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TMI Blog2015 (10) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... section 221(1) is not automatic and mandatory. The proviso to section 221(1) states that where assessee proves to the satisfaction of the A.O. default for good and sufficient reasons, no penalty shall be levied under this section. In fact, this aspect was examined by the Ld. CIT(A) and came to the conclusion that there are good and sufficient reasons for the assessee not to discharge the self-assessment tax at the particular point of time due to financial crunch. However, he restricted the penalty to 10% instead of deleting the whole of the amount. The assessee had made out a good case in its support and the facts do indicate that there are good and sufficient reasons for assessee’s delay in payment of taxes. Relying on the various case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax liability as per the assessee s own computation was ₹ 3,45,21,923 after claiming TDS of ₹ 5,38,443 and advance tax of ₹ 20,00,000 and the balance tax payable was worked out to ₹ 3,19,89,480. Assessee did not pay self-assessment tax but filed return of income on due date. Since there is failure on the part of the assessee to pay self-assessment tax, A.O. issued notice under section 221(1) and levied penalty of ₹ 79,97,970 being 25% of the tax payable. 3. Assessee contended before the Ld. CIT(A) that nonpayment of self-assessment tax was beyond the control of the assessee as the at the relevant point of time assessee s factory was closed by A.P. Pollution Control Board w.e.f. 11/2009 and therefore, asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e perused the order levying penalty u/s. 221(1) as well as the submissions made by the appellant. The levy of penalty u/s. 221(1) is not mechanical and automatic. The proviso to section 221(1) states that where the assessee proves to the satisfaction of the (Assessing) Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section. Further, even where the Assessing Officer decides to levy penalty, the amount of penalty should be based on the conduct of the assessee and all attendant circumstances. Various judicial pronouncements held that the imposition of penalty is not mandatory but is discretionary. The discretion, of course, will have to be exercised judiciously according to well known princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial Companies (Special Provisions) Act, 1985 has been registered by BIFR. I am in agreement with the Assessing Officer that the appellant company was liable to pay taxes, which were due on the income that the company had generated. The taxes payable are in respect of profits earned by the appellant and the first charge shall always be of the Revenue in respect of such taxes. The submissions made by the appellant indicate that to keep the business cycle running, all funds were diverted towards setting up the new Unit at Nandigama. The funds diverted included those, which should have gone towards payment of taxes on profits earned. Hence, the failure of the appellant to pay taxes in time should lead to some punitive action. However, the puni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient reasons, no penalty shall be levied under this section. In fact, this aspect was examined by the Ld. CIT(A) and came to the conclusion that there are good and sufficient reasons for the assessee not to discharge the self-assessment tax at the particular point of time due to financial crunch. However, he restricted the penalty to 10% instead of deleting the whole of the amount. We are of the opinion that assessee had made out a good case in its support and the facts do indicate that there are good and sufficient reasons for assessee s delay in payment of taxes. Relying on the various case law which are extracted by the Ld. CIT(A) in para-7 of the order, it can be concluded that penalty under section 221(1) is not a mode of recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X
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