DCIT, Chandigarh V. M/s Kudos Chemie Ltd., Chandigarh

ITA 1137/CHANDI/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8971 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 10-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Opportunity of being heard; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER ITA NOS.1137 & 1138/CHD/2010 (ASSESSMENT YEARS : 2008-09 & 2009-10) THE D.C.I.T., VS. M/S KUDOS CHEMIE LTD., CIRCLE 4(1), # 622, SECTOR 33B, CHANDIGARH. CHANDIGARH. PAN: AAACK6650K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAVI SARANGAL, CIT DR RESPONDENT BY : SHRI TEJ MOHAN SINGH DATE OF HEARING : 15.09.2016 DATE OF PRONOUNCEMENT : 28.11.2016 O R D E R PER DIVA SINGH, J.M . : THE PRESENT APPEALS FILED BY THE REVENUE HAVE COME UP FOR HEARING BEFORE THE TRIBUNAL AS A RESULT OF A REMAND OF ORDE R DATED 22.08.2013 OF THE ITAT BY THE HON'BLE HIGH COURT VIDE ORDER DATED 16. 1.2015 IN ITA NOS.134 AND 135 OF 2015. THESE APPEALS ARISE OUT OF CONSOL IDATED ORDER DATED 14.6.2010 OF LEARNED COMMISSIONER OF INCOME TAX (AP PEALS), CHANDIGARH PERTAINING TO 2008-09 AND 2009-10 ASSESSMENT YEARS AGAINST THE PENALTY LEVIED UNDER SECTION 140A(3) R.W.S. 221(1) OF THE I NCOME TAX ACT, 1961. IT WAS A COMMON STAND OF THE PARTIES THAT THE ISSUES I N BOTH THE APPEALS ARE IDENTICAL. ACCORDINGLY FOR READY REFERENCE THE GROU NDS IN ITA NO.1137/CHD/2010 ARE REPRODUCED HEREUNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.C1T(A) HAS ERRED IN ALLOWING APPEAL OF THE AS SESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT (A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSE E WITHOUT TAKING INTO 2 ACCOUNT THE MATERIAL FACTS ON RECORD AND BELIEVING THE VERSION OF THE ASSESSEE WHILE CONDONING DELAY IN FILING THE APPEAL . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD.C1T (A) HAS ERRED DELETING THE PENALTY U/S 140A(3), R /W SECTION 221(1) OF RS. 66 LACS RIGHTLY IMPOSED BY THE ASSESSING OFFICER. 4. IT IS PRAYED THAT THE ORDER OF THE LD. C1T (A) B E SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 2. IN THE FACTS OF THE PRESENT CASE THE ASSESSING O FFICER IN THE YEARS UNDER CONSIDERATION HAD LEVIED PENALTY OF RS.66 LAC S AND RS.65.71 LACS IN ASSESSMENT YEAR 2008-09 AND 2009-10 ASSESSMENT YEAR S. WHEREAS IN 2008- 09 ASSESSMENT YEAR, THE ASSESSEE HAD DECLARED A TOT AL INCOME OF RS.8,99,88,410/- ON 30.9.2008 IT HAD FAILED TO PAY PART OF THE INCOME TAX/INTEREST AS A RESULT OF WHICH PENALTY PROCEEDIN GS UNDER SECTION 140A R.W.S. 221(1) OF THE ACT WERE INITIATED. THE ASSES SEE TOOK UP THE PLEA THAT THE TAXES COULD NOT BE PAID DUE TO A FINANCIAL CRUN CH. THE SAID ARGUMENT WAS REJECTED BY THE ASSESSING OFFICER LEADING TO TH E PENALTY OF RS.66 LACS FOR FAILING TO PAY INCOME TAX/INTEREST TO THE TUNE OF RS.3,29,89,112/- UPTO THE DATE OF FILING OF THE RETURN. 2.1 SIMILARLY, IN 2009-10 ASSESSMENT YEAR ON ACCOUN T OF SIMILAR REASONS PENALTY OF RS.65.71 LACS WAS IMPOSED UPON THE ASSES SEE. 2.2 THE ISSUE TRAVELED IN APPEAL BEFORE THE CIT (AP PEALS), WHO RELYING UPON ON CIT VS. MYSORE FERTILIZER COMPANY, 145 ITR 91 (MAD) AND OBSERVATIONS OF THE MINISTER OF FINANCE IN THE LOK SABHA IN HIS REPLY TO THE DEBATE ON CLAUSE BY CLAUSE CONSIDERATION OF FINANCE BILL AND THE RATIO LAID DOWN IN ACIT VS. SARVARYA TEXTILES LTD., 137 ITR 369 (AP) HELD THAT IN VIEW OF SUFFICIENT REASONS FOR NOT PAYING TAX WITH THE RETURN QUASHED THE PENALTY ORDER. THE SAID ORDER CHALLENGED BY THE RE VENUE BEFORE THE ITAT MET WITH PARTIAL SUCCESS AND ON A FURTHER CHALLENGE BY THE REVENUE BEFORE 3 THE HONBLE HIGH COURT RESULTED IN A REMAND BY THE HON'BLE HIGH COURT HOLDING AS UNDER : THE TRIBUNAL ACCEPTED THE REVENUE'S CONTENTION THA T THE ASSESSEE WAS LIABLE TO PAY PENALTY BUT REDUCED THE PENALTY TO RS.10 LACS F OR EACH YEAR. A RELEVANT EXTRACT FROM THE ORDER PASSED BY THE TRIBUNAL READS AS FOLLOWS:- ' THE ISSUE ARISING BEFORE US IS IN RELATION TO LEV Y OF PENALTY UNDER SECTION 140A(3) OF THE ACT WITH SECTION 221(1) OF THE ACT F OR NON DEPOSIT OF THE TAXES BEFORE FILING THE RETURN OF INCOME. THE COURT S HAVE TIME AND AGAIN LAID DOWN THE PROPOSITION THAT LIBERAL INTERPRETATI ON SHOULD BE GIVEN TO THE PROVISIONS OF SECTION 140A(3) WITH SECTION 221( 1) OF THE ACT. THE LIST OF CASES HAVE BEEN REFERRED BY THE CIT (APPEALS). T HERE IS NO DISPUTE REGARDING THE SAID ISSUE. HOWEVER, THE PERUSAL OF T HE FINANCIAL STATEMENTS OF THE ASSESSEE COMPANY FOR THE FINANCIAL YEAR 2007 -08 AND 2008-09 REFLECT THE AVAILABILITY OF THE FUNDS WITH THE ASSE SSEE WHICH IN-TURN HAVE BEEN UTILIZED FOR EXPANSION PURPOSES. THE ASSESSEE HAD ALSO BORROWED FUNDS FROM THE BANKS AS IS APPARENT FROM KUMAR VIRE NDER 2015.02.05 12:12 I ATTEST TO THE ACCURACY AND AUTHE NTICITY OF THIS DOCUNT HIGH COURT CHANDIGARH THE PERUSAL OF THE BALANCE SH EET FOR THE TWO FINANCIAL YEARS. HOWEVER, IN THE TOTALITY OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE FIND THE ASSESSEE TO HAVE NOT DISCHARG ED ITS ONUS VIS-A-VIS PAYMENT OF TAXES DUE. WE ARE OF THE VIEW THAT THE E NDS OF JUSTICE WOULD BE MET BY RESTRICTING THE LEVY OF PENALTY UNDER SECTIO N 140A(3) READ WITH SECTION 221(1) OF THE ACT TO RS.10 LACS FOR EACH OF THE YEAR, I.E., ASSESSMENT YEAR 2008-09 AND 2009-10. THUS APPLYING THE LIBERAL INTERPRETATION, WE RESTRICT THE LEVY OF PENALTY IN THE CASE TO RS.10 LACS EACH FOR THE FINANCIAL YEAR 2007-08 AND 2008-09. AC CORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE PENALTY LEVIE D UNDER SECTION 140A(3) READ WITH SECTION 221(1) OF THE ACT AT RS.10 LACS E ACH. THE GROUNDS OF APPEAL, THUS, RAISED BY THE REVENUE ARE PARTLY ALLO WED.' THE ASSESSEE HAS, AS RECORDED IN THE OPENING PARAGR APH OF THE JUDGMENT, GIVEN UP A CHALLENGE TO EXIGIBILITY TO PE NALTY AND, THEREFORE, THE QUESTIONS, AS AGREED BY COUNSEL FOR THE PARTIES, THAT REQUIRE AN ANSWER ARE (A) WHETHER QUANTUM OF PENALTY CAN BE DETERMINED WITHOU T REFERRING TO RELEVANT FACTORS AND ASSIGNING ADEQUATE REASONS? (B) WHETHER QUANTUM OF PENALTY DETERMINED IS NOT PERVERSE AND ARBITRARY? AND (C) FACTORS TO BE CONSIDERED WHILE DETERMINING QUANTUM OF PENALTY, UNDER SECTION 221 O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). THE QUESTIO NS ARE BEING ANSWERED TOGETHER. A PERUSAL OF THE AFORESAID EXTRACT REVEALS THAT THE TRIBUNAL HAS RESTORED THE ASSESSEE'S EXIGIBILITY TO PENALTY, BUT WHILE DO ING SO, HAS REDUCED THE QUANTUM OF PENALTY TO RS.10 LACS FOR EACH FINANCIAL YEAR WITHOUT ASSIGNING ANY REASON OTHER THAN HOLDING THAT 'THE ENDS OF JUSTICE ' AND A 'LIBERAL INTERPRETATION' REQUIRE THAT THE PENALTY BE REDUCED. THE WORDS 'ENDS OF JUSTICE' AND 'APPLYING A LIBERAL INTERPRETATION' ARE MEANINGLESS IF THEY DO NOT REFER TO RELEVANT FACTS OR FACTORS THAT UNDERLINE 'THE ENDS OF JUSTICE' AND ' A LIBERAL INTERPRETATION'. THE MERE USE OF THE WORDS ' THE ENDS OF JUSTICE' AND 'A LIBERAL INTERPRETATION ' WHILE REDUCING PENALTY FROM 4 RS.66 LACS TO RS.10 LACS EACH, PARTICULARLY WHEN TH E TRIBUNAL HAD ACCEPTED THAT THE ASSESSEE HAS NOT DISCHARGED ONUS TO EXPLAIN ITS DEFAULT, ARE INSUFFICIENT TO INFER A LEGAL EXERCISE OF DISCRETION TO DETERMINE T HE QUANTUM OF PENALTY. THE IMPUGNED ORDER, THEREFORE, DOES NOT MEET THE PARAME TERS OF A JUDICIAL, MUCH LESS A QUASI JUDICIAL DETERMINATION. WHILE EXERCISING THE POWER TO DETERMINE THE QUANTUM OF PENALTY, WHETHER IN ORIGINAL OR APPELLAT E PROCEEDINGS, THE DISCRETION SO CONFERRED HAS TO BE EXERCISED BY REFERENCE TO RE LEVANT FACTS, FOLLOWED BY A PERCEPTIBLE PROCESS OF REASONING, LEADING TO A FAIR AND JUST CONCLUSION. A FEW FACTORS WHICH, IN OUR CONSIDERED OPINION, MAY BE RE LEVANT, THOUGH NOT BE EXHAUSTIVE OF THE CIRCUMSTANCES THAT MAY BE TAKEN I NTO CONSIDERATION ARE:- (A) THE PERIOD OF DEFAULT; (B) THE REASONS FOR DEFAULT; (C) THE RECURRING NATURE OF THE DEFAULT; (D) CONDUCT OF THE ASSESSEE AND (E) ANY EXTENUATING CIRCUMSTANCES PUTFORTH BY THE ASSESSEE. THE TRIBUNAL DID NOT TAKE INTO CONSIDERATION ANY RELEVANT FACT OR FACTOR BUT BY MERELY USING A FEW L EGAL PHRASES, REDUCED THE PENALTY FROM 66/60 TO 10 LACS EACH. THE DISCRETION CONFERRED TO DETERMINE THE QUANTUM OF PENALTY, IS JUDICIAL IN NATURE AND MAY I F THE FACTS AND FACTORS SO WARRANT, BE MORE OR LESS THAN THE RS.10 LACS DETERMINED BY THE TRIB UNAL OR THE RS.66 LACS DETERMINED BY THE ASSESSING OFFICER. THE TRIBUNAL HAVING DETERMINED THE QUANTUM OF PENALTY WITHOUT ASSIGNING ANY TANGIBLE REASON OR BY REFERRI NG TO ANY RELEVANT FACT OR FACTOR, HAS ARBITRARILY REDUCE D PENALTY TO RS.10 LACS. THE TRIBUNAL WOULD, THEREFORE, BE REQUIRED TO RECONSIDE R THE QUANTUM OF PENALTY LIABLE TO BE PAID BY THE ASSESSEE. THE QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE REVENUE ACCORDINGLY. [ EMPHASIS PROVIDED ] 3. BOTH THE PARTIES HAVE BEEN HEARD. THE LEARNED A .R. INITIALLY TOOK UP THE PLEA THAT FINANCIAL CRUNCH WAS AN ISSUE WHICH T HE ASSESSEE COULD DEMONSTRATE. HOWEVER, ON A CAREFUL READING OF THE DECISION OF THE HON'BLE HIGH COURT AS HIGHLIGHTED ABOVE THE ASSESSEE IS FOU ND TO HAVE GIVEN UP THIS CHALLENGE BEFORE THE ITAT IN THE FIRST ROUND. THE SAID FINDING HAS NOT BEEN UPSET BY ANY FORUM AND THE ISSUE NOW OPEN BEFORE TH E ITAT BY VIRTUE OF THE REMAND OF THE HONBLE HIGH COURT IS LIMITED ONLY TO THE QUANTIFICATION OF THE PENALTY IN THE TWO YEARS UNDER CONSIDERATION. IN THE CIRCUMSTANCES THE LD. AR SUBMITTED THAT THE FACTUAL SUBMISSION FOR TH E PURPOSES OF QUANTIFYING THE PENALTY HAVE NEVER BEEN ADDRESSED BY THE AUTHOR ITIES AND THUS IT WAS REQUESTED THE ARGUMENT OF FINANCIAL CRUNCH WILL HAV E TO BE SUPPORTED BY EVIDENCES AND THESE HAVE NEVER BEEN CONSIDERED BY T HE TAX AUTHORITIES. IN THE CIRCUMSTANCES, IT WAS REQUESTED THAT THE APPEAL S MAY BE REMANDED TO THE ASSESSING OFFICER. THE SAID PLEA WAS REITERATED BY THE REVENUE ALSO AS THE 5 ARGUMENT OF FINANCIAL CRUNCH ON SPECIFIC DATES IT W AS ARGUED WILL NEED TO BE DEMONSTRATED BY THE ASSESSEE BY SUPPORTING EVIDENCE S. ACCORDINGLY, ON A CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE ACCEPTING THE COMMON PLEA OF THE PARTIES THAT MATTER MAY BE REMAN DED TO THE FILE OF THE ASSESSING OFFICER WE FIND THAT THE FACTORS WHICH OU GHT TO BE TAKEN INTO CONSIDERATION FOR DECIDING THE ISSUES EVIDENTLY ARE NOT AVAILABLE ON RECORD. ACCORDINGLY, IN THE CIRCUMSTANCES THE ISSUE IS SET- ASIDE AND RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW IN THE LIGHT OF THE DIRECTIONS OF THE HONBLE HIGH COURT. NEEDLESS TO SAY THAT THE ASSESSING OFFICER SHALL PR OVIDE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE 4. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH NOVEMBER, 2016. SD/- SD/- (OM PRAKASH KANT) (DIVA SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH NOVEMBER, 2016 *RATI* (CHANDIGARH)/ SUJEET (DELHI) COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR //TRUE COPY// //TRUE COPY// ASSISTANT REGISTRAR, ITAT, CHANDIGARH