. The Commissioner of Income Tax (Appeals) set aside the penalty based on the appellant's financial crunch plea and subsequent remittance of TDS along with interest under Section 221 (1)(A) of the Act.

4. The appellant appealed against the Commissioner of Income Tax (Appeals) order before the Income Tax Appellate Tribunal. The tribunal reversed the Commissioner's decision and restricted the penalty to ?20,55,573, considering the financial capacity of the appellant and the non-justification of financial stringency as a defense.

5. The High Court upheld the tribunal's decision, stating that the tribunal's finding was based on a sound appreciation of the available material. The court noted that the appellant had been declared as an assessee in default under Section 201 (1) of the Act, and since the order was final and unchallenged, there was no ground to interfere with the tribunal's decision. Therefore, the appeal was dismissed without framing substantial questions of law as requested by the appellant.