AMRRUT SHAVJJIBHAI GADA,MUMBAI V. DYCIT, CIRCLE-13(2)(1), MUMBAI, MUMBAI

ITA 3773/MUM/2023

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The case involves Amrrut Shavjjibhai Gada, the proprietor of Sejal Glass House, who appealed against the penalty imposed under section 221(1) of the Income Tax Act, 1961, for non-payment of an outstanding tax demand of INR 1,21,24,070 for the assessment year 2008-09. The penalty was initially levied by the Assessing Officer following a survey and subsequent income declaration by the assessee, which significantly increased his tax liability. The Commissioner of Income Tax (Appeals) partially relieved the assessee by removing the interest component from the penalty but upheld the principal amount. The Tribunal dismissed the appeal, agreeing with the lower authorities that the assessee had not provided sufficient justification for the non-payment of the tax demand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470231 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAM KRISHNA KEDIA
• Assessee Lawyers: PRAYAG JHA
• Keywords: Additional evidence; Reasonable cause; TDS
• Section: 250; 143(1)

Judgement Text

"Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI. NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI. SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 3773/Mum/2023 (Assessment Year :2008-09) Amrrut Shavjjibhai Gada Sejal Glass House, Krishna Kunj Ground Floor, S.V. Road, Malad West, Mumbai 400064 PAN: AADPG5298D ……………. Appellant v/s Dy. Commissioner of Income Tax Circle- 13(2)(1), Mumbai Aayakar Bhavan, M.K. Road, Mumbai-400020 ……………. Respondent Assessee by : Dr. Prayag Jha Revenue by :Shri. Ram Krishna Kedia, Sr. DR Date of Hearing – 18/03/2025 Date of Order – 20/03/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. 1. The present appeal has been filed by the assessee challenging the impugned order dated 12/09/2023, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], which in turn arose from the penalty order passed under section 221(1) of the Act, for the assessment year 2008-09. 2. In this appeal, the assessee has raised the following grounds: – ITA No. 3773/Mum/2023 Page | 2 1. “The Ld CIT(A), NFAC, erred in deciding the assessee's appeal against the penalty order passed under section 221 of the IT Act without considering properly the Written Submission made by the assessee. 2. The Ld CIT(A), NFAC, erred in not considering the fact that the assessee was facing financial difficulty during the period when the demand was payable and there was reasonable cause for failure on the part of the assessee and penalty was not leviable. 3. The Ld CIT(A), NFAC, erred in not considering the fact that Ld AO had imposed penalty without considering the payment of Rs.12,40,000/- made before the date of passing of the impugned penalty order. 4. The Ld CIT(A), NFAC, erred in not appreciating that the Ld Assessing Officer was not justified in imposing penalty equivalent to the amount of outstanding demand though he had the discretion to impose penalty at any amount between Rs.1/- to Rs.1,21,24,070/-. 5. The Ld CIT(A), NFAC, erred in sustaining the order of penalty in respect of the demand on account of income tax in a mechanical manner without considering the reasons which caused the default. 6. The above grounds of appeal are without prejudice to one another. 7. The appellant craves leave to furnish Additional Evidence which may be relevant to the above Grounds of Appeal in course of the appeal proceedings. 8. The appellant craves leave to amend or alter any of the above Grounds of Appeal or to add new Grounds of Appeal during the course of appeal proceedings.” 3. The solitary grievance of the assessee, in the present appeal, is against the levy of penalty under section 221(1) of the Act. 4. The brief facts of the case are that the assessee is engaged in the business of dealing in glass and runs proprietary concern in the name of M/s Sejal Glass House. A survey action was conducted at the business premises of the assessee on 21/08/2007 and the assessee filed its return of income, for the year under consideration, on 30/09/2008, declaring a total income of INR 4,36,80,110, which consists of additional income of INR 4,30,50,000 ITA No. 3773/Mum/2023 Page | 3 declared during the survey action. The return filed by the assessee was selected for scrutiny, and vide order dated 28/12/2010 passed under section 143(3) of the Act the total income of the assessee was assessed at INR 5,04,72,310, after making various additions on the basis of impounded documents. Subsequently, penalty proceedings under section 221(1) of the Act was initiated on the basis that the assessee has not paid an outstanding tax demand of INR 1,21,24,070. In response to the show cause notice dated 13/09/2017, the assessee submitted that he had no money to make the payment of the entire amount of tax liability. Disagreeing with the submissions of the assessee, the Assessing Officer (“AO”), vide order dated 13/11/2017 passed under section 221(1) of the Act, noted that the assessee has sufficient income in his income tax returns filed after the assessment year 2008-09 from which the payment of outstanding demand could have been made. The AO further held that however the assessee despite having sufficient income chose not to pay the outstanding tax demand even after the lapse of almost 9 years. Accordingly, the AO levied a penalty of INR 1,21,24,070 under section 221(1) of the Act. 5. The learned CIT(A), vide impugned order, after considering the written submissions filed by the assessee during the appellate proceedings, granted partial relief to the assessee by deleting the component of interest from the amount of penalty levied on the assessee under section 221(1) of the Act and upheld the penalty levied only in respect of the outstanding tax demand. Being aggrieved, the assessee is in appeal before us. ITA No. 3773/Mum/2023 Page | 4 6. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that on 21/08/2007, survey proceedings were conducted at the business premises of the assessee, during which the assessee declared additional income amounting to INR 4,30,50,000 in respect of the investment in the commercial complex. On 30/09/2008, the assessee filed the return of income for the year under consideration declaring a total income of INR 4,36,80,110, which mainly consists of additional income of INR 4,30,50,000 declared during the course of survey action. As per the assessee, it paid an amount of Rs. 50 lakh as advance tax for the year under consideration. After giving the credit of TDS deducted and tax already paid, the return of income filed by the assessee was processed under section 143(1) of the Act computed a demand of INR 1,21,24,070, which the assessee did not pay as a self-assessment tax. Accordingly, a penalty under section 221 of the Act was levied on the assessee. As per the assessee, he is in financial difficulty and has no money to make the payment of the entire amount of tax liability, therefore, he could not make the payment of the tax due at the time of filing the return of income. 7. During the hearing, the learned Authorised Representative (“learned AR”) by referring to the provisions of section 221(1) of the Act submitted that the maximum amount of penalty that can be levied under this section is the amount of tax in arrears. Thus, the AO is expected to examine the facts and circumstances before levying the penalty under section 221(1) of the Act. However, in the present case, the AO did not consider the good and sufficient reasons available with the assessee to make the payment of the due tax ITA No. 3773/Mum/2023 Page | 5 arrears at the time of filing the return of income and levied a penalty at 100% of the tax in arrears. The learned AR further submitted that till the levy of penalty under section 221(1) of the Act, the assessee has made partial payment of tax on various occasions, which were not considered by the AO while levying the impugned penalty. 8. We find that the AO vide penalty order passed under section 221(1) of the Act as well as the learned CIT(A) vide impugned order noted that the assessee had sufficient income in his hands after the assessment year 2008- 09 from which the payment of outstanding tax demand could have been made. However, the assessee chose to not make the payment of the tax arrears. The details of income shown by the assessee for the assessment years 2009-10 till the assessment year 2016-17, as noted by the lower authorities, are reproduced as follows: – Λ.Υ. Income shown in ITR (in Rs.) Remarks 2009-10 5038510 2010-11 4798097 2011-12 5657915 2012-13 4746508 2013-14 - ITR not filed, but the assessee has received remuneration of Rs. 36,00,000/- form M/s. Sejal Glass Ltd. 2014-15 - ITR not filed, but the assessee has received remuneration of Rs. 45,00,000 form M/s. Sejal Glass Ltd 2015-16 3616490 2016-17 211860 9. We find that the learned CIT(A) in para-5.4 of its order also noted that the assessee has considered it important to pay the interest on an unsecured loan instead of paying the due tax amount to the Government. Further, we ITA No. 3773/Mum/2023 Page | 6 find that as per the Explanation to section 221(1) of the Act, the assessee shall not cease to be liable to any penalty merely by reason of the fact that before the levy of such penalty he has paid the tax. Therefore, in view of the express provisions of section 221(1) of the Act, we do not find any merits in the submissions of the learned AR that till the levy of penalty under section 221(1) of the Act, the assessee has made partial payment of tax on various occasions, which were not considered by the AO. During the hearing, apart from reiterating the submissions made before the lower authorities, the learned AR did not bring any material on record to show that the exercise of discretion by the AO to levy a penalty at 100% of the amount of tax in arrears is not as per the provisions of the Act. Further, in light of the income declared by the assessee in his return of income for subsequent years as noted in the foregoing paragraphs, we do not find that the assessee has good and sufficient reasons for the default in making the payment of tax in arrears. As the learned CIT(A) has already granted partial relief to the assessee by reducing the penalty by the amount of interest, we do not find any basis for quashing the remaining penalty upheld by the learned CIT(A) under section 221(1) of the Act. Accordingly, the impugned order passed by the learned CIT(A) is upheld and the grounds raised by the assessee are dismissed. 10. In the result, the appeal by the assessee is dismissed. Order pronounced in the open Court on 20/03/2025 Sd/- NARENDRA KUMAR BILLAIYA ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 20/03/2025 ITA No. 3773/Mum/2023 Page | 7 Divya R. Nandgaonkar, (Stenographer) Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "