JEHANGIR LENTIN ESTATES PVT. LTD., MUMBAI V. I.T.O. 5(2)(2), NAVI MUMBAI

ITA 1646/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75615 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 06-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI . , !'# $ % & , ' !'# !( BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER !. : 1646 / / 2011 A.Y. 2009-10 ITA NO. : 1646/MUM/2011 (ASSESSMENT YEAR: 2009-10) M/S JEHANGIR LENTIN ESTATES PVT. LTD., 2 ND FLOOR, GORDHAN BUILDING NO. 11, 12/14, PAREKH ST., PRATHNA SAMAJ, MUMBAI- 400 004 PAN: AAACJ 2485 P VS INCOME TAX OFFICER-5(2)(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI R K SAHU /DATE OF HEARING : 06-02-2014 / DATE OF PRONOUNCEMENT : 19-02-2014 ' + O R D E R % & , !: PER VIVEK VARMA, JM: THE INSTANT APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT(A) 9, MUMBAI, DATED 21.12.2010, WHEREIN, THE FOLLOWING GROU NDS HAVE BEEN RAISED: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/S 250 OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT HOLDING THAT THE PENALTY PROCEEDINGS AND THE ORDER PASSED U/S 221(1) OF THE ACT AS BAD IN LAW. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN HOLDING THAT THE PROVISIONS OF SECTION 221(1) OF THE ACT ARE NOT APPLICABLE IN THE PRESENT CASE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING LEVY OF PENALTY BY THE ASSESSING OFF ICER OF RS. 20,20,710/- UNDER SECTION 221(1) OF THE ACT IN RESPECT OF DELAY IN PAYMENT OF TAX BY THE APPELLANT. M/S JEHANGIR LENTIN ESTATES PVT LTD ITA NO. 1646/MUM/2011 2 2. THE SOLITARY ISSUE PERTAINS TO LEVY AND SUSTAINING OF PE NALTY OF RS. 20,20,710/- LEVIED U/S 221(1) OF THE INCOME TAX ACT, 1961. 3. THE FACTS AS NOTED IN THE SOF ARE THAT THE ASSESSE E IS A COMPANY, REGISTERED UNDER COMPANIES ACT, 1956. THE ASSES SEE FILED ITS RETURN OF INCOME, DECLARING AN INCOME OF RS. 3,08,63,810/-, W HICH WAS FILED BY THE ASSESSEE ON 30.09.2009, I.E. THE DUE DATE OF FILING OF RETURN. ACCORDING TO THE RETURN THE TAX PAYABLE BY THE ASSESS EE ON THE RETURNED INCOME WAS RS. 72,78,563/- AND INTEREST THEREON UNDER VARIOUS PROVISIONS AMOUNTED TO RS. 10,22,627/-, AGGREGATING THE TOTAL LIABILITY AT RS. 80,82,840/-. THIS TOTAL SUM WAS NOT PAID BY THE ASSESSEE, NEITHER AS ADVANCE TAX ON VARIOUS DATES DUR ING THE FINANCIAL YEAR, NOR AS SELF ASSESSMENT TAX U/S 140A WHILE FILING THE R ETURN OF INCOME. HOWEVER, THE ASSESSEE PAID AND CLEARED THE ENTIRE TAX LIABILITY, INCLUDING THE INTEREST AS ON 31.12.2009, BY PAYING A SUM OF RS. 83,01,194/- BY ADDING THE INTEREST FOR THE PERIOD 01.10.20 09 TO 31.12.2009. AS PER THE SUBMISSIONS OF THE AR AS WELL AS FROM THE ORDER OF THE CIT(A), THE AO SERVED ON THE ASSESSEES SH OW CAUSE NOTICE ON 22.02.2010, AS TO WHY PENALTY U/S 221(1) BE NOT LEVIED. 4. THE ASSESSEE ADMITTEDLY DID NOT COMPLY WITH THE NOT ICE AND AS A RESULT, THEREOF, THE AO LEVIED THE PENALTY OF RS. 20,20,710/- U/S 221(1). 5. THE ASSESSEE TOOK THE MATTER BEFORE THE CIT(A), BEFORE WHOM, THE ASSESSEE SUBMITTED THAT IT HAD COMMITTED A DEFAULT, BUT N EITHER THAT WAS A CONTINUING DEFAULT, NOR WAS AN INTENTIONAL DEFAULT. THE ASSESSEE SUBMITTED THAT DUE TO LACK AND PAUCITY OF FUNDS, THE ASSE SSEE COULD NOT CLEAR GOVERNMENT LIABILITY. BUT THE ASSESSEE, WHEN FACED WITH CONTINUING HARDSHIP AND THE STATUTORY LIABILITY STARING ITS FACE, THE ASSESSEE BORROWED FUNDS TO CLEAR THE GOVERNMENT DUES. 6. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THE TRUTH T HAT THE ASSESSEE HAD SOLD A PROPERTY FOR RS. 2,94,39,030/- DURING THE MONTH OF JULY, 2008, WHICH THE ASSESSEE, ADVANCED THE SAME TO ITS GROUP M/S JEHANGIR LENTIN ESTATES PVT LTD ITA NO. 1646/MUM/2011 3 ASSOCIATES, FOR A SHORT TERM ADJUSTMENT TO M/S MANAV B UILDERS PVT. LTD. RS. 3,10,00,000/- AND TO MR. HARSH MEHTA A SUM OF RS. 25,04,708/-, AS THEY WERE IN IMMEDIATE NEED OF FUNDS. THE AS SESSEE HAD ADVANCED THE FUNDS TO THE GROUP ASSOCIATES, WITH AN UNDERSTANDING THAT THE FUNDS WOULD BE RETURNED AND THE ASSESSEE SHALL CLEAR ITS LIABILITIES. BUT THE BANK ACCOUNTS OF THESE TWO PERSONS WERE ATTACHED BY THE INCOME TAX DEPARTMENT. IT WAS T HIS PERIOD, WHEN THE ASSESSEE NEEDED ITS FUNDS TO CLEAR ITS DUES. SINCE IT WAS THE ASSESSEES FUNDS THAT LAY ATTACHED, IN THIRD PERSON DUES , THE ASSESSEE COULD NOT CLEAR ITS STATUTORY DUES AND BECAME A DEFAULTER. 8. THE CIT(A), TAKING INTO CONSIDERATION THE ABOVE POSITIO N, OPINED THAT IF THE INTENTION OF APPELLANT WERE CLEAR, THEN IT COU LD HAVE ARRANGED MONEY EARLIER . THE CIT(A), THEREFORE SUSTAINED THE PENALTY, AS IMPOSED BY THE AO. 9. AGAINST THIS ORDER, THE ASSESSEE IS BEFORE THE ITAT. 10. BEFORE US, THE AR ONCE AGAIN REITERATED THE FACTS TH AT WERE SUBMITTED BEFORE THE CIT(A). THE AR SUBMITTED THAT PRIOR T O THIS EVENT, THE FINANCIAL POSITION OF THE ASSESSEE WAS NEVER BAD. THE FACT THAT THE FUNDS (SALE PROCEEDS IN THE INSTANT CIRCUMSTANCE) ARE SOM ETIMES ADVANCED TO ITS GROUP ASSOCIATES IS A NORMAL BUSINESS CIR CUMSTANCE. BUT HAVING THE SAME FUNDS GETTING ATTACHED IN DIFFERENT PE RSONS ACCOUNTS WAS UNFORESEEN AND LEAVING THE ASSESSEE IN A P RECARIOUS CIRCUMSTANCE, IS AN ISSUE TO BE EXAMINED. THE AR SUBMITTED THAT EVEN FOR PAYMENT OF NORMAL EXPENSES AND ESSENTIAL EXPENSES SU CH AS WATER BILL, THE ASSESSEE WAS FORCED TO TAKE LOAN FROM ITS OTHER A SSOCIATES (AS IS EVIDENT FROM THE COPIES OF BANK STATEMENTS APPEN DED). THE AR SUBMITTED THAT NEVER EVER, THE ASSESSEE HAD DEFAULTED IN ANY STATUTORY PAYMENTS AND IN THAT SEQUENCE OF EVENTS, WHEN THE ASSE SSEE WAS UNABLE TO GET ITS OWN FUNDS BACK FROM ITS GROUP ASSOCIATE S, TO WHOM IT HAD ADVANCED LOANS, THE ASSESSEE APPROACHED ITS ASSOCIA TES AND TOOK LOAN TO CLEAR ITS TAX DUES, BEING THE ACTUAL LIABILITY AS PER RETURN, AND M/S JEHANGIR LENTIN ESTATES PVT LTD ITA NO. 1646/MUM/2011 4 ADDED THERETO THE INTEREST FOR THE THREE MONTHS FOR TH E PERIOD FROM OCTOBER 2009 TO DECEMBER 2009 AND CLEAR THE DUES. THE AR, SUBMITTED THAT TAKING INTO ACCOUNT THE ENTIRE CIRCUMSTAN CES, WHEN THE DUES WERE CLEARED MUCH BEFORE THE DEPARTMENT GETTING A CTIVE ON THIS ISSUE, IS A REASONABLE GROUND FOR DELETION OF PENALTY. 11. THE DR ON THE OTHER HAND SUPPORTED THE ORDERS O F THE REVENUE AUTHORITIES AND SUBMITTED THAT PRIOR TO ANYTHING ELSE, THE GOVERNMENT SHOULD GET ITS DUES. THE SUBMISSION AND EXPLANATION OF THE ASSESSEE THAT IT ADVANCED FUNDS TO ITS GROUP ASSOCIATES, WHICH GOT ATTACHED AND THE ASSESSEE WAS LEFT WITH A TIGHT FINANCIAL POSITION IS SIMPL Y AN EYEWASH TO HOOD WINK AND THE DR ALSO SUBMITTED THAT EV EN IF THE ASSESSEE WAS SO INNOCENT, THE ASSESSEE COULD HAVE ARRA NGED FUNDS EARLIER, AS OPINED BY THE CIT(A). THE DR ALSO POINTED OUT TH AT THE ASSESSEE DID NOT PAY ITS ADVANCE TAX INSTALLMENTS FALLING DU E IN SEPTEMBER 2008 AND DECEMBER 2008 AND MARCH 2008. ALL T HESE CIRCUMSTANCES INDICATE THAT THE ASSESSEE ACTUALLY DID NO T WANT TO PAY TAX DUES AND THE REVENUE AUTHORITIES HAVE RIGHTLY INVOK ED AND LEVIED THE PENALTY. THE DR ALSO SUBMITTED THAT THE AO WAS MORE THEN FAIR TO IMPOSE A PENALTY ONLY AT 25% OF THE TAX DUE. HENCE THE ORDERS OF THE REVENUE AUTHORITIES SHOULD BE SUSTAINED. 12. WE HAVE HEARD THE ARGUMENTS OF EITHER SIDE AND HAV E PERUSED THE FACTS AS COMING OUT FROM THE ORDER OF THE CIT(A) AND ALSO AS APPENDED IN THE APB. 13. THE BASIC FACTS, THAT THE ASSESSEE SOLD ITS PROPERTY AND ADVANCED THE SALE PROCEEDS TO ITS GROUP ASSOCIATES AND THOSE FUN DS GOT STUCK UNDER ATTACHMENT BY THE INCOME TAX DEPARTMENT, ARE U NDISPUTED. WE HAVE TO EXAMINE THE CIRCUMSTANCES AND WEIGH THE ARGUME NTS OF EITHER SIDE ON THIS UNDISPUTED FACT AND TO SEE WHETHER THE ASS ESSEE ACTUALLY HOOD WINKED THE DEPARTMENT OR THE CIRCUMSTANCES WERE CREATED AGAINST THE ASSESSEE, WHO WAS FORCED TO DEFAULT, WITHOUT ANY MALAFIDE M/S JEHANGIR LENTIN ESTATES PVT LTD ITA NO. 1646/MUM/2011 5 INTENTION. THE DR VERY RIGHTLY SAID THAT THE TAX DUES HA VE TO BE CLEARED FIRST, BUT WE ARE EXAMINING THE SITUATION AS IS EVIDENT FROM THE BANK STATEMENTS PRODUCED BEFORE US, I.E. WHEN THE ASSESSEE IS IN A SITUATION WHERE IT HAS TO ARRANGE FUNDS, EVEN FOR BASIC SURVIVAL, SUC H AS TO PAY FOR WATER BILLS, WHICH IS AN ESSENTIAL ELEMENT FOR SURVIVAL. IN SUCH A CIRCUMSTANCE, WILL THE ASSESSEE FACE THE CONSEQUENCES ON LIFE OR STATUTORY CONSEQUENCES. IT IS A FACT THAT THE ASSESSEE DID NOT PAY ADVANCE TAX, BUT THE BASIC FACT REMAINS THAT THE ASSESS EE HAS TO PAY TAX ON ITS INCOME AS ON 31.03. NO DOUBT THE PAYMENT OF A DVANCE TAX IS ESSENTIAL, BUT THE NON PAYMENT OF ADVANCE TAX GETS COMP ENSATED BY THE CHARGE OF STATUTORY INTEREST, BUT WE ARE EXAMINING, WHAT IS THE ULTIMATE, AND THE ANSWER IS, THE TAX DUE. THE FACT THAT IT WAS THE ASSESSEES MONEY WHICH HAD GOT STUCK IN AN ATTACHMENT OF A THIRD PARTY, CANNOT AND COULD NOT HAVE BEEN CONCEIVED BY THE ASSESSEE. THE FACT IS THAT THE ASSESSEE ARRANGED FUNDS TO CLEAR ITS TAX DUES ALONG WITH INTEREST UPTO THE DATE OF PAYMENT, IN DECEMBER 2009, GO ES TO SHOW THE BONA FIDE INTENTION OF THE ASSESSEE AND NOT THE MALA-FIDE INTENTION, AS MADE OUT BY THE CIT(A). 14. WE HAVE GONE THROUGH THE CITATIONS, AS RELIED UPON B Y THE DR AND ALSO THE CASE LAWS MENTIONED BY THE ASSESSEE IN PRO CEEDINGS BEFORE THE CIT(A). WE HAVE TAKEN NOTE OF THE SAME. AT TH E MOMENT, WE HAVE TO TAKE A DECISION TAKING INTO ACCOUNT THE 2 ND PROVISO, EXPLANATION TO SECTION AND SUBSECTION (2) TO SECTION 221 , WHICH READ AS UNDER: WHERE AS A RESULT OF ANY FINAL ORDER THE AMOUNT OF T AX, WITH RESPECT TO THE DEFAULT IN THE PAYMENT OF WHICH THE PENALTY WAS LEVIED, HAS BEEN WHOLLY REDUCED, THE PENALTY LEVIED SHALL BE CANCELLED AND THE AMOUNT OF PENALTY PAID SHALL B E REFUNDED. 15. WHEN WE EXAMINE THE CASE FROM THE ANGLE OF 2 ND PROVISO AS WELL, WE FIND THAT THE ASSESSEE HAD ELABORATELY PROVED ITS BONA FIDE INTENTION TO PAY THE TAX AND STATUTORY LIABILITIES. THE DEFAULT, AS WELL AS THE REASONS MAKING THE ASSESSEE A DEFAULTER, WAS A GOOD AND SUFFICIENT REASON. AGAIN SUB-SECTION (2) PROVIDES THE CUSHION, THAT IF T HE ASSESSEES AMOUNT OF TAX HAS BEEN REDUCED, THE PENALTY SHALL BE M/S JEHANGIR LENTIN ESTATES PVT LTD ITA NO. 1646/MUM/2011 6 CANCELLED. IN THE INSTANT CASE, THOUGH THERE IS NO OCCASIO N FOR INVITING SUB-SECTION (2). 16. IT IS APPARENTLY CLEAR THAT SUBSECTION (2) PERTAINS TO POST ASSESSMENT PERIOD, BUT THE FACT IS THAT THE LEGISLATURE ITS ELF PROVIDES THAT PENALTY SHALL NOT BE LEVIED WHEN GOOD AND SUFFICIENT RE ASON HAS BEEN GIVEN OR IN POST ASSESSMENT STAGE WHEN THE FINAL T AX IS FINALLY DETERMINED AT A LESSER FIGURE, THE PENALTY SHALL BE CANCELLED. 17. WE HAVE TO MENTION THAT EXPLANATION CREATES THE LIAB ILITY EVEN IF THE TAX IS PAID. BUT THE FACT IS THAT THE 2 ND PROVISO WAS BROUGHT IN AS A SAVING PROVISION, MUCH AFTER THE INSERTION OF THE EXPLANAT ION GOES TO SHOW THE LEGISLATIVE INTENT IS TO BECOME REASONABLE TO THE ASSESSEE. 18. ON EXAMINATION OF THE ENTIRE GAMUT OF CIRCUMSTANCES, T HE FACT THAT THE ASSESSEE CLEARED ITS TAX, INTEREST AND BALANCE INTEREST DUES, LEAVING NOT EVEN A RUPEE OUTSTANDING IN DUES, MUCH BEFORE THE AO TRIGGERED THE PENAL PROVISIONS ONLY GOES TO PROVE THE A SSESSEES FAIR INTENTION. 19. THE FACT THAT THE ASSESSEE NOT BEING A HABITUAL DEFA ULTER WITH NO ADVERSE HISTORY TAINTED ON HIM GOES TO PROVE THAT THE DEFAULT WAS COMMITTED BY IT WITHOUT ANY MALA FIDE INTENTION AND UNDER EXTREME DIRE CIRCUMSTANCES. 20. IN THESE CIRCUMSTANCES, WE CANNOT SUBSCRIBE TO THE VIEWS OF THE REVENUE AUTHORITIES AND SUSTAIN AN ACTION WHICH IS STRICTLY TECHNIC AL. 21. KEEPING IN MIND THE OBSERVATIONS MADE BY THE HONBLE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION, ANANTNAG VS MST KATIJI, REPORTED IN AIR 1987 SC 1353, WHEREIN IT HAS BEEN PROPOUN DED, WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS AR E PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF NON -DELIBERATE DELAY. M/S JEHANGIR LENTIN ESTATES PVT LTD ITA NO. 1646/MUM/2011 7 22. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE CI T(A) AND DIRECT THE AO TO CANCEL THE PENALTY LEVIED AT RS. 20,20,71 0/- U/S 221(1) OF THE INCOME TAX ACT. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 9 TH FEBRUARY 2014. SD/- SD/- ( . ) ( % & ) !'# !'# (D. KARUNAKARA RAO) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 19 TH FEBRUARY, 2014 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ! ! ' (#) - 9, %&' / THE CIT(A) -9, MUMBAI. 4) ! ! ' -5, %&' / THE CIT 5, MUMBAI, 5) #() * ! , ! * , %&' / THE D.R. I BENCH, MUMBAI. 6) )+ , COPY TO GUARD FILE. !-./ / BY ORDER / / TRUE COPY / / [ 0 / 1 &2 ! * , %&' DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *451 . . * CHAVAN, SR. PS