2020 (10) TMI 410 - AT - Income Tax

Penalty imposed u/s. 221 r.w.s. 140A(3) - self assessment tax was not paid - assessee was requested to pay tax dues but no response from the assessee - assessee raised a ground that due to financial liquidity crisis the assessee could not pay taxes - HELD THAT - CIT-A examined the financial position of assessee as on the due dates of installments of payments of advance tax and also on due date for filing of return of income, wherein we note that the assessee had sufficient balance amount in its accounts to discharge the tax liability as on the due dates of installments in terms of section 211 of the Act. Therefore, we completely agree with the reasons recorded by the CIT(A) in its order that the assessee had sufficient funds to discharge its liability. Whether provision u/s. 273B of the Act is applicable to the assessee or not? - reasonable cause as defined u/s. 273B in our opinion is not applicable to the penalty imposable u/s. 221 of the Act. The term advance tax refers to paying a part of taxes before the end of the financial year. It should be paid in the year in which the income is received. Assessee paid ₹ 11,21,000/- on two dates 13-03-2015 and 16-03-2015 i.e. after passing of penalty order on 03-03-2015 and an amount of ₹ 35,00,000/- on 16-01-2017 i.e. just before passing impugned order on 23-02-2017. We agree with the submission of Shri Alok Malviya that the assessee shall not cease to be liable to any penalty under sub-section (1) of section 221 merely by reason of the fact that the assessee paid tax, but however taking into consideration the facts of circumstances, it is fair and just to restrict the penalty to ₹ 66,134/- being 1% of ₹ 66,13,420/- and we confirm the penalty to an amount of ₹ 66,134/- and the order of CIT(A) is modified accordingly. Thus, grounds raised by the assessee are partly allowed.

Summary

Issues:
Challenge to confirmation of penalty under section 221 of the Act by CIT(A).

Analysis:
The appeal was against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The assessee did not appear, leading to an ex-parte hearing. The main issue raised was the challenge to the penalty imposed under section 221 of the Act. The Assessing Officer (AO) imposed a penalty of ?25,00,000 for non-payment of self-assessment tax, which the CIT(A) reduced to ?16,53,355 after considering the submissions made by the assessee. The assessee argued financial constraints as the reason for non-payment. The CIT(A) analyzed the financial position of the assessee and found that there were sufficient funds available to discharge the tax liability on the due dates. The CIT(A) also considered the provisions of section 273B regarding the imposition of penalties in cases of reasonable cause for failure to pay taxes. However, it was concluded that section 273B did not apply to penalties under section 221 of the Act.

The ITAT Pune examined the provisions of advance tax payment under sections 207, 208, and 211 of the Act. It was noted that the assessee, being a Private Limited Company, was liable to pay advance tax and failed to do so. The AO issued show cause notices regarding the penalty, but the assessee did not respond. The ITAT upheld that the assessee had a tax liability of ?66,13,420 but failed to pay the advance tax before the due date of filing the return. The penalty imposed by the AO was reduced by the CIT(A) to 1/4th of the tax due, amounting to ?16,53,355. The ITAT modified the penalty further to ?66,134, being 1% of the tax due, considering the circumstances. The appeal of the assessee was partly allowed based on these findings.

In conclusion, the ITAT Pune partially allowed the appeal of the assessee, modifying the penalty imposed under section 221 of the Act to ?66,134. The judgment highlighted the importance of timely payment of advance tax and the consequences of non-compliance with tax payment obligations.