ATHARVA INFRACOMM INDIA LTD., MUMBAI V. I.T.O. 8(1)(4), MUMBAI

ITA 2494/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2814 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 27-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2012
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI SANJAY GARG (JM) I.T.A. NO. 2494 /MUM/ 20 1 2 (ASSESSMENT YEAR 20 1 0 - 11 ) M/S. ATHARVA INFRACOMM INDIA LTD. OFFICE NO. 1, A - 3 WING MALAD HIGHWAY BUILDING NEAR SHANTAR AM TALAO OPP. KURAR POLICE STATION KURAR VILLAGE, MALAD WEST MUMBAI - 400 097. VS. ITO 8(1)(4) MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO . AAHCA9099B ASSESSEE BY SHRI DHARMESH SHAH DEPARTMENT BY SHRI A. RAMACHANDRAN DATE OF HEARING 16.8 . 201 6 D ATE OF PRONOUNCEMENT 16.8 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27 - 01 - 2012 PASSED BY LD CIT(A) - 16, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2010 - 11. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE PENALTY LEVIED BY THE AO U/S 140A(3) OF THE ACT. 2. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.1.24 CRORES FOR THE YEAR UNDER CONSIDERATION. AS PER THE RETURN OF INCOME, THE ASSESSEE WAS REQUIRED TO PAY A SUM OF RS.47,27,495/ - AS SELF ASSESSMENT TAX U/S 140A OF THE ACT. HOWEVER, THE ASSESSEE DID NOT PAY THE SAME AT THE TIME OF FILING RETURN OF INCOME. HENCE THE AO TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT IN TERMS OF SEC. 140A (3) OF THE ACT. THE EXPLANATION OF THE ASSESSEE WAS THAT IT WAS HAVING FINANCIAL PROBLEMS AND HENCE COULD NOT PAY THE SELF M/S. ATHARVA INFRACOMM INDIA LTD. 2 ASSESSMENT TAX. HOWEVER, THE SAID EXPLANATION WAS NOT ACCEPTABLE TO THE AO AND ACCORDINGLY LEVIED PENALTY U/S 221 OF THE ACT @ 5% P ER MONTH ON THE UNPAID AMOUNT OF SELF ASSESSMENT TAX AND THUS RAISED A DEMAND OF RS.14,18,249/ - . THE LD CIT(A) ALSO CONFIRMED THE SAME. 3. THE LD A.R SUBMITTED THAT THE ASSESSEE HAD STARTED ITS BUSINESS ACTIVITIES ONLY DURING THE YEAR UNDER CONSIDERAT ION AND HENCE IT WAS ITS FIRST YEAR OF OPERATION. THE ASSESSEE WAS EXECUTING MAJOR ERECTION WORKS FOR VARIOUS MOBILE OPERATORS ON SUB - CONTRACT BASIS. THE ASSESSEE HAD BORROWED HUGE FUNDS FOR THE PURPOSE OF BUSINESS. AT THE SAME TIME, ITS CUSTOMERS WERE NOT SETTLING THE BILLS, WHICH RESULTED IN ACCUMULATION OF HUGE SUNDRY DEBTORS BALANCES. DUE TO THIS FINANCIAL MISMATCH, THE ASSESSEE WAS FACING HEAVY FINANCIAL CRUNCH AND HENCE IT COULD NOT PAY THE SELF ASSESSMENT TAX AS REQUIRED U/S 140A OF THE ACT. ACC ORDINGLY THE LD A.R SUBMITTED THAT THERE WAS REASONABLE CAUSE FOR NOT MAKING PAYMENT OF SELF ASSESSMENT TAX AT THE TIME OF FILING RETURN OF INCOME. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS PAID THE TAX SUBSEQUENTLY AND ACCORDINGLY PRAYED FOR DELETION OF THE IMPUGNED PENALTY. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE IS BEING GUIDED BY PROFESSIONAL CHARTERED ACCOUNTANT AND BESIDES THAT, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY IS ALSO A CHARTERED ACCOUNTANT. HENCE THE ASSESSEE W AS VERY MUCH AWARE OF ITS LEGAL OBLIGATIONS. HE FURTHER SUBMITTED THAT THE BALANCE SHEET OF THE ASSESSEE SHOWED THAT IT WAS HAVING SUFFICIENT BANK BALANCES AS ON 31.3.2010. HENCE THE EXPLANATION OF THE ASSESSEE THAT IT WAS HAVING FINANCIAL CRUNCH IS NOT BORNE OUT OF RECORD. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENALTY LEVIED U/S 221 OF THE ACT. 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE FACT REMAINS THAT THE ASSESSEE HAS FAILED TO PAY THE SELF ASSESSM ENT TAX AT THE TIME OF FILING ITS RETURN M/S. ATHARVA INFRACOMM INDIA LTD. 3 OF INCOME. HENCE THE ASSESSING OFFICER HAS RIGHTLY TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT IN TERMS OF SEC. 140A(3) OF THE ACT. IN SUCH CASES, THE AO CAN INVOKE THE PROVISIONS OF SEC. 221 OF THE ACT TO LEVY PENALTY. THE PROVISIONS OF SEC. 221(1) DO NOT PRESCRIBE THE MINIMUM AMOUNT OF PENALTY THAT CAN BE LEVIED, BUT IT PROVIDES THAT THE PENALTY SHOULD NOT EXCEED THE AMOUNT OF TAX IN ARREARS. THE SECOND PROVISO TO SEC. 221 OF THE ACT STATES THAT THE PENALTY SHALL NOT BE LEVIED IF THE ASSESSEE PROVES TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS. 6. IN THE INSTANT CASE, THE ASSESSEE HAS SUBMITTED THAT IT WAS FACING FINANCIAL CRUNCH DUE TO EXPANSION OF IT S BUSINESS OPERATIONS AND MOUNTING DEBTORS BALANCES. HOWEVER, THE TAX AUTHORITIES HAVE POINTED OUT THAT THE ASSESSEE WAS HAVING SUFFICIENT BANK BALANCES AS ON 31.3.2010. THOUGH WE ARE OF THE VIEW THAT THE FINANCIAL CONDITION OF THE ASSESSEE HAS TO BE SE EN AS ON THE DATE OF FILING OF RETURN OF INCOME, YET WE NOTICE THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM OF FINANCIAL CRUNCH BY FURNISHING ANY SUPPORTING DOCUMENTS, I.E., THE ASSESSEE HAS FAILED TO SHOW THAT IT WAS FACING FINANCIAL PROBLEMS AT THE TIME OF FILING OF ITS RETURN OF INCOME. HENCE, WE ARE OF THE VIEW THAT THE TAX AUTHORITIES ARE JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS FAILED TO SATISFY THE AO THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS. 7. WE FURTHER NOTICE THAT TH E ASSESSEE HAS PAID A SUM OF RS.25.00 LAKHS ONLY TOWARDS SELF ASSESSMENT TAX ON 21.02.2011. THE SELF ASSESSMENT TAX PAYABLE BY THE ASSESSEE STOOD AT RS.47,27,495/ - AND THE DETAILS OF PAYMENT OF BALANCE AMOUNT OF TAX WERE NOT FURNISHED. 8. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 221 OF THE ACT FOR LEVYING PENALTY. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS LEVIED PENALTY AT 5% PER M/S. ATHARVA INFRACOMM INDIA LTD. 4 MONTH OF UNPAID AMOUNT OF SELF ASSE SSMENT TAX. IN OUR VIEW, THE RATE OF PENALTY OF 5% IS VERY MUCH ON THE HIGHER SIDE. HAD THE ASSESSEE FILED THE RETURN OF INCOME BELATEDLY AND PAID THE TAX AT THAT POINT OF TIME, IT WOULD HAVE BEEN VISITED WITH THE INTEREST LIABILITY U/S 234A OF THE ACT @ 1% ONLY. HENCE, IN OUR VIEW, LEVYING OF PENALTY @ 1% WOULD BE REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THIS CASE. ACCORDINGLY WE MODIFY THE ORDER PASSED BY LD CIT(A) AND DIRECT THE ASSESSING OFFICER TO COMPUTE THE PENALTY @ 1% PER MONTH ON THE UNPAI D AMOUNT OF SELF ASSESSMENT TAX. WE ORDER ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 16. 8 .2016 SD/ - SD/ - (SANJAY GARG ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 16 / 8 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS