M/s. FIL Industries, Ltd, Srinagar V. The Dy. Commissioner of Inocme-tax, Srinagar

ITA 341/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0815 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Additional evidence; Reasonable cause
• Section: 153A; 148; 90; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER I.T.A NO. 341(ASR)/2014 ASSESSMENT YEAR: 2010-11 M/S. FIL INDUSTRIES LTD. 7, SHIEKH BAGH SRINAGAR (J&K) PAN:AAACF3272A VS. DY. CIT, CIRCLE-3, SRINAGAR. (APPELLANT) (RESPONDENT) I.T.A NO.398(ASR)/2014 ASSESSMENT YEAR: 2010-11 DY. CIT, CIRCLE-1, 2 ND FLOOR AAYAKAR BHAWAN, RAILHEAD COMPLEX, JAMMU. VS. M/S. FIL INDUSTRIES LTD. 7, SHIEKH BAGH SRINAGAR (J&K) PAN:AAACF3272A (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SALIL AGGARWAL (ADV.) RESPONDENT BY: SH. TARSEM LAL (DR .) DATE OF HEARING: 23.03.2016 DATE OF PRONO UNCEMENT: 13.04.2016 ORDER PER T.S.KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) DATED 3 1.03.2014 FOR ASST. YEAR 2010-11. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE AS W ELL AS BY REVENUE ARE REPRODUCED BELOW: ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 2 ITA NO.341(ASR)/2014 (I) THAT THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) JAMMU HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING A PENA LTY OF SUM OF RS.23,46,619/- LEVIED U/S 221(1) OF THE ACT. (II) THAT THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HAS FAILED TO APPRECIATE THAT PENALTY LEVIED U/S 221(1) OF THE ACT FOR DELAY IN PAYMENT OF SELF ASSESSMENT TAX IS WITHOUT JURISDICTION AND IN ANY CASE NOT IN ACCORDANCE WITH LAW SINCE THE ENTIRE SELF ASSESSMEN T TAX ALONGWITH INTEREST WAS DULY DEPOSITED WITHIN A PERIOD OF TWO MONTHS FROM THE FILING OF RETURN OF INCOME BY THE APPELLANT AND RETURN OF INCOME WAS FILED BEFORE THE DUE DATE U/S 139(1) OF THE ACT. (III) THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO FAILED TO APPRECIATE THAT THERE WAS REASONABLE CAUS E ON THE PART OF THE APPELLANT FOR DELAY IN DEPOSIT OF SELF-ASSESSMENT T AX AND THE ALLEGED BREACH WAS AT BEST A TECHNICAL AND VENIAL BREACH, F OR WHICH NO PENALTY IS LEVIABLE. (IV) THAT THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN NOT ADMITTING ADD ITIONAL EVIDENCE FILED BY THE APPELLANT COMPANY TO EXPLAIN THAT CASH BALANCE OF RS.93.80 LACS WAS BALANCE LYING AT VARIOUS BRANCHES OF APPELLANT COMP ANY AND, WHICH HAD BEEN UTILIZED TO REPAY BANK BORROWING AND AS SUCH, THERE WAS NO DEFAULT BY THE APPELLANT COMPANY. IT IS THEREFORE PRAYED THAT THE PENALTY LEVIED AND SUSTAINED OF RS.23,46,616/- MAY KINDLY BE DELETED AND APPEAL OF THE APPELLANT COMPANY BE ALLOWED. WHEREAS THE FOLLOWING GROUNDS OF APPEAL HAS BEEN TA KEN BY THE REVENUE IN ITA NO.398(ASR)/2014. (I) WHETHER THE COMMISSIONER OF INCOME TAX (APPEAL S), JAMMU WAS RIGHT IN LAW IN REDUCING THE PENALTY U/S 221(1) OF THE I.T. ACT., 1961 TO 25%. (II) WHETHER THE COMMISSIONER OF INCOME TAX (APPEAL S), JAMMU WAS RIGHT IN LAW HOLDING THAT THE MAXIMUM PENALTY MAY N OT BE LEVIED IN THE FIRST INSTANCE UNLESS SITUATION WARRANTS OTHERWISE AS NOWHERE IN SECTION 221(1) OF THE I.T. ACT.1961, IT IS MENTIONED THAT M AXIMUM PENALTY MAY NOT BE LEVIED IN THE FIRST INSTANCE. (III) WHETHER THE COMMISSIONER OF INCOME TAX (APPEA LS), JAMMU WAS RIGHT IN LAW IN NOT CONSIDERING THAT THE ASSESSEE H AS DEFAULTED IN PAYMENT ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 3 OF SELF ASSESSMENT TAX WHICH IT HAS CALCULATED/ASSE SSED AFTER CONSIDERING BUSINESS EXPEDIENCY OF ITS BUSINESS. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ORDE R PASSED U/S 221(1) OF THE ACT IS THAT THE ASSESSEE FILED RETURN OF IN COME ON 30/09/2010 DECLARING A PROFIT OF RS.10.34 CRORES, BUT DID NOT FILE ANY EVIDENCE OF PAYMENT OF ADVANCE TAX OR SELF ASSESSMENT TAX. OUT OF TOTAL TAX LIABILITY OF RS.1,75,84,292/-, THE ASSESSEE HAD PAID ONLY 25.20 LAKHS (ON ACCOUNT OF TDS) LEAVING A BALANCE DEMAND OF RS.1,50,55,026/-. THE ASSESSING OFFICER OBSERVED THAT THE SAID TAX WAS PAYABLE UNDE R THE PROVISIONS OF SECTION 140A WHICH WAS NOT PAID BY ASSESSEE AND THE REFORE, THE ASSESSEE WAS SHOW CAUSED A NOTICE U/S 221(1) OF THE ACT FOR NON PAYMENT OF SELF ASSESSMENT TAX. IN ITS REPLY THE ASSESSEE SUBMITTED THAT ENTIRE TAX OF RS.1,50,55,026/- HAS BEEN PAID ON VARIOUS DATES AND THE LAST INSTALLMENT WAS PAID ON 1.12.2010 AND AS EVIDENCES THE CHALLANS FOR PAYMENT OF THE ABOVE TAXES WERE ATTACHED WITH THE R EPLY. THE ASSESSING OFFICER HELD THAT ASSESSEE HAD DELIBERATELY NOT DEP OSITED SELF ASSESSMENT TAX AND IT WAS ONLY WHEN THE DEPARTMENT HAD NOTICED THE DEFAULT REGARDING PAYMENT OF SELF ASSESSMENT TAXES THAT ASS ESSEE MADE SUCH PAYMENTS. THE ASSESSING OFFICER IN THIS RESPECT OBS ERVED THAT PAYMENT OF TAXES WAS MADE AFTER NOVEMBER, 2010 WHEREAS THE PEN ALTY NOTICE U/S 221(1) WAS ISSUED BY THE DEPARTMENT ON 28.10.2010. THE ASSESSING OFFICER, THEREFORE, HELD THAT ASSESSEE HAD DEFAULTE D ON MAKING PAYMENT OF SELF ASSESSMENT TAX AND ASSESSEE WAS ALSO REQUIR ED TO FURNISH CASH FLOW STATEMENT TO DETERMINE THE AVAILABILITY OF CAS H. FROM THE PERUSAL OF ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 4 CASH FLOW STATEMENT, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE WAS HAVING SUFFICIENT CASH BALANCE WHEREAS IT HAD NOT P AID ANY ADVANCE TAX OR SELF ASSESSMENT TAX. IN VIEW OF THE ABOVE, THE A SSESSING OFFICER IMPOSED A PENALTY OF RS.15,055,026/- U/S 221(1) OF THE ACT. 4. AGGRIEVED WITH THE ORDER THE ASSESSEE FILED APPE AL BEFORE LEARNED CIT(A) AND SUBMITTED DETAILED SUBMISSIONS. THE LEAR NED CIT(A) AFTER GOING THROUGH THE SUBMISSIONS FILED BY ASSESSEE ALL OWED PART RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 4.4 GROUND OF APPEAL NOS.4 TO 6, 8 & 9 RELATED TO THE PLEA OF THE APPELLANT THAT THE APPELLANT DEPOSITED THE TAX WITHIN TWO MON THS OF THE FILING OF RETURN AND THE DELAY WAS ON ACCOUNT OF REASONABLE C AUSE. THE APPELLANT DURING THE COURSE OF PENALTY PROCEEDINGS ARGUED THA T THE TAX COULD NOT BE DEPOSITED ON TIME BECAUSE OF SHORTAGE OF FUNDS. HOW EVER, ON VERIFICATION OF CASH FLOW STATEMENT SUBMITTED BY THE APPELLANT HIMS ELF, IT WAS OBSERVED BY THE AO THAT FUNDS OF RS.93,86,475/- WAS AVAILABL E WITH THE APPELLANT WHICH COULD HAVE BEEN USED FOR MEETING ITS INCOME T AX LIABILITIES. IT WAS DESIRABLE THAT THE TAXES SHOULD HAVE BEEN PAID AS S OON AS INCOME WAS EARNED. THE APPELLANT DURING THE COURSE OF APPELLAT E PROCEEDINGS HAS SUBMITTED THAT OUT OF THE SAID BALANCE OF RS 93.86 LAKHS, THE AMOUNT OF RS 75.48 LAKHS WAS IN CORPORATION BANK WHICH WAS LATER ON USED FOR REPAYMENT OF BANK BORROWINGS. FIRST OF ALL, NO SUCH PLEA WAS TAKEN BEFORE THE AO AND SUCH ADDITIONAL EVIDENCES COULD NOT BE A CCEPTED UNDER RULE 46A AS THERE WAS NO REASONABLE CAUSE FOR NOT PROVID ING SUCH EVIDENCES DURING PENALTY PROCEEDINGS. FURTHER, IF THE FUNDS W ERE BORROWED BY THE APPELLANT FOR RUNNING OF BUSINESS, THE PAYMENT OF I NCOME TAX LIABILITY WAS ALSO A PART OF BUSINESS AND PRIORY IN REPAYMENT OF BANK LOAN OVER INCOME TAX LIABILITY WHERE THERE IS NOTHING ON RECORD TO S HOW THAT THERE WAS UNDUE PRESSURE FROM BANK AUTHORITIES TO LIQUIDATE THE LOA N COULD NOT BE CONSIDERED AS REASONABLE CAUSE FOR NON PAYMENT OF T AX. HOWEVER, IT IS NOTICED THAT SINCE THE FUNDS AVAILAB LE WITH THE COMPANY WAS ONLY RS 93,86,475/- AND THE TAX LIABILITY WAS R S 1,50,55,026/- IT MAY BE CONSIDERED REASONABLE CAUSE FOR NON PAYMENT OF T AX TO THE EXTENT OF RS.56,68,551/-(I.E. RS 1,50,55,026-RS 93,86,475). F URTHER IN MY OPINION, IT WOULD BE VERY HARSH TO LEVY PENALTY OF 100% OF BALA NCE INCOME TAX PAYABLE, AS THE APPELLANT HAS DEPOSITED THE TAX WIT H INTEREST AFTER THE SHOW CAUSE NOTICE WAS ISSUED TO THE APPELLANT BUT B EFORE PASSING OF THE ORDER. ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 5 I HAVE CONSIDERED THE SUBMISSION DATED 19.03.2014 A ND 27.03.2014 OF THE APPELLANT REITERATING THE LIQUIDITY CRUNCH FACED BY THE APPELLANT. THE APPELLANT HAS PLEADED THAT CASH IN FLOW WAS LESS TH AN THE CASH OUT FLOW AND THE REASONS GIVEN WERE THAT THE HUGE INVENTORY (24.13 CRORES) AND SUNDRY DEBTORS (65.35CRORES) WERE FINANCED OUT OF B ORROWED FUNDS OF RS. 86.81 CRORES. IT WAS ALSO POINTED OUT THAT DUE TO V OLATILE CONDITION IN THE STATE OF J&K DURING THE RELEVANT PERIOD IN 2011, TH E ENTIRE BUSINESS WERE CLOSED FOR SEVERAL MONTHS WHICH DELAYED THE PROCESS OF REALIZATION OF SALE RECEIPTS. DUE TO THIS DISTURBED CONDITION THE CBDT EXTENDED THE DATES OF FILING RETURN UP TO 31 ST JANUARY, 2011. ON OTHER HAND THE AO IN THE PENALTY ORDER HAS MENTIONED THAT RS. 93.86 LACS WAS AVAILAB LE WITH THE APPELLANT AS PER THE CASH FLOW STATEMENT FURNISHED BY THE APP ELLANT BEFORE HIM. THE APPELLANT DISPUTED THIS AND STATED THAT THE LIQUIDI TY WAS MOSTLY IN TERMS OF CHEQUES OF VARIOUS PARTIES WHICH WERE SENT FOR COLL ECTION. OUT OF SUCN CHEQUES DEPOSITED AN AMOUNT OF RS. 61.08 LACS WAS R ECEIVED FROM THE BANK IN THE ACCOUNT ONLY AFTER CLOSURE OF THE FINAN CIAL YEAR 2010. THE ARGUMENT OF THE APPELLANT IS CONSIDERED AND FOU ND THAT FOR ADVANCE TAX PAYMENT THIS MAY 1 BE OF SOME RELEVANCE BUT DOES NOT EXPLAIN AS TO WHY THE DEPOSIT OF TAX WAS NOT MADE IMMEDIATELY AFT ER THE CLOSE OF THE FINANCIAL YEAR AND DEFERRED TILL THE FIRST WEEK OF MONTH OF DECEMBER, 2011. IN CIT VS SMT. VIJAYNATHIMALA (1977) 108 ITR 882, ( MAD), IT WAS OBSERVED THAT ONCE AN ASSESSEE HAS FAILED TO PAY THE AMOUNT OF ADVANCE TAX ON THE DUE DATE, DEFAULT HAS OCCURRED AND LIABLE FOR PENA LTY. THE FACT THAT THE ASSESSEE HAS SUBSEQUENTLY PAID THE AMOUNT AFTER THE ISSUE OF NOTICE BY THE ASSESSING OFFICER COULD NOT WIPE OUT THE DEFAUL T WHICH HAD ALREADY OCCURRED. IN PRINCIPLE, I AGREE SO FAR AS LEVY OF P ENALTY IS CONCERNED BUT DO NOT AGREE ENTIRELY WITH THE QUANTUM OF PENALTY LEVI ED WHICH WAS AT THE MAXIMUM AMOUNT PRESCRIBED UNDER THE STATUTE. AS PER SCHEME OF ACT, ANY NUMBER OF PENALTIES COULD BE LEVIED U/S 221(1) WITHOUT ANY TIME LIMITATION IS SUGGESTIVE OF THE FA CT THAT THE MAXIMUM PENALTY MAY NOT BE LEVIED IN THE FIRST INSTANCE UNL ESS SITUATION WARRANTS OTHERWISE. THE MINIMUM AND MAXIMUM PENALTY PRESCRIB ED ARE SUCH AMOUNT AS THE AO MAY IMPOSE FOR DEFAULT OR CONTINUI NG DEFAULT AND AMOUNT OF TAX IN ARREAR RESPECTIVELY. FROM FACTS AN D CIRCUMSTANCES OF THE CASE THE GRAVITY OF DEFAULT DID NOT WARRANT MAXIMUM PENALTY IN THIS CASE. THE AO IS TO SEE THE SERIOUSNESS OF DEFAULT AND THE CHRONIC DEFAULTER IS TO PENALIZED WITH MAXIMUM PENALTY. THE MAXIMUM PENALTY IS MEANT FOR HABITUAL AND CHRONIC DEFAULTER AND THE FACTS OF THI S CASE SUGGEST THAT THE APPELLANT CANNOT BE PUT UNDER THIS CATEGORY. SO FAR AS THE ASSESSING OFFICER'S OBSERVATION IS CONCERNED THAT RS. 93.86 L ACS WAS AVAILABLE AS PER CASH FLOW STATEMENT GIVEN BY THE APPELLANT HIMSELF BEFORE HIM, IN MY VIEW, IT IS HARSH TO EXPECT THAT THE ENTIRE AMOUNT AVAILA BLE WITH THE APPELLANT SHOULD HAVE BEEN UTILIZED FOR THE TAX PAYMENT AND B RINGING THE FINANCES IN THE BUSINESS TO-A HALT. THE APPELLANT HAS TO SEE TH E BUSINESS EXPEDIENCY, OTHER PRESSING NEEDS AND WHAT IS THE BEST FOR HIS B USINESS AT THAT POINT OF TIME. NEVERTHELESS, THE PAYMENT OF INCOME TAX IS AL SO AN INTEGRAL PART OF THE BUSINESS LIABILITY. I AM OF THE VIEW THAT OUT O F RS.93,86,475/- THE APPELLANT SHOULD HAVE SPARED CERTAIN PERCENTAGE TOW ARDS THE TAX LIABILITY. ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 6 SINCE THE APPELLANT HAS LIQUIDATED THE ENTIRE TAX L IABILITY WITH INTEREST IN FIRST WEEK OF DECEMBER 2011, THE INTENSITY OF DEFAU LT IS MITIGATED TO SOME EXTENT. I THEREFORE HOLD THAT PENALTY OF 25% OF THE AMOUNT OF RS.93,86,475/-(I.E. LIQUIDITY AVAILABLE ON SAID DAT E) IS REASONABLE AND JUSTIFIED IN THE INTEREST OF JUSTICE. ACCORDINGLY, I REDUCE THE QUANTUM OF PENALTY FROM RS.1,50,55,000/- TO RS.23,46,619/-. 4.5. GROUND OF APPEAL NO 7 RELATES TO THE PLEA OF THE APPELLANT THAT THE APPELLANT HAS DEPOSITED THE TAX VOLUNTARILY. THE AP PELLANT HAS ARGUED THAT THE TAX HAS BEEN DEPOSITED BEFORE THE ORDER U/S 221 (1) WAS PASSED BY THE AO AND ACCORDINGLY THE PENALTY IMPOSED BY THE AO IS NOT JUSTIFIABLE. IT IS NOTICED THAT THE TAX WAS PAID BY THE APPELLANT AFTE R THE SHOW CAUSE NOTICE WHICH WAS ISSUED TO THE APPELLANT FOR IMPOSITION OF PENALTY FOR DEFAULT IN PAYMENT OF SELF ASSESSMENT TAX. THE EXPLANATION TO THE SECTION 221(1) CLEARLY COVERS SUCH CASES AND PROVIDES THAT AN ASSE SSEE SHALL NOT CEASE TO BE LIABLE TO ANY PENALTY UNDER THIS SUB SECTION MER ELY BY REASON OF THE FACT THAT BEFORE THE LEVY OF SUCH PENALTY HE HAS PAID TH E TAX. THEREFORE, THIS PLEA OF THE APPELLANT IS NOT TENABLE. THE APPELLANT HAS ALSO ARGUED THAT THE DUE DATE OF FILING OF RETURN WAS EXTENDED UP TO 31-01-11 AND THE APPELLANT HAS PAID ENTIRE TAX BY 01-12- 2010 I.E. PRIOR TO SUCH DATE AND ACCORDINGLY THE PE NALTY U/S 221(1) SHOULD NOT BE LEVIED ON THE APPELLANT. IT IS OBSERVED THAT AS PER THE PROVISIONS OF SECTION 140A, THE ASSESSEE SHALL BE LIABLE TO PAY T AX TOGETHER WITH INTEREST BEFORE FURNISHING THE RETURN AND THE RETURN SHALL B E ACCOMPANIED BY THE PROOF OF PAYMENT OF SUCH TAX AND INTEREST. THEREFOR E, THE ASSESSEE IS IN DEFAULT FOR MAKING PAYMENT OF TAX, IF HE DOES NOT D EPOSIT SELF ASSESSMENT TAX BEFORE FILING OF RETURN. SECTION 140 A TALKS AB OUT PAYMENT OF TAX BEFORE FILING OF RETURN AND NOT BEFORE DUE DATE OF RETURN. THEREFORE, THE APPELLANT COULD NOT TAKE THE BENEFIT OF EXTENDED PERIOD UP TO DUE DATE OF FILING OF RETURN FOR DEPOSIT OF TAX, IF RETURN WAS FILED BEFO RE THE DUE DATE OF FILING OF RETURN. THEREFORE, THIS PLEA OF THE APPELLANT COULD NOT BE SUSTAINED AS PER THE PROVISIONS OF INCOME TAX ACT. FOR THE SAKE OF A RGUMENTS, IT IS ALSO NOTICED THAT AS PER THE PRESENT PROVISIONS, THE RET URN IS TREATED AS DEFECTIVE RETURN U/S 139(9) IF TAX IS NOT DEPOSITED BEFORE TH E FILING OF RETURN. NOW, IF THE RETURN IS FILED BEFORE DUE DATE WITHOUT DEPOSIT OF SELF ASSESSMENT TAX, THE RETURN IS TO BE CONSIDERED AS DEFECTIVE AND ASS ESSEE CANNOT PLEAD THAT THE RETURN CANNOT BE TREATED AS DEFECTIVE TILL THE DUE OF FILING OF RETURN. THIS GROUND OF APPEAL OF THE APPELLANT IS, ACCORDINGLY, DISMISSED. 5. AGGRIEVED WITH THE ORDER BOTH PARTIES ARE IN APP EAL BEFORE US. 6. THE LEARNED DR FIRST TOOK UP APPEAL AND INVITIN G OUR ATTENTION TO THE FACTS AND CIRCUMSTANCES, HE SUBMITTED THAT IT W AS A CASE OF A COMPANY AND IT WAS REQUIRED TO DEPOSIT ADVANCE TAX IN FOUR QUARTERLY INSTALLMENTS STARTING FROM JUNE AND ASSESSEE DID NO T DEPOSIT ANY OF THE ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 7 INSTALLMENTS AND NEITHER IT DEPOSITED ANY SELF ASSE SSMENT TAX AND THEREFORE, IT WAS A CASE OF A WILLFUL DEFAULTER. TH E LEARNED DR SUBMITTED THAT ASSESSING OFFICER HAD IMPOSED 100% OF TAX OUTS TANDING AS PENALTY AND LEARNED CIT(A) HAS REDUCED THE PENALTY TO 25% O N THE BASIS OF SUBMISSIONS OF ASSESSEE THAT THERE WAS A SHORTAGE O F FUNDS WHICH WAS NOT A SUFFICIENT REASON AS THE SCHEME OF ACT IS PAY AS YOU EARN. IT WAS SUBMITTED THAT ASSESSEE HAD NOT PAID ANY OF THE INS TALLMENTS OF ADVANCE TAX WHICH HAD BECOME DUE TO THE GOVERNMENT AND THER EFORE, THE ASSESSEE HAD USED THE GOVERNMENT MONEY FOR ITS BUSI NESS OPERATIONS WHICH IS NOT PERMITTED. THE LEARNED DR FURTHER ARGU ED THAT THE LEARNED CIT(A) HAS RELIED UPON CASH FLOW STATEMENT AS ON 31 .03.2010 FOR ALLOWING RELIEF AND HAS IGNORED TO VERIFY THE CASH POSITION OF ASSESSEE BETWEEN 1.4.2010 TO DATE OF FILING OF RETURN I.E., 30.09.20 10. THEREFORE, THE LEARNED CIT(A) HAS WRONGLY ALLOWED RELIEF TO THE AS SESSEE. 7. WITHOUT PREJUDICE THE LEARNED DR SUBMITTED THE P AYMENT OF TAXES WAS A STATUTORY LIABILITY OF THE ASSESSEE AND NOT D EPOSITING THE SAME WITHIN THE PRESCRIBED PERIOD OF TIME ATTRACTED THE PENAL PROVISIONS. RELIANCE IN THIS RESPECT WAS PLACED ON FOLLOWING CA SE LAWS. (I) M/S. BAJAJ INFRASTRUCTURE PROJECTS LTD VS.; ACI T, 47 ITD 0059 MUMBAI BENCH. 8. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED THA T ASSESSEE WAS A CLOSELY HELD COMPANY AND IT WAS FILING ITS RETURN O F INCOME REGULARLY ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 8 ALONG WITH PAYMENT OF TAXES SINCE 1989. THE LEARNED AR SUBMITTED THAT IN NONE OF THE YEARS THE ASSESSEE HAD COMMITTED ANY DEFAULT IN PAYMENT OF DUE TAXES AND THEREFORE, THE ASSESSEE CANNOT BE BRANDED AS A WILLFUL DEFAULTER. THE LEARNED AR SUBMITTED THAT FOR THE YE AR UNDER CONSIDERATION THE DATE OF FILING OF INCOME TAX RETU RN WAS EXTENDED TO 31 ST JANUARY, 2011 AND IN THIS RESPECT OUR ATTENTION WA S INVITED TO (PB- 83 & 84) WHERE THE ORDERS U/S 119 EXTENDING THE DAT E OF FILING OF RETURN WERE PLACED. THE LEARNED AR SUBMITTED THAT INITIALL Y THE PERIOD OF FILING OF RETURN WAS EXTENDED TO 30 TH NOVEMBER, 2010 AND IT WAS AGAIN EXTENDED TO 31 ST JANUARY, 2011. THE LEARNED AR SUBMITTED THAT THE A SSESSEE HAD DEPOSITED THE DUE TAXES BEFORE TWO MONTHS I.E., BEF ORE THE DUE DATE OF FILING OF RETURN. INVITING OUR ATTENTION TO DEFINIT ION OF TAX AS CONTAINED IN SECTION 2(43) OF THE ACT, THE LEARNED AR SUBMITTED THAT AS PER THIS DEFINITION THE TAX MEANS THE INCOME TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT AND DOES NOT INCLUDE ADVANCE TAX AS ARG UED BY LEARNED DR. THE LEARNED AR IN THIS RESPECT INVITED OUR ATTENTIO N TO (PB-70) WHERE A COPY OF NOTICE ISSUED BY OFFICE OF ASSISTANT COMMIS SIONER OF INCOME TAX WAS PLACED AND SUBMITTED THAT THE DEPARTMENT ITSELF HAD ISSUED NOTICE FOR NON PAYMENT OF SELF ASSESSMENT TAX U/S 140A OF THE ACT. THE LEARNED AR SUBMITTED THAT ASSESSEE HAD DEPOSITED INTEREST U NDER THE PROVISIONS OF SECTION 234A TO 234C OF THE ACT WHICH AMOUNTED T O APPROXIMATELY RS.21 LACS AND THEREFORE, THE IMPOSITION OF PENALTY WAS NOT JUSTIFIED. INVITING OUR ATTENTION TO DETAILED SUBMISSIONS FILE D BEFORE LEARNED CIT(A) ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 9 THE LEARNED AR TOOK US TO (PB-97 TO 114) AND SUBMIT TED THAT THE ASSESSEE HAD FILED DETAILED SUBMISSIONS BEFORE LEAR NED CIT(A) BUT LEARNED CIT(A) DID NOT CONSIDER ANY OF THE SUBMISSIONS AND ALSO DID NOT GIVE ANY FINDINGS TO THE SUBMISSIONS AND SIMPLY REDUCED THE AMOUNT OF PENALTY