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TMI Blog2015 (6) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... fied and correct in demolishing the same. In view of the observations of the Hon’ble High Court of Delhi in the judgment dated 12.8.2013 in assessee’s own case (2015 (6) TMI 308 - DELHI HIGH COURT), we are also in agreement with the conclusion of the CIT(A) that the assessee was facing financial constrain and acute liquidity crunch and there was a “good and sufficient cause” for the assessee for non payment of tax which was incorrectly rejected by the AO while wrongly imposing penalty u/s 140A(3) of the Act. We are unable to see any infirmity, perversity or any other valid reason to interfere with the impugned order of the CIT(A) which deleted the penalty and thus, we uphold the same. - Decided in favour of assessee. - ITA No. 5198/Del/2013 - - - Dated:- 11-5-2015 - Shri B.C. Meena, and Shri C.M. Garg,JJ. For the Petitioner: Sh. M.B. Reddy, CIT DR For the Respondent: Sh. Sudesh Garg, Adv. ORDER PER SHRI C.M. GARG, J.M. This appeal by the Revenue has been directed against the order of the Commissioner of Income Tax (Appeals)-XXXI, dated 10.06.2013 for A.Y. 2009-10 by which penalty order vide dated 31.05.2012 u/s 140A(3) of the Income Tax Act, 1961 (for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) rejected this legal contention of the assessee in paragraph no. 3.6 of the impugned order by holding that the provisions of section 292B of the Act would cover such inadvertent mistakes in quoting the correct section of the Act as the assessee had participated in the proceedings without raising any objection. 6. The CIT(A) allowed the appeal of the assessee on merits by passing the impugned order by accepting submissions and explanations of the assessee on the issue. Now the aggrieved Revenue is before this Tribunal in the second appeal with the grounds as reproduced hereinabove. 7. The ld. Departmental Representative (DR) supporting the penalty order submitted that no supporting document in regard to shortage and scarcity of the funds or liquidity crunch was filed before the AO and the bank accounts of the assessee were attached in the month of March, 2011 because the assessee was not making the payment of demand raised after completion of assessment proceedings. The ld. DR also submitted that the undisclosed income was admitted by the assessee voluntarily to cover up the incriminating documents found during the course of search operation and the same was admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years which are prior to A.Y. 1989-90. The ld. DR in his rejoinder submitted that the AO rightly placed reliance on the decisions/judgments to support levy of penalty. However, he could not controvert the fact that there were substantial changes in the section 140A of the Act prior to 1989. 11. On careful consideration of above submissions and vigilant perusal of said judgment we note that judgments in the case of CIT vs. Devi Dayal Stainless Steel India (P) Ltd. (supra), CIT vs. J. Pitambardas (supra), Taylor Instrument Co. Vs. CIT (supra), V. Govinda Chetty vs. CIT (supra) and Ramchandra Pesticides vs. CIT (supra) are related to the assessment years which are prior to A.Y. 1989-90 period and admittedly provision of section 140A of the Act have been amended several times hence, we respectfully note that the ratio of these judgments cannot be applied blindly in view of subsequently amendments in section 140A of the Act. We also note that the judgment of Hon ble Apex Court in the case of ITO vs. A.M.S. Salimaricer (supra) the constitutional validity of section 140A of the Act was upheld which is not a subject matter before us and the Hon ble Supreme Court observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble; (vii) In the light of order of the Hon ble High Court dated 12.8.2013 in ITA No. 384/2013 CIT vs. Rakesh Kumar (the assessee himself) the argument of acute cash liquidity problem of the respondent was accepted by the Hon ble High Court and the CIT(A) was directed to admit the appeal of the assessee for adjudication on merits, hence this cause was rightly accepted by the CIT(A) as good and reasonable cause for allowing appeal of the assessee; (viii) There was a payment of ₹ 5,000/- as instalment on 2.12.2011 which also shows cash crunch and liquidity problem and at the same time this act also shows honesty and sincerity of the assessee as a tax abiding citizen and the negligible cash balance available in the bank accounts of the assessee at the time of filing return also support the cause of cash crunch and liquidity problem which was a good and strong sufficient cause for delay in payment of tax and hence penalty is not imposable; (ix) The amount surrendered by the assessee during search and seizure operation was abnormally high which resulted into high tax demand and the same was not related to normal business operations of the assessee which caused unavoidable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of this Act shall apply accordingly. In view of the above provisions, you were required to pay self assessment tax and to furnish the evidence along with the return of income for the A.Y. 2009-10. State as to why you should not be treated assessee in default as provided under section 140A(3) of the Act. Further, show cause as to why a penalty u/s 140A(3) should not be imposed upon you for not complying with the provisions of section 140A(1) of the Income Tax Act, 1961 and not making full payment of self assessment tax. For filing the reply to the above show cause, your case stands fixed in the O/o of the undersigned on 1st December, 2011 at 1.00 p.m. You may furnish evidence of the tax paid as computed in the return of income. In case no such evidence is submitted or no compliance is made, proceedings u/s 140A(3) for imposing penalty will be considered and decided on merits. 15. From penalty order we further observe that the assessee submitted following reply during the penalty proceedings before the AO: We acknowledge the receipt of the captioned notice and in pursuance to that we beg to submit that the assessee has submitted its return of income for the A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.12.2011 State Bank of India 0004329 15989 5,00,000.00 06.12.2011 State Bank of India 0004329 09810 10,00,000.00 07.12.2011 State Bank of India 0004329 09221 10,00,000.00 08.12.2011 State Bank of India 0004329 21946 1,00,000.00 12.12.2011 HDFC Bank Ltd. 0510308 54702 14,00,000.00 03.02.2012 HDFC Bank Ltd. 0510308 52193 10,00,000.00 10.02.2012 HDFC Bank Ltd. 0510308 52166 25,00,000.00 11.02.2012 HDFC Bank Ltd. 0510308 50988 25,00,000.00 16.02.2012 HDFC Bank Ltd. 0510308 51115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (1989) 47 Taxman 166: (1989) 80 CTR 69: (1990) 183 ITR 471 (Ker); CIT vs. Jaipur Electro P. Ltd. (1990) 183 ITR 476 (Raj) CIT vs. Bhikaji Ramchandra (1990) 183 ITR 478 (Bom) The assessee is in genuine hardship due to which there is delay of tax due u/s 140A. However, the same has been deposited, therefore, it is requested before your good-self to kindly not to levy and penalty u/s 140A(3). 16. From operative part of the penalty order, we note that the penalty was imposed by the AO with the following conclusion and findings: 4. Reply filed on behalf of the assessee company has been considered and discussed with the Authorized Representative of the assessee company. In the reply, the assessee company has submitted that it has deposited the tax liability on the admitted income shown in the return of income, but delayed. For the delay in depositing the tax, it has contended to build up its case in view of shortage of funds. However, no supporting documents in this regard have been filed to show scarcity of funds or liquidity crunch. Further, the assessee has taken the plea of attachment of bank account made by the Department for recovery of outstanding demand. In this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Stainless Steel India Pvt. Ltd. (1991) 189 ITR 506 (Bom.); b) Commissioner of Income Tax vs. Pitambardas (J.) Co. (1995) 216 ITR 172 (Bom.); c) Taylor Instrument Co. (India) Ltd. Vs. Commissioner of Income Tax (1998) 232 ITR 771 (Del.); d) Govinda Chetty (V.) vs. Commissioner of Income Tax (1998) 231 ITR 615 (Mad.); e) Ramachandra Pesticides P. Ltd. Vs. Commissioner of Income Tax (2006) 285 ITR 045 (Karn.); f) Income Tax Officer vs. A.M.S. Salimaricar (2001) 247 ITR 808 (SC). 6. Keeping in view the detailed discussion in view of the assessee, I am of the considered opinion that the assessee has failed to establish any reasonable cause of non payment of admitted tax liability u/s 140A(1) of the Income Tax Act, 1961 within the time limit prescribed by the Income Tax Act, 1961 and is in default within the provision of sec. 140A(3) of the Act. Moreover, failure on the part of the assessee has also been examined in view of the decisions of Hon ble Apex Court and High Courts as mentioned above. Therefore, the assessee is held in default for not making payment of admitted tax liability of ₹ 4,12,62,460/- within the time limit as prescribed by the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of non payment of admitted tax and the consequent refusal of admission of appeal by CIT(A) and has held that appeal should be admitted and decided on merits. 3.9 It is also noted that the AO has initiated the action of levying penalty after he completed the assessment u/s 143(3) and that too after a gap of almost a year. Once a demand notice u/s 156 has been issued on completion of assessment, the appellant gets 30 days time to pay the taxes due as per the demand notice. The intimation of fresh penal proceedings for default of SA tax payment after gap of almost a year of completion of assessment and after a gap of 14 months of filing the return thus, shows that the AO has not considered the default very seriously. 3.10 Looking to all the circumstances and the conduct of the appellant in making tax payments in 24 installments, including as small a sum as ₹ 5000/-. I am of the view that the appellant must have faced liquidity crunch due to a large sum of additional income offered during the search under Rajdurbar group. The appellant has made the payments of the taxes due, as and when he could organize the funds. Though the bank accounts had been attached during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of provision of section 140A 221 of the Act, we note that section 140A(3) stipulates that if any assessee fails to pay the whole or any part of such tax or interest or both in accordance with provisions of sub section (1), he shall, without prejudice to any other consequence which he may incur, be deemed to be an assessee in default in respect of the tax or interest or both remained unpaid, and all the provisions of this Act shall apply accordingly. Meaning thereby the provisions of section 140A(3) of the Act provides a situation where if any assessee fails to pay whole or any part of such tax or interest or both as per provisions of section 140A(1) of the Act then he shall be deemed to be an assessee in default in respect of unpaid tax or interest or both. While from the language used by the legislation in section 221 of the Act we clearly observe that this provision provides penalty leviable and payable when the assessee is in default in making a payment of tax then the AO may impose penalty does not exceeds the amount in arrears. For the sake of clarity in our observations and conclusion, we find it appropriate to reproduce section 221 of the Act as under: 221 . (1)When an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act further provides that where as a result of any final order the amount of tax, with respect to the default in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the amount of penalty paid shall be refunded. 21. Turning to the legal issue before us as we have already noted that the AO issued show cause notice to the assessee u/s 140A(3) of hte Act and the penalty order was also passed by imposing penalty u/s 140A(3) of the Act and there is no mention of section 221 of the Act either in the notice dated 23.11.2011 nor in the penalty order dated 31.05.2011 as reproduced hereinabove. The CIT(A) in para 3.6 of the impugned order has held that the provisions of section 292B of the Act would cover such inadvertent mistakes in quoting the correct section of the Act. As we have already noted that as per first proviso to section 221(1) of the Act it is mandatory that before levying such penalty the assessee shall be given a reasonable opportunity of being heard and second proviso to the said sub section further provides that where the assessee proves to the satisfaction of the AO that the default was for good and suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serving that in the return of income said income was voluntarily surrendered and offered for tax and the assessee was under obligation to pay tax on the admitted and surrendered income before filing the return and, therefore, assessee is liable to pay penalty u/s 140A(3) of the Act. 24. From vigilant perusal from the operative part of the impugned order of the CIT(A), we note that undisputedly all due taxes were paid by the assessee before passing and levying penalty order and there was no arrear of tax against the assessee as on 31.05.2012 when the penalty order was passed. The ld. DR has not controverted this fact that the assessee paid entire amount of tax upto 16.02.2012 in 24 instalments, wherein on 02.12.2011 there was a payment of ₹ 5,000/- which shows that the appellant was really facing liquidity crunch. From the copies of the bank statements of the relevant period April, 2010 to March, 2011, placed before authorities below, we note that the assessee was operating 5 bank accounts with RBS Bank, Dena Bank, Federal Bank, Indian Overseas Bank Union Bank, wherein the total balance as on the date of filing of return shown was less than ₹ 2.5 lacs and this fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish, prove and to discharge its onus to show that there was a good and sufficient reason for non payment of tax as required as per second proviso to sec. 221(1) of the Act. 27. In view of above, we respectfully follow the ratio of the decision of ITAT Mumbai A Bench in the case of AGO Pharmaceuticals Ltd. Vs. ACIT (supra), wherein it was held that where the assessee has filed the return of income on 28.09.2009 and paid self assessment tax u/s 140A of the Act on 19.01.2010 then since assessee had paid self assessment tax immediately when fact regarding non payment of tax came to its notice then the assessee was not liable for penalty u/s 221 of the Act. In the present case undisputedly the assessee had paid entire demand of tax by way of last instalment paid on 16.02.2012 and this fact was also noticed by the AO while passing the impugned penalty order. However, we also hold in view of Explanation to sub section (1) of section 221 of the Act the assessee does not secure any immunity from levy of penalty only on the ground that he had paid entire amount of tax arrears before levy of penalty meaning thereby there was no amount of tax remained unpaid against the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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