VINAYAK MANUTRADE PVT.LTD., Jaipur V. `, Jaipur

ITA 229/JPR/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5143 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: O P AGARWAL
• Keywords: Reasonable cause

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH , - MH - TSU U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI A.D. JAIN, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA- @ ITA NO. 229/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2010-11 M/S VINAYAK MANUTRADE PVT. LTD., 31, INDUSTRIAL AREA, JHOTWARA, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 6(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACV 6404 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MANISH AGARWAL & SHRI O.P. AGARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 05/09/2016 MN?KKS'K .KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 06/09/2016 VKNS'K@ ORDER PER: A.D. JAIN, J.M. THIS IS ASSESSEES APPEAL FOR A.Y. 2010-11 FILED AG AINST THE ORDER DATED 06/02/2014 PASSED BY THE LD. CIT(A)-II, JAIPU R AGAINST CONFIRMATION OF LEVY OF PENALTY OF RS. 1.00 LAC OUT OF TOTAL PENALTY LEVIED OF RS. 1.75 LACS U/S 121 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED E-RETURN FOR A.Y. 2010-11 ON 07/10/2010, DECLARING INCOME OF RS. 60,7 8,000/- AND TAX AND ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 2 INTEREST THEREON, AS PER COMPUTATION OF TOTAL INCOM E WAS WORKED OUT AT RS. 17,41,738/-, WHICH WAS PAYABLE U/S 140A(1) OF TH E ACT, HOWEVER, THE SELF ASSESSMENT TAX U/S 140A WAS PAID ONLY BY 01/02/ 2011. 3. IN THE PENALTY ORDER DATED 28/3/2011, THE LD ASS ESSING OFFICER HAS OBSERVED AS FOLLOWS:- ON BEING ASKED BY THIS OFFICE, THE ASSESSEE DEPOSI TED THE DUE SELF ASSESSMENT TAX ON 1.2.2011. AS THE ASSESSE E HAS FAILED TO MAKE NECESSARY COMPLIANCE OF THE PROVISIO NS OF SECTION 140A(1), A SHOW CAUSE NOTICE NO. 5632 DATED 18.3.2011 WAS ISSUED U/S 221 READ WITH SECTION 140A( 3) REQUIRING THE ASSESSEE TO EXPLAIN AS WHY HE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT AND WHY THE PENALTY S HOULD NOT BE LEVIED U/S 221. IN COMPLIANCE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FURNISHED WRITTEN REPLY VIDE LETTER NO. VMPL/IT/201 0-11/01 DATED 22.3.2011. THE ASSESSEE SUBMITTED THAT, WE HAV E ALREADY PAID THE TAX WHICH IS DUE UNDER SECTION 140A FOR THE ASSESSMENT YEAR 2010-11. RECEIPT COPY & PHOTO COPY OF CHEQUE IS ENCLOSED WITH THIS LETTER. I HAVE CONSIDERED THE ABOVE REPLY OF THE ASSESSEE. THE ASSESSEE HAS NOT MENTIONED ANY REASONABLE CAUSE FOR FAILURE TO MAKE NECESSARY COMPLIANCE OF THE PROVISIONS OF S ECTION 140A(1) AND MAKE NECESSARY PAYMENT OF DUE SELF ASSE SSMENT TAX BEFORE FILING OF RETURN. THEREFORE, IN VIEW OF T HE PROVISIONS ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 3 OF SECTION 140A(3), THE ASSESSEE SHALL BE DEEMED TO BE IN RESPECT OF THE UNPAID SELF ASSESSMENT TAX OF RS. 17 ,41,738/-. IN VIEW OF THE ABOVE DISCUSSION, I AM SATISFIED THAT , IT IS A FIT CASE FOR LEVY OF PENALTY FOR FAILURE TO MAKE NECESS ARY PAYMENT U/S 140A(1) OF DUE SELF ASSESSMENT TAX OF R S. 17,41,738/- BEFORE FILING OF RETURN WITHOUT ANY REAS ONABLE CAUSE. THEREFORE, IN VIEW OF THE PROVISIONS OF SECTIO N 140A(3), THE ASSESSEE IS DEEMED TO BE IN DEFAULT IN RESPECT OF THE UNPAID SELF ASSESSMENT TAX OF RS. 17,41,738/-. 