WHEREAS THE FACT REMAINS THAT NO PENALTY WAS IMPOSA BLE UNDER THE PROVISIONS OF SECTION 221(1). THE LEARNED AR SUBMIT TED THAT SECTION 140A(3) OF THE ACT WENT THROUGH A CHANGE W.E.F. 1.0 4.1989. HE SUBMITTED THAT BEFORE 1.04.1989 THE PENALTY FOR NON PAYMENT O F TAX OR ANY PART OF TAX WAS IMPOSABLE FOR EVERY MONTH DURING WHICH THE DEFAULT CONTINUED WHEREAS AFTER THE AMENDMENT FOR NON PAYMENT OF TAX AND INTEREST OR ANY PART OF IT THE ASSESSEE IS DEEMED TO BE AN ASSESSEE IN DEFAULT. IT WAS SUBMITTED THAT PENALTY UNDER SECTION 221(1) FOR VIO LATION OF PROVISIONS OF SECTION 221(1), CANNOT BE IMPOSED IF THE ASSESSEE P ROVES TO THE SATISFACTION OF ASSESSING OFFICER THAT DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS. HE SUBMITTED THAT DETAILED REASONS WERE FI LED BEFORE ASSESSING OFFICER AND CIT(A) FOR DELAY IN MAKING PAYMENT OF T AX BUT THE AUTHORITIES BELOW DID NOT DEAL WITH THE SAME. THE LEARNED AR FU RTHER INVITED OUR ATTENTION TO CIRCULAR NO.549 DATED 31.10.1989 WHERE IN THE AMENDED PROVISIONS OF SECTION 140(A0(3) WERE EXPLAINED. THE LEARNED AR SUBMITTED THAT OLD PROVISIONS OF INCOME TAX ACT GAVE ASSESSIN G OFFICER DISCRETIONARY POWERS TO CHARGE INTEREST AND TO LEVY PENALTY FOR T HE SAME DEFAULT AND THEREFORE, WITH THE AMENDMENT THE PAYMENT OF INTERE ST U/S 234A TO 243C WERE MADE MANDATORY. INVITING OUR ATTENTION TO PARA 4.17 OF THE SAID ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 10 CIRCULAR THE LEARNED AR SUBMITTED THAT THE CIRCULAR ITSELF CLARIFIES THAT SINCE THE RATE OF MANDATORY INTEREST FOR FAILURE TO PAY THE TAX HAS BEEN INCREASED, IT WAS NOT NECESSARY TO RETAIN THIS PROV ISION ANY MORE. THE LEARNED AR SUBMITTED THAT THE CIRCULAR WAS BINDING UPON THE DEPARTMENT WHICH THE LEARNED CIT(A) HAS COMPLETELY IGNORED. 9. WITHOUT PREJUDICE THE LEARNED AR SUBMITTED THAT LEARNED CIT(A) HAS NOT INTERPRETED THE CASH FLOW STATEMENT IN THE RIGHT PERSPECTIVE AND SUBMITTED THAT THE CASH AVAILABLE WAS UTILIZED TO R EPAY THE DEBTS AND OVER DRAFT LIMITS WHICH WAS DUE TO BANKS AND IN TH IS RESPECT THE LEARNED AR INVITED OUR ATTENTION TO (PB-85) WHERE THE BREAK UP OF CASH AND BANK BALANCES WITH THE VARIOUS BRANCHES OF BANKS WAS PLA CED. THE LEARNED AR SUBMITTED THAT THERE WAS NO SUFFICIENT CASH BALANCE AVAILABLE WITH THE ASSESSEE AS PER THE FUND FLOW STATEMENT READ WITH B REAK UP OF FUNDS AS PER PAPER BOOK PAGE 85 AND ASSESSEE HAD NOT DIVERTE D ANY OF ITS FUNDS FOR NON BUSINESS PURPOSE, THEREFORE, PENALTY U/S 22 1(1) WAS NOT IMPOSABLE AS THERE WAS REASONABLE AND SUFFICIENT CA USE FOR NON PAYMENT OF TAXES. RELIANCE IN THIS RESPECT WAS PLACED ON TH E FOLLOWING CASE LAWS. (I) DCIT VS. AANJANEYA LIFE CARE LTD. 61 TAXMAN.COM 207 (MUMBAI_TRIB.). (II) DCIT VS.SHEETAL REFINERIES LTD. 50 TAXMAN.COM 84(HYDERABAD-TRIB) REPLYING TO THE RELIANCE PLACED BY LEARNED DR ON TH E CASE LAWS OF MUMBAI BENCH THE LEARNED AR SUBMITTED THAT IN THAT CASE THE ASSESSEE WAS NOT FACING FINANCIAL DIFFICULTIES, THEREFORE, T HE BENCH HAD DECIDED AGAINST THE ASSESSEE. ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 11 10. THE LEARNED DR IN HIS REJOINDER SUBMITTED TH AT SECTION 221(1) IS A MANDATORY SECTION AND TAX U/S 140A MEANS UNDER AN Y PROVISIONS OF THE ACT AND WHICH MEANS ADVANCE TAX ALSO. REGARDING THE JUDGMENTS RELIED UPON BY LEARNED AR THE LEARNED DR SUBMITTED THAT THESE CANNOT BE RELIED AS THE ASSESSEE HAD NOT BEEN ABLE TO PROV E FINANCIAL DIFFICULTIES. HE FURTHER SUBMITTED THE ASSESSEE NEEDED TO FILE CA SH FLOW STATEMENT FROM JUNE 2009 ONWARDS ON WHICH DATE THE FIRST INST ALLMENT FELL DUE. THE LEARNED DR FURTHER SUBMITTED THAT ASSESSEE HAD ALSO NOT FILED CASH FLOW STATEMENT AFTER 31 ST MARCH, 2010, THEREFORE, THE LEARNED CIT(A) HAS WRONGLY ALLOWED RELIEF TO THE ASSESSEE AND KEEPING IN VIEW THE FACT THAT SECTION 221(1) IS A MANDATORY SECTION, THE ASSESSIN G OFFICER HAD RIGHTLY IMPOSED THE PENALTY. 11. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. IT IS AN UNDISPUTED FAC T THAT THE PERIOD OF FILING OF RETURN IN THIS YEAR FOR THE STATE OF JAMM U AND KASHMIR WAS EXTENDED TO 31 ST JANUARY, 2011 AS IS APPARENT FROM PAPER BOOK PAGE 84 WHERE AN ORDER U/S 119 DATED 30.09. 2010 EXTENDING THE DATE OF FILING OF RETURN IN THE STATE OF JAMMU & KASHMIR TO 31 ST JANUARY, 2011 IS PLACED. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HAD FILED RETURN OF INCOME ON 30.09.2010 WHICH IS A FACT WHICH ASSESSING OFFIC ER HAS NOTED IN HIS ORDER. IT IS ALSO AN UNDISPUTED FACT THAT ASSESSEE HAD DEPOSITED THE ENTIRE TAX IN INSTALLMENTS ON THE FOLLOWING DATES. ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 12 (I) 15.11.2010 RS.25,00,000/- (II) 23.11.2010 RS.25,00,000/- (III) 30.11.2010 RS.35,00,000/- (IV) 1.12.2010 RS.65,55,026/- _______________ TOTAL RS.1,50,55,026 FROM THE ABOVE DATES OF PAYMENT OF TAXES IT IS OBSE RVED THAT ASSESSEE HAD DISCHARGED ITS LIABILITY OF PAYMENT OF TAX BY 1 ST DECEMBER, 2010 WHICH DATE FALLS BEFORE EXTENDED DATE FOR FILING OF RETURN WHICH FELL DUE ON 31 ST JANUARY, 2011. THE ASSESSEE IN THIS CASE HAD FILED THE RETURN OF INCOME ON 30.09.2010 WHEREAS IT COULD HAVE FILED TH E RETURN OF INCOME ON 31.01.2011 WHICH DATE IS AFTER THE PAYMENT OF TA XES. THE ASSESSEE COULD HAVE FILED THE RETURN OF INCOME BY 31 ST JANUARY, 2011 AND COULD HAVE ENCLOSED THE CHALLANS FOR PAYMENT OF TAX ALONG WITH THE RETURN OF INCOME AND THEREFORE, COULD HAVE COMPLIED WITH THE PROVISIONS OF LAW. THE PENALTY U/S 221(1) IS ATTRACTED FOR VIOLATION O F PAYMENT OF TAX U/S 140A OF THE ACT. THEREFORE, IT IS IMPORTANT TO GO T HROUGH THE PROVISIONS OF SECTION 140(A)(1) AND 140A(3) WHICH READS AS UNDER: 140A (1) WHERE ANY TAX IS PAYABLE ON THE BASIS OF ANY RETURN REQUIRED TO BE FURNISHED UNDER [SECTION 115WD OR SECTION 115 WH OR] SECTION 139 OR SECTION 142 [ OR SECTION 148 OR [ 153A OR], AS THE CASE MAY BE,SECTION 158BC]], [AFTER TAKING INTO ACCOUNT,- (I) THE AMOUNT OF TAX, IF ANY, ALREADY PAID UNDER ANY P ROVISION OF THIS ACT; (II) ANY TAX DEDUCTED OR COLLECTED AT SOURCE; (III) ANY RELIEF OF TAX OR DEDUCTION OF TAX CLAIMED UNDER SECTION 90 OR SECTION 91 ON ACCOUNT OF TAX PAID IN A COUNTRY OUTS IDE INDIA; (IV) ANY RELIEF OF TAX CLAIMED UNDER SECTION 90A ON ACCO UNT OF TAX APID IN ANY SPECIFIED TERRITORY OUTSIDE INDIA REFERRED TO I N THAT SECTION; AND ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 13 (V) ANY TAX CREDIT CLAIMED TO BE SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115JAA [OR SECTION 115JD],] [THE ASSESSEE SHALL BE LIABLE TO PAY SUCH TAX TOGET HER WITH INTEREST PAYABLE UNDER ANY PROVISIONS OF THIS ACT FOR ANY DELAY IN F URNISHING THE RETURN OR ANY DEFAULT OR DELAY IN PAYMENT OF ADVANCE TAX, BEF ORE FURNISHING THE RETURN AND THE RETURN SHALL BE ACCOMPANIED BY PROOF OF PAYMENT OF SUCH TAX AND INTEREST.] [EXPLANATION- WHERE THE AMOUNT PAID BY THE ASSESSEE UNDER THIS SUB- SECTION FALLS SHORT OF THE AGGREGATE OF THE TAX AND INTEREST AS AFORESAID, THE AMOUNT SO PAID SHALL FIRST BE ADJUSTED TOWARDS THE INTEREST PAYABLE AS AFORESAID AND THE BALANCE, IF ANY, SHALL BE ADJUSTE D TOWARDS THE TAX PAYABLE.]***** [(3) IF ANY ASSESSEE FAILS TO PAY THE WHOLE OR ANY PART OF SUCH TAX OR INTEREST OR BOTH IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (1), HE SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF T HE TAX OR INTEREST OR BOTH REMAINING UNPAID, AND ALL THE PROVISIONS OF TH IS ACT SHALL APPLY ACCORDINGLY.]***** FROM THE ANALYSIS OF ABOVE PROVISIONS OF SECTION 14 0A(1), WE FIND THAT THE SECTION REQUIRES THAT ASSESSEE IS LIABLE TO PAY TAX ES ON THE TOTAL INCOME ON THE BASIS OF ANY RETURN U/S 139 AFTER REDUCING T HE ADVANCE TAXES AND TAX DEDUCTED AT SOURCE, IF ANY AND SUCH RETURN SHAL L BE ACCOMPANIED WITH THE PROOF OF PAYMENT OF SUCH TAXES AND INTERES T. SUB-SECTION 3 OF SECTION 140A REQUIRES THAT IF AN ASSESSEE FAILS TO PAY WHOLE OR ANY PART OF ANY SUCH TAX OR INTEREST THE ASSESSEE SHALL BE DEEM ED TO BE AN ASSESSEE IN DEFAULT AND THEREFORE, THE PROVISIONS OF ACT SHA LL APPLY ACCORDINGLY. IT IS APPARENT FROM THE ABOVE THAT SECTION 140 (A)(1) OF THE ACT APPLIES IN RESPECT OF RETURN REQUIRED TO BE FURNISHED U/S 139 OF THE ACT. THE RETURN IN THIS CASE WAS REQUIRED TO BE FURNISHED U/S 139 O F THE ACT BY 31 ST JANUARY, 2011. THE ENTIRE TAX WAS PAID BY 1.12.2010 WHICH IS MUCH PRIOR TO THE DUE DATE OF FILING OF RETURN WHICH HAP PENED TO BE ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 14 31/01/2011 AND IF THE ENTIRE TAX HAS BEEN PAID BEFO RE THE FILING OF DUE DATE OF RETURN THERE CAN NOT BE SAID TO BE DEFAULT U/S 140A(1) OF THE ACT. THE ONLY DEFAULT COMMITTED BY ASSESSEE IS THAT IT H AD FILED ITS RETURN OF INCOME ON 30.09.2010 AND BY THE DATE OF FILING OF R ETURN THE TAXES WERE NOT PAID BUT THE FACT REMAINS THE DUE DATE OF FILIN G OF RETURN WAS EXTENDED TO 31 ST JANUARY, 2011 AND, THEREFORE, TECHNICALLY THE ASSE SSEE WAS ENTITLED TO PAY TAXES BEFORE THE DUE DATE OF FI LING OF RETURN WHICH HAPPENED TO BE 31 ST JANUARY, 2011. THE ENTIRE TAXES HAS BEEN PAID BY 1 ST DECEMBER, 2010 AND THEREFORE, THE BREACH IS MERELY A TECHNICAL BREACH AND FOR WHICH NO PENALTY SHOULD HAVE BEEN LEVIED. M OREOVER, THE ASSESSEE HAS PAID INTEREST AS APPLICABLE UNDER THE PROVISIONS OF ACT. THEREFORE, KEEPING IN VIEW THE ENTIRE FACTS AND CIR CUMSTANCES AND SPECIFICALLY THE FACT THAT ASSESSEE BELONGED TO DIS TURBED AREA OF JAMMU & KASHMIR, THE PENALTY IN THIS CASE WAS NOT IMPOSABLE . THE HONBLE APEX COURT IN THE CASE OF HINDUSTANT STEEL LTD. VS. STATE OF ORISSA REPORTED IN 83 ITR 26 HAS HELD AS UNDER: AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PEN ALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED D ELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DIS HONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENAL TY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSI DERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY I S PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE J USTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FRO M A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRE SCRIBED BY THE STATUTE. THOSE IN CHARGE OF THE AFFAIRS OF THE COMPANY IN FA ILING TO REGISTER THE COMPANY AS A DEALER ACTED IN THE HONEST AND GENUINE BELIEF THAT THE ITA NOS.341 & 398 (ASR)/2014 AS ST. YEAR: 2010-11 15 COMPANY WAS NOT A DEALER. GRANTING THAT THEY ERRED, NO CASE FOR IMPOSING PENALTY WAS MADE OUT. IN VIEW OF THE FACTS AND CIRCUMSTANCES GROUND NOS.1 TO 3 OF ASSESSEES APPEAL ARE ALLOWED. GROUND NO. 4 HAS NOT BEEN ARGUE D BY LEARNED AR, THEREFORE, IT IS DISMISSED AS NOT PRESSED. ON THE O THER HAND APPEAL FILED BY THE REVENUE IS DISMISSED. 12. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS PA RTLY ALLOWED,WHEREAS THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:13.04.2016. /PK/PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.