2021 (5) TMI 796 - AT - Income Tax

Penalty proceedings u/s. 221(1) - default as per Section 220 - Assessee company filed Return of Income without paying self-assessment tax u/s.140A - HELD THAT - Assessee during the course of hearing stated that the assessee was in financial constraint whereas the business activity carried on by the assessee whole year and Return of Income having been filed much after the end of the year. But the AR of the assessee could not explain fund availability position on the due date of payment of advance tax as well as on the date of self-assessment tax i.e. date of filing of return. We also observe form the order of the authorities below, the assessment was completed u/s. 144 by rejecting the books of accounts of the assessee which clearly shows that the intention of the assessee was not in favour of the revenue for the payment of tax. It clearly shows that the assessee was not paying the taxes within the stipulated time. Hence the Assessing Officer has rightly imposed the penalty u/s. 221(1) of the Income Tax Act after considering that the assessee is in default for payment of tax. We did not find any substance on the submission of the Authorised Representative. The case laws (supra) relied on by the learned Authorised Representative are distinguishable on the facts of the present case on hand. As per our considered opinion, the CIT(A) has rightly confirmed the order of the Assessing Officer for imposing penalty u/s. 221(1) - Decided against assessee.

Summary

Issues:
Assessment of tax arrears, penalty under Section 221(1) of the Income Tax Act, 1961.

Analysis:
1. The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals)-3, Hyderabad regarding the assessment of tax arrears and the imposition of a penalty under Section 221(1) of the Income Tax Act, 1961.

2. The assessee had filed the Return of Income for the A.Y. 2009-10 without paying self-assessment tax, leading to a substantial demand raised by the Assessing Officer. Despite being allowed to pay taxes in instalments by the CIT(A)-III, Hyderabad, the assessee failed to comply with the payment schedule, resulting in the initiation of penalty proceedings under Section 221(1) of the Act.

3. The Assessing Officer, after providing multiple opportunities to the assessee to explain the non-payment of taxes, levied a penalty of ?1,00,000 under Section 221 of the Act. The authorities noted that the assessee did not pay advance tax as required by law, even though engaged in business activities throughout the year, and failed to provide a satisfactory explanation for the financial constraints claimed.

4. The Tribunal observed that the assessee's failure to pay taxes within the stipulated time, as evidenced by the rejection of books of accounts during assessment under Section 144, indicated non-compliance with tax obligations. The Tribunal upheld the imposition of the penalty under Section 221(1) of the Act, dismissing the appeal and affirming the decision of the Assessing Officer and CIT(A).

5. The Tribunal found the case laws cited by the assessee's Authorized Representative to be distinguishable from the present case and concluded that the penalty under Section 221(1) was rightly imposed. The order was pronounced on 24th May 2021, dismissing the appeal of the assessee.