4. OUT OF THE TOTAL PENALTY LEVIED OF RS. 1.75 LACS , THE LD. CIT(A) CONFIRMED THE PENALTY OF RS. 1.00 LAC BY OBSERVING AS FOLLOWS:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; PENAL TY ORDER AND APPELLANT'S WRITTEN SUBMISSION. APPELLANT DID NOT PA Y ADVANCE TAX ON CAPITAL GAINS EARNED BY IT. EVEN AT THE TIME OF FILING RETURN OF INCOME, APPELLANT DID NOT PAY S ELF- ASSESSMENT TAX. THEREFORE THERE WAS DEFAULT ON THE PART OF APPELLANT FOR WHICH ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 221. APPELLANT SUBSEQUENTLY PAID THE TAX HO WEVER AS PER EXPLANATION TO SECTION 221, SUBSEQUENT PAYME NT OF TAX WILL NOT FREE APPELLANT FROM PENAL ACTION. APPEL LANT WAS SUPPOSED TO PAY ADVANCE TAX ON INCOME RECEIVED DURI NG THE YEAR. EVEN IF DEFAULT WAS COMMITTED IN PAYMENT O F ADVANCE TAX, APPELLANT WAS SUPPOSED TO PAY SELF- ASSESSMENT TAX AT THE TIME OF FILING RETURN OF INCO ME HOWEVER APPELLANT DID NOT PAY EVEN SELF-ASSESSMENT T AX. ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 4 THEREFORE IT IS NOT IN DISPUTE THAT APPELLANT COMMIT TED DEFAULT FOR WHICH PENALTY ON TO SECTION 221 IS LEVIA BLE. HOWEVER PENALTY NEED NOT BE LEVIED IF THERE IS REASO NABLE CAUSE IN NONPAYMENT OF TAX. APPELLANT SUBMITTED THA T IT WAS RUNNING INTO LOSSES AND THEREFORE PAYMENT OF TAX WAS NOT MADE. AFTER GETTING CC LIMIT FROM BANK, OUTSTAN DING TAX WAS PAID. HOWEVER APPELLANT DID NOT EXPLAIN AS TO WHY PAYMENT OF ADVANCE TAX WAS NOT MADE WHILE RECEIVING SALE CONSIDERATION RESULTING IN CAPITAL GAINS. SIMILARLY , APPELLANT DID NOT EXPLAIN AS TO HOW PART OF SALES CONSIDERATIO N RECEIVED WAS DIVERTED TO OTHER ACTIVITIES THEN PAYIN G TAXES. IN VIEW OF THIS, THERE IS NO REASONABLE CAUSE FROM W HICH APPELLANT WAS PREVENTED IN MAKING PAYMENT OF TAXES. IF APPELLANT WAS SINCERE ENOUGH, THE TAX COULD BE PAID FROM SALE CONSIDERATION RECEIVED. IN VIEW OF THIS, I'M CO NVINCED THAT APPELLANT WAS ASSESSEE DEFAULT FOR WHICH PENALTY IS LEVIABLE. HOWEVER CONSIDERING THE SUBSEQUENT CONDUCT AND PAYMENT OF TAXES BEFORE ISSUE OF PENALTY SHOW CAUSE NOTICE, PENALTY LEVIED BY THE AO APPEARS TO BE ON H IGHER SIDE. I THEREFORE RESTRICT THE PENALTY LEVIED BY TH E A.O. TO RS. 1 LAKH. APPELLANT GETS RELIEF OF RS. 75000/-. 5. THE LD. COUNSEL FOR THE ASSESSEE, CHALLENGING THE IMPUGNED ORDER HAS CONTENDED THAT IT WAS DUE TO CIRCUMSTANCES BEYON D THE CONTROL OF THE ASSESSEE COMPANY, THAT THE DELAY IN QUESTION OCCURR ED; THAT THE ASSESSEE COMPANY WAS NOT HAVING ANY LIQUID FUNDS TO DEPOSIT T HE TAX; THAT THE ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 5 ASSESSEE COMPANY FACED FINANCIAL LOSSES RUNNING INT O LACS OF RUPEES DUE TO A FIRE INCIDENT IN THE FACTORY AREA, WHICH HAD B EEN DULY REPORTED IN LEADING NEWS PAPER OF THE CITY; THAT THE ASSESSEE CO MPANY WAS FACING FINANCIAL LOSSES YEAR AFTER YEAR; THAT THE LOSSES O F MORE THAN RS. 56.00 LACS WERE BROUGHT FORWARD FROM THE PRECEDING ASSESSME NT YEARS AND DUE TO HEAVY BUSINESS LOSSES, THE ASSESSEE HAD TO SELL ITS FACTORY BUILDING IN THE YEAR UNDER CONSIDERATION AND OUT OF THE SALE PR OCEEDS THEREOF, THE LOANS TAKEN FROM FINANCIAL INSTITUTIONS LIKE RAJAST HAN FINANCIAL CORPORATION ETC. WERE PAID BY THE ASSESSEE COMPANY ; THAT DUE TO ITS STRINGENT FINANCIAL POSITION, AT THE TIME OF FILING OF RETURN OF INCOME, THE ASSESSEE COMPANY WAS NOT HAVING ANY LIQUID FUNDS TO DEPOSIT THE TAX, WHICH FACT IS ALSO FORTIFIED FROM THE BANK ACCOUNTS OF THE ASSESSEE, WHEREIN SUFFICIENT FUNDS WERE NOT AVAILABLE AT THAT RELEVANT TIME; THAT COPIES OF MONTHLY BANK STATEMENTS WERE FILED BEFORE THE LD. CIT(A); THAT WHEN THE ASSESSEE WAS GRANTED CC LIMIT ON 28/01/2011 FROM SBBJ, THE ASSESSEE FIRSTLY PAID THE SELF ASSESSMENT TAX ON 01 /2/2011; THAT A COPY OF THE BANK STATEMENT AND DAILY BANK SUMMARY WAS DULY F ILED BEFORE THE LD. CIT(A); THAT IN THE SAID ACCOUNT, NO AMOUNT HAD BEEN CREDITED FROM THE DATE OF OPENING OF THE ACCOUNT TILL 21/2/2011; THAT THIS SHOWS THE BAD FINANCIAL POSITION OF THE ASSESSEE COMPANY; THAT TH ERE WAS NO MALAFIDE ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 6 INTENTION OF THE ASSESSEE FOR NON-DEPOSIT OF THE TA X BEFORE, OR AT THE TIME OF FILING OF RETURN OF INCOME; THAT THE DEFAULT OCC URRED SOLELY DUE TO THE FINANCIAL HARDSHIP OF THE ASSESSEE COMPANY, FOR WHIC H, THE ASSESSEE CANNOT BE PENALIZED; AND THAT THE LD CIT(A) ILLEGALL Y FAILED TO TAKE INTO CONSIDERATION THE ABOVE FACTS AND CIRCUMSTANCES, AS CLEARLY STATED BEFORE HIM, SHOWING REASONABLE CAUSE FOR NON-PAYMENT OF TAX . 6. ON THE OTHER HAND, THE LD DR HAS PLACED STRONG R ELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT IN RESPO NSE TO THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE, THE ASSESSEE H AD MERELY STATED THAT IT HAD ALREADY PAID DUE TAX U/S 140A OF THE ACT FOR THE YEAR UNDER CONSIDERATION; THAT THE ASSESSEE HAD NOT MENTIONED ANY REASONABLE CAUSE FOR FAILURE TO MAKE NECESSARY COMPLIANCE OF T HE PROVISIONS OF SECTION 140(1) OF THE ACT AND TO MAKE NECESSARY PAY MENT OF DUE SELF ASSESSMENT TAX BEFORE FILING OF RETURN; THAT, THERE FORE, THE LD ASSESSING OFFICER CORRECTLY DEEMED THE ASSESSEE TO BE AN ASSE SSEE IN DEFAULT, CONSIDERING THE PROVISIONS OF SECTION 140A(3) OF TH E ACT; THAT SINCE THE ASSESSEE HAD FAILED TO MAKE NECESSARY PAYMENT OF DU E SELF ASSESSMENT TAX BEFORE FILING OF RETURN WITHOUT ANY REASONABLE C AUSE, THE PENALTY WAS CORRECTLY LEVIED ON THE ASSESSEE; THAT THE LD. CIT( A) HAS OBSERVED THAT THE ASSESSEE DID NOT EXPLAIN AS TO WHY THE PAYMENT O F ADVANCE TAX WAS ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 7 NOT MADE WHILE RECEIVING SALE CONSIDERATION, RESULT ING IN CAPITAL GAINS, NO DID THE ASSESSEE EXPLAIN AS TO HOW PART OF THE SALE CONSIDERATION RECEIVED WAS DIVERTED TO OTHER ACTIVITIES RATHER THAN PAYING TAX; THAT THIS HAS NOT BEEN REFUTED SUCCESSFULLY; THAT HENCE, AS CORRECTLY OBSERVED BY THE LD CIT(A), THERE IS NO REASONABLE CAUSE HAVING PREVENTE D THE ASSESSEE IN MAKING PAYMENT OF TAXES. THE LD. DR HAS SUBMITTED TH AT THUS, THERE BEING NO MERIT IN THE ASSESSEES APPEAL, THE SAME B E DISMISSED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE QU ESTION IS AS TO WHETHER THERE WAS ANY REASONABLE CAUSE PREVENTING THE ASSESSEE FROM MAKING PAYMENT OF DUE TAXES AND IF THERE WAS EXISTIN G SUCH A REASONABLE CAUSE, WHETHER THE PENALTY HAS RIGHTLY BEEN IMPOSED AND CONFIRMED. 