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TMI Blog2015 (6) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... instance, in our view, is not justified. Considering the facts and circumstances of case, we are of the view that penalty @ 5% of the admitted tax liability would be reasonable and meet the ends of justice. Accordingly, we direct AO to confine the penalty u/s 221(1) of the Act to 5% of the admitted tax liability in each case - Decided partly in favour of assessee. - ITA No. 675 to 681/Hyd/2014 - - - Dated:- 27-5-2015 - P M Jagtap, AM And Saktijit Dey, JM,JJ. For the Appellant : Mr S Rama Rao For the Respondent : Mr Rajat Mitra ORDER Per P M Jagtap, AM These seven appeals filed by seven assessees against seven separate orders dated 28.01.2014 passed by the Ld. CIT(A)-VII, Hyderabad involve a common issue relating to imposition of penalty under section 221(1) read with section 140A(3) of the Income Tax Act, 1961 and the same therefore, have been heard together and are being disposed of by a single composite order for the sake of convenience. 2. All the seven assessees in the present case are companies which belong to a group of companies established by Sri Ramalinga Raju and his family members. During the previous year relevant to A.Y. 2008-09, all these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere also recorded by the A.O. under section 131. They however could not offer any explanation to the satisfaction of the A.O. for the default in payment of tax by the assessee companies. The assessee companies also filed their reply to the show cause notices in writing offering their explanation as under : (i) At the outset it is submitted that there has been no willful of any kind by the assessee to evade payment taxes and the proposed initiation of penalty proceedings is unsubstantiated without cause. (ii) We further submit that as per the reasons mentioned in the earlier show cause notice there has been no establishment of any willful intent or attempt on the part of the assessee in evading the payment of taxes. The returns were filed by the assessee on 30th September, 2008 by which date the assessee was not having immediate means to pay the tax and the monies by it for the purpose of paying tax amounts. (iii) Further, the subsequent events are well within the knowledge of revenue including the periodical requests made to arrive at a suitable arrangement that shall ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given. Hence, it is not correct to conclude that the earlier penalty proceeding has not established any willful intention of tax default by the assessee company. The submission that, it did not have any means on 30.09.2008 while filing the return of income, for tax payment is also notacceptable. What stopped the assessee company from making any tax payment as advance tax, when it actually derived income during the F.Y. 2007-O8? The assessee is a well established company carrying out business for years, with the support of many professionals. Hence, it is appropriate to conclude that it was well aware of the tax liability also when it entered into any transactions which derived income for it. As mentioned above, the company had liquidity as per the Bank Statement and was having sufficient current assets to clear the tax dues. This dearly shows that the assessee company does not have good and sufficient reasons for non-payment of the tax. (iii) The submission that the subsequent events are well within the knowledge of revenue and all the properties are under attachment/ restraint and they do not have any right to dispose of any asset to pay the taxes is also examined carefully. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. M/s. Yamuna Agro Farms P. Ltd., Rs.49,00,000 2. M/s. Wardha Greenfields P. Ltd. Rs.50,00,000 3. M/s. Vindhya Greenlands P. Ltd. Rs.52,00,000 4. M/s. Swarnamukhi Greenfields P. Ltd. Rs.47,00,000 5. M/s. Swarnagiri Greenfields P. Ltd. Rs.23,00,000 6. M/s. Vamsadhara Agro P. Ltd. Rs.47,00,000 7. M/s. Uttarashada Bio-Tech P. Ltd. Rs.34,00,000 3. The penalties imposed by the A.O. under section 221(1) read with section 140A(3) of the I.T. Act were challenged by the assessee companies in the appeals filed before the Ld. CIT(A) and elaborate submissions were made on their behalf during the course of appellate proceedings before him which, as summarized by the Ld. CIT(A) in his impugned order, were as under : a. The transaction covered in this case is not a sale. The appellant had transferred land to M/s Hill County P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested to be adjusted against six companies - (a) Swarnamukhi Greenfields Pvt Ltd (b) Himagiri Biotech Pvt Ltd Cc) Sindhu Green lands Pvt Ltd (Goman Agro Farms Pvt Ltd) (d) Himagiri Greenfields Pvt Ltd were mentioned. It is noted that the appellant company is not among these six companies. h. In terms of the Company Law Board Order, dated 13.01.2011, M/s IL FS was inducted into HCPL in the best interest of the company, stake holders and public interest. Post induction M/s. IL FS negotiated for suitable arrangement for payment of outstanding demand in the 14 LOC subsidiary companies and finally tax payments were made in the case of the appellant on 21/2/11 (5O lakhs), 16/3/11 (50 lakhs), 16/3/11 (77.97 lakhs), 3/6/11 (75 lakhs) and 10/04/12 (23.59 lakhs). i. Imposition of penalty u/s' 221 is only discretionary and not mandatory. j. There was good and sufficient reason in the appellant's case for non levy of penalty. CBDT circular no.119 dated 26.09.1973 was cited. The appellant also extracted clause B of Para 2 of the circular which reads as under :- In cases where sale proceeds of the asset transferred have not been received for any reason, the income tax office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not justify what transpired in FY 2007-08 when all the advance tax instalments fell due and were ignored. The appellant did receive lot of funds and deployed them elsewhere as evidenced from the balance sheet (current assets) without bothering about the tax liability, which it very well knew, would arise. 5.3. The appellant had cited the following case laws governing the levy of penalty. The gist of the submissions inferred from the said case laws and my remarks are summarized below : Sn. Case Law Gist Remarks 1. Hindustan Steel Ltd vs State of Orissa (83 ITR 26)(SC) An Order imposing the. penalty for failure to carry out a statutory obligation is the result of quasi criminal proceedings. Penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumelious/ dishonest or acted in conscious disregard of its obligation. Penalty will statutory not be imposed merely obligation. because it is lawful to do so. Whether a penalty should be imposed for failure to perform a statutory obligation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se may be, in accordance with the provisions of this Chapter. 5.3.2. Section 191 provides for direct payment of taxes, if there was no TDS. The essential thing to note is the requirement to pay as you earn by any means so that revenues keep coming at a steady pace and would not cause difficulty either to the tax payer or to the Govt. Section 191 - Direct payment [***] In the case of income in respect of which provision is not made under this Chapter for deducting income-tax at the time of payment, and in any case where income-tax has not been deducted in accordance with the provisions of this Chapter, income-tax shall be payable by the assessee direct. 5.4. The taxes are the revenue of the Govt enabling it to carry out its functions and when the liability is self determined (not through a highly disputed assessment), the responsibility on the tax payer is more and so would be consequences for default. 5.5. As remarked earlier, the entire defence was built on events that took place after 9/1/09 - nothing much is said about what prevented the appellant to pay in the period 2007-08 or up to the date on which the tax return was filed without payment of self assessment ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for default in making payment. 30. Keeping in view the aforesaid statutory provision, let us examine the facts of the present case. At the cost of repetition, we would like to observe that there is no dispute that assessee has defaulted in discharging its tax liability u/s 140A at the time of filing of return of income. It is the claim of assessee that due to liquidity problem, it could not pay the tax liability on the date of filing of return as assessee did not have sufficient funds with him. However, it is a fact on record that assessee has received about ₹ 16.67 crores on sale of land in June, 2007. On perusal of bank account copies submitted in the paper book, though it appears that the balance at the beginning of the year and at the end of the year is nil, but at the same time there are substantial transactions in between. In fact in case of one of the assessee on 24/10/07, an amount of ₹ 5 crores was received and the same was transferred to M/s Maytas on the very next day i.e. on 25/10/2007. The same is also the case with other assessees. Therefore, the claim of assessee that funds were not available cannot be accepted. More so, when admittedly as per asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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