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TMI Blog2014 (4) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... d tax liability and interest u/s 234B & 234C of the Act – thus, there is no prejudice to the department since the assessee has not only discharged the tax liability but has also paid the interest - the action of the CIT(A) in deleting the penalty upon considering the explanation of the assessee cannot be faulted with, as there was a reasonable cause for not paying the admitted tax liability at the time of filing of return of income – thus, there is no reason to interfere with the order of the CIT(A) – Decided against Revenue. - I.T.A. No. 623/Hyd/2013 - - - Dated:- 2-4-2014 - Shri B. Ramakotaiah And Shri Saktijit Dey,JJ. For the Petitioner : Shri Solgy Jose T. Kottaram For the Respondent : Shri K. A. Sai Prasad ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the Assessing Officer, the assessee preferred an appeal before the CIT(A). 4. In course of hearing of appeal, before the CIT(A) it was contended by the assessee that since the assessee was eligible for deduction u/s 80IB(1), it was not liable to tax under the normal provisions, but, was liable to pay tax u/s 115JB of the IT Act. It was submitted that the real estate market was severely affected due to sudden demise of the, then, Chief Minister Shri Y.S. Rajasekhar Reddy on 03/09/2009 and the subsequent telengana agitation, which had an effect on the business of the assessee. As a result of which sales dropped from 125 crores in the preceding AY to Rs. 10.09 crores in the assessment year under consideration and the net profit drop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant was in dire financial straits and was faced with genuine difficulty in meeting its income tax liability. 6. In the case of CIT Vs. Dadu Wala and Co. [1988] 1770 ITR 491 (Raj.), it was held as follows with regard to levy of penalty u/s 221: The imposition of penalty provided for therein is within the discretion of the ITO when the assessee is in default in making payment of income-tax. However, the exercise of discretion is not to be arbitrary but is dependent on the facts and circumstances of the case. It is equally clear that penalty is not automatically attracted in case of default in payment of income-tax and the same has to be imposed if the facts and circumstances on which the discretion is to be exercised justify im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the provisions contained u/s 221(1) of the Act would show that the expression used u/s 221(1) is may and not shall, which is suggestive of the fact that imposition of penalty is neither automatic nor mandatory. A discretion is left with the AO to decide whether to impose penalty or not by considering the explanation of the assessee. This fact is evident from the provisions of section 221(1) of the Act, wherein, not only the opportunity of being heard has been provided to the assessee but also the AO has been vested with power to not impose penalty if assessee proves to the satisfaction of the AO that the default was for good and sufficient cause. As can be seen from the discussions made in the order of the CIT(A), the assessee has e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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