8. THE ASSESSEE HAD LAID BEFORE THE LD. CIT(A) THAT I T WAS DUE TO CIRCUMSTANCES BEYOND THE ASSESSEES CONTROL THAT TH E ASSESSEE COMPANY, AT THE RELEVANT TIME, WAS NOT HAVING IN ITS POSSESSI ON ANY LIQUID FUNDS TO DEPOSIT THE TAX. IT REMAINS UNDISPUTED THAT THE ASS ESSEE COMPANY WAS FACED WITH CONTINUING FINANCIAL LOSSES RUNNING INTO THE LACS OF RUPEES. IT IS ALSO UNCHALLENGED AS A FACT THAT A FIRE HAD BROKEN OUT IN THE FACTORY AREA OF THE ASSESSEE. THE FACTUM OF AN AMOUNT OF RS. 56.0 0 LACS WORTH OF LOSSES HAVING BEEN BROUGHT FORWARD FROM THE EARLIER ASSESSMENT YEARS ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 8 AND OF THE ASSESSEE HAVING BEEN COMPELLED TO SELL O FF ITS FACTORY BUILDING IN THE YEAR UNDER CONSIDERATION BECAUSE OF SUCH HEA VY BUSINESS LOSSES, IS ALSO UNQUESTIONED. THE SALE PROCEEDS FROM THE SALE O F THE FACTORY BUILDING WERE UTILIZED TO PAY OFF THE LOANS TAKEN FR OM THE FINANCIAL INSTITUTIONS. THE BANK ACCOUNT OF THE ASSESSEE UNDIS PUTEDLY SHOWED THAT LIQUID FUNDS WERE NOT AVAILABLE WITH THE ASSESSEE AT THE TIME OF FILING OF THE RETURN OF INCOME. AS SOON AS CC LIMIT WAS GRANTE D TO THE ASSESSEE ON 28/01/2011, THE ASSESSEE FIRST PAID OFF THE SELF AS SESSMENT TAX ON 01/02/2011. THIS WAS ALSO UNDISPUTEDLY DEPICTED IN T HE COPY OF THE BANK STATEMENT AND DAILY BANK SUMMARY FILED BEFORE THE L D CIT(A). IN FACT, IN THE SAID ACCOUNT, NO AMOUNT HAD BEEN CREDITED FROM THE DATE OF THE OPENING OF THE ACCOUNT TILL 21/2/2011, SHOWING THE D IRE FINANCIAL POSITION OF THE ASSESSEE COMPANY. MOREOVER, THE AUTHORITIES BELOW HAVE REMAINED UNABLE TO ESTABLISH ANY MALAFIDE INTENTION OF THE A SSESSEE FOR NON- DEPOSITED OF TAX EITHER BEFORE, OR AT THE TIME OF F ILING OF RETURN OF INCOME. TOO, NO CASE HAS BEEN MADE OUT AGAINST THE ASSESSEE THAT NON-DEPOSIT OF TAX BEFORE FILING OF THE RETURN OF INCOME WAS WITH AN Y PURPOSE OF EVASION OF TAX, OR CONCEALMENT OF INCOME. UNDISPUTEDLY, THE REFORE, IT WAS DUE TO GENUINE FINANCIAL HARDSHIP, THAT THE TAX COULD NOT BE DEPOSITED IN GOOD TIME. THERE WAS NO WILLFUL ATTEMPT ON THE PART OF THE ASSESSEE TO EVADE ITA 229/JP/2014_ M/S VINAYAK MANUTRADE PVT. LTD. VS. ITO 9 THE TAX. FURTHER, NO CONSCIOUS NEGLIGENCE OF THE AS SESSEE HAS BEEN PROVED ON RECORD, MUCH LESS ANY DELIBERATE DEFIANCE OF THE LAW AT THE HANDS OF THE ASSESSEE HAS BEEN MADE OUT. 9. IN VIEW OF THE ABOVE, FINDING FORCE IN THE GRIEVA NCE SOUGHT TO BE RAISED BY THE ASSESSEE, THE SAME IS ACCEPTED. THE PE NALTY IS QUASHED. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/09/2016. SD/- SD/- FOE FLAG ;KNO , - MH TSU (VIKRAM SINGH YADAV) (A.D. JAIN) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06 TH SEPTEMBER, 2016 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S VINAYAK MANUTRADE PVT. LTD., JAIP UR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD 6(1), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 229/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR