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TMI Blog2016 (5) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... is not appropriate. Since the assessee show cause for delay in payment of self-assessment tax, accordingly, we delete the penalty u/s.221(1) of the Act. - Decided in favour of assessee - ITA No. 611/Mds/2014 - - - Dated:- 22-4-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For The Appellant by : Shri T. Banusekar, CA For The Respondent : Ms. Vijaya Prabha, JCIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals) dated 21.1.2014 for the assessment year 2010-11. 2. The main ground raised by the assessee is with regard to concurring of levy of penalty u/s.221(1) by the Commissioner of Income-tax(Appeals). Further, the assessee has raised an additional ground, which is as follows: The learned CIT(A) has erred in law and in facts in confirming and enhancing levy of penalty u/s.221(1) of the Act. The learned CIT(A) ought to have appreciated that after the order u/s.143(1) of the Act dated 26.07.2012 was passed there could not be any default of non-payment of self-assessment tax. 2.1 The assessee has filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 5.12.2012 was issued proposing levy of penalty u/s.221(1) of the Act and date of hearing was fixed on 10.12.2012. However, there was no response and accordingly, the AO levied penalty of ₹ 47,84,870/- @ 10% of self-assessment tax payable of ₹ 4,78,48,702/-. Against this, the assessee carried the matter before the CIT(Appeals). 4. The CIT(Appeals) observed that it is a fit case for not only levy of penalty but also for enhancing it . Accordingly, he confirmed the penalty and enhanced the penalty at 25% of selfassessment tax payable at ₹ 1,19,62,175/-. Aggrieved, the assessee is in appeal before us. 5. The primary objection of the ld. AR is that the notice dated 5.12.2012 issued by the AO to the assessee on 8.12.2012 mentioning the assessment year 2012-13 though the assessment involved was for the asst. year 2010-11. According to the ld. AR, there is no proper notice for the asst. year 2010- 11 for levying penalty u/s.221(1) of the Act. Further, it is submitted that the assessee has not received earlier notice dated 26.9.2012 and according to him, there is violation of natural justice in levying the penalty. Further, it is submitted that the assessee was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actor having not deducted tax at source as required by s.194C(2) under bona fide belief that no tax was required to be deducted at source since the sub-contractors did not have taxable income penalty under s.221 was not leviable. 5.3 He also relied on the judgment of the Kerala High Court in the case of CIT v. Chembara Peak Estates Ltd. (183 ITR 471), wherein it was observed that want of sufficient liquid funds was reasonable cause, deletion of penalty under s.221 was justified. Further, the ld. AR relied on the judgment of the Madras High Court in the case of A M Agencies v. CIT Ors. (239 ITR 136) for the proposition that if the penalty is levied after long period of one year, it is barred by limitation. He drew our attention to the sequence of events as follows : Date Particulars Remarks 31.07.2010 Due date for filing return of income for the AY 2010-11 u/s.139(1) 02.08.2011 Date of filing of return of income by the assessee for the AY 2010-11 31.03.2012 Due date for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 26.9.2012. Regarding the merits of the case, he submitted that first show cause notice was issued on 26.9.2012 u/s.221(1) of the Act and before that the assessee paid only ₹ 61,57,871/-. After issuing notice u/s.221(1) of the Act, the assessee has paid ₹ 5,20,17,724/-. Further, he submitted that in the sworn statement recorded from Shri Om Pprakash Agarwal, one of the partners of the firm on 5.12.2012, in answer to question No.13, stated as under : Balance of 41,062 sq.ft. was sold to DABC for a consideration of ₹ 17,87,06,700/- at the rate of ₹ 4350/- sq.ft. in the year 2009-10 AY 2010-11 It is pertinent to refer to the agreement for sale entered into on 01.04.2009 between the appellant (vendor) and M/s. Deluxe Apartments and Building Company regarding the sale for a consideration of ₹ 17,87,06,700/-. It was mentioned in the agreement that the purchaser has already paid ₹ 83,15,050/- and the balance sale consideration ₹ 17,03,91,650/- within a period of 24 months and as per following schedule. On or before 30.06.2009 ₹ 50,00,000 On or before 30.09.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chitra Construction 1,00,90,000 Nil DABC 4,73,01,190 Nil BB Asia Impex Pvt. Ltd. 1,18,26,584 1,80,00,636 Petroplast Industries Ltd. Nil 2,14,21,656 Assets side as on 31.03.2009 was ₹ 8,72,03,826/- and increased to ₹ 21,24,24,810/-. In the circumstances, paucity of funds as one of the reasons for not paying the taxes is completely ruled out. Then it is inconceivable to say that the appellant failed to pay the tax for good and sufficient reasons. Reliance was placed on the decision of Bombay High Court in the case of CIT vs Hydroflex Equipment Limited (2006) 282 ITR 418 wherein it was held that penalty could be levied when there was no sufficient cause for non-payment of tax for AY 1997-98. The Jurisdictional High Court in the case of CIT vs Smt. Vijayanthimdla (1977) 108 ITR 882, held that section 221 of the Act applies to a case of default in payment of advance tax also. The question referred to the Madras High Court was whether, on a proper i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aggregate of the tax and interest payable as envisaged by s. 140A(1), the amount paid shall be first adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. 9. Sec. 221 (1) and the Explanation thereto read as under : 221. (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-s. (2) of s. 220, be liable, by way of penalty, to pay such amount as the AO may direct, and in the case of a continuing default, such further amount or amounts as the AO may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears: Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard: Provided further that where the assessee proves to the satisfaction of the AO that the default was for good and sufficient reasons, no penalty shall be levied under this section. Explanation : For the removal of doubt, it is hereby declared that an assessee shall not cease to be liable to any penalty un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Nachimuthu Industrial Association Vs. Learned Commissioner of Income Tax (123 ITR 611)(Madras) wherein it was held that income was exempt and that there was paucity of funds are relevant circumstances for deletion of penalty u/s.221(1) of the Act. Further, it was seen that the assessee is not being habitual defaulter with no adverse history tainted on the assessee goes to prove that the default was committed without malafide intention and under extreme paucity of funds, so when substantial justice and technical considerations are pitted against each other, the case of substantial justice deserves to be preferred for other side cannot claim to have vested right in injustice being done because of non deliberate delay as held by the Supreme Court in the case Culcutta, Land Acquisition, Anathnalh v. MST Kittji reported in AIR 1987 SC 1353. Further as held by Culcutta High Court in the case of Shreeniwas Sons Vs. ITO reported in [1974] 96 ITR 562 (Cal) that Tax and interest are different in character. Under section 221 of the Income-tax Act, 1961, penalty can be imposed only when the assessee is in default in making payment of tax; that under section 2(43) of the Act defines t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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