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TMI Blog2016 (5) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... f return there can not be said to be default u/s 140A(1) of the Act. The only default committed by assessee is that it had filed its return of income on 30.09.2010 and by the date of filing of return the taxes were not paid but the fact remains the due date of filing of return was extended to 31st January, 2011 and, therefore, technically the assessee was entitled to pay taxes before the due date of filing of return which happened to be 31st January, 2011. The entire taxes has been paid by 1st December, 2010 and therefore, the breach is merely a technical breach and for which no penalty should have been levied. Moreover, the assessee has paid interest as applicable under the provisions of Act. Therefore, keeping in view the entire facts and circumstances and specifically the fact that assessee belonged to disturbed area of Jammu Kashmir, the penalty in this case was not impossible - Decided in favour of assessee. - I.T.A No. 341(Asr)/2014, I.T.A No. 398(Asr)/2014 - - - Dated:- 13-4-2016 - Sh. A. D. Jain, Hon ble Judicial Member And Sh. T. S. Kapoor, Hon ble Accountant Member For the Appellant : Sh. Salil Aggarwal (Adv.) For the Respondent : Sh. Tarsem Lal (DR.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Whether the Commissioner of Income Tax (Appeals), Jammu was right in law in not considering that the assessee has defaulted in payment of self assessment tax which it has calculated/assessed after considering business expediency of its business. 3. The brief facts of the case as noted in the order passed u/s 221(1) of the Act is that the assessee filed return of income on 30/09/2010 declaring a profit of ₹ 10.34 crores, but did not file any evidence of payment of advance tax or self assessment tax. Out of total tax liability of ₹ 1,75,84,292/-, the assessee had paid only 25.20 lakhs (on account of TDS) leaving a balance demand of ₹ 1,50,55,026/-. The Assessing Officer observed that the said tax was payable under the provisions of section 140A which was not paid by assessee and therefore, the assessee was show caused a notice u/s 221(1) of the Act for non payment of self assessment tax. In its reply the assessee submitted that entire tax of ₹ 1,50,55,026/- has been paid on various dates and the last installment was paid on 1.12.2010 and as evidences the challans for payment of the above taxes were attached with the reply. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and priory in repayment of bank loan over income tax liability where there is nothing on record to show that there was undue pressure from bank authorities to liquidate the loan could not be considered as reasonable cause for non payment of tax. However, it is noticed that since the funds available with the company was only ₹ 93,86,475/- and the tax liability was ₹ 1,50,55,026/- it may be considered reasonable cause for non payment of tax to the extent of ₹ 56,68,551/-(i.e. ₹ 1,50,55,026-Rs 93,86,475). Further in my opinion, it would be very harsh to levy penalty of 100% of balance income tax payable, as the appellant has deposited the tax with interest after the show cause notice was issued to the appellant but before passing of the order. I have considered the submission dated 19.03.2014 and 27.03.2014 of the appellant reiterating the liquidity crunch faced by the appellant. The appellant has pleaded that cash in flow was less than the cash out flow and the reasons given were that the huge inventory (24.13 crores) and sundry debtors (65.35crores) were financed out of borrowed funds of ₹ 86.81 crores. It was also pointed out that due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer's observation is concerned that ₹ 93.86 lacs was available as per cash flow statement given by the appellant himself before him, in my view, it is harsh to expect that the entire amount available with the appellant should have been utilized for the tax payment and bringing the finances in the business to-a halt. The appellant has to see the business expediency, other pressing needs and what is the best for his business at that point of time. Nevertheless, the payment of Income Tax is also an integral part of the business liability. I am of the view that out of ₹ 93,86,475/- the appellant should have spared certain percentage towards the tax liability. Since the appellant has liquidated the entire tax liability with interest in first week of December 2011, the intensity of default is mitigated to some extent. I therefore hold that penalty of 25% of the amount of ₹ 93,86,475/-(i.e. liquidity available on said date) is reasonable and justified in the interest of justice. Accordingly, I reduce the quantum of penalty from ₹ 1,50,55,000/- to ₹ 23,46,619/-. 4.5. Ground of appeal no 7 relates to the plea of the appellant that the appellant has de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a company and it was required to deposit advance tax in four quarterly installments starting from June and assessee did not deposit any of the installments and neither it deposited any self assessment tax and therefore, it was a case of a willful defaulter. The learned DR submitted that Assessing Officer had imposed 100% of tax outstanding as penalty and learned CIT(A) has reduced the penalty to 25% on the basis of submissions of assessee that there was a shortage of funds which was not a sufficient reason as the scheme of Act is pay as you earn. It was submitted that assessee had not paid any of the installments of advance tax which had become due to the Government and therefore, the assessee had used the Government money for its business operations which is not permitted. The learned DR further argued that the learned CIT(A) has relied upon cash flow statement as on 31.03.2010 for allowing relief and has ignored to verify the cash position of assessee between 1.4.2010 to date of filing of return i.e., 30.09.2010. Therefore, the learned CIT(A) has wrongly allowed relief to the assessee. 7. Without prejudice the learned DR submitted the payment of taxes was a statutory liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 221(1). The learned AR submitted that section 140A(3) of the Act went through a change w.e.f. 1.04.1989. He submitted that before 1.04.1989 the penalty for non payment of tax or any part of tax was imposable for every month during which the default continued whereas after the amendment for non payment of tax and interest or any part of it the assessee is deemed to be an assessee in default. It was submitted that penalty under section 221(1) for violation of provisions of section 221(1), cannot be imposed if the assessee proves to the satisfaction of Assessing Officer that default was for good and sufficient reasons. He submitted that detailed reasons were filed before Assessing Officer and CIT(A) for delay in making payment of tax but the authorities below did not deal with the same. The learned AR further invited our attention to Circular No.549 dated 31.10.1989 wherein the amended provisions of section 140(A0(3) were explained. The learned AR submitted that old provisions of Income Tax Act gave Assessing Officer discretionary powers to charge interest and to levy penalty for the same default and therefore, with the amendment the payment of interest u/s 234A to 243C were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rightly imposed the penalty. 11. We have heard the rival parties and have gone through the material placed on record. It is an undisputed fact that the period of filing of return in this year for the State of Jammu and Kashmir was extended to 31st January, 2011 as is apparent from paper book page 84 where an order u/s 119 dated 30.09. 2010 extending the date of filing of return in the State of Jammu Kashmir to 31st January, 2011 is placed. It is also an undisputed fact that the assessee had filed return of income on 30.09.2010 which is a fact which Assessing Officer has noted in his order. It is also an undisputed fact that assessee had deposited the entire tax in installments on the following dates. (i) 15.11.2010 Rs.25,00,000/- (ii) 23.11.2010 Rs.25,00,000/- (iii) 30.11.2010 Rs.35,00,000/- (iv) 1.12.2010 Rs.65,55,026/- Total Rs.1,50,55,026 From the above dates of payment of taxes it is observed that assessee had discharged its liability of payment of tax by 1st December, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the tax or interest or both remaining unpaid, and all the provisions of this Act shall apply accordingly.]***** From the analysis of above provisions of section 140A(1), we find that the section requires that assessee is liable to pay taxes on the total income on the basis of any return u/s 139 after reducing the advance taxes and tax deducted at source, if any and such return shall be accompanied with the proof of payment of such taxes and interest. Sub-section 3 of section 140A requires that if an assessee fails to pay whole or any part of any such tax or interest the assessee shall be deemed to be an assessee in default and therefore, the provisions of Act shall apply accordingly. It is apparent from the above that section 140 (A)(1) of the Act applies in respect of return required to be furnished u/s 139 of the Act. The return in this case was required to be furnished u/s 139 of the Act by 31st January, 2011. The entire tax was paid by 1.12.2010 which is much prior to the due date of filing of return which happened to be 31/01/2011 and if the entire tax has been paid before the filing of due date of return there can not be said to be default u/s 140A(1) of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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