MIMANSA JEWELEERY P.LTD, MUMBAI V. ACIT 5(2), MUMBAI

ITA 3808/MUM/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9709 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: DR DANIEL
• Keywords: Reasonable cause
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3808/M/2011 ASSESSMENT YEAR: 2009-10 M/S. MIMANSA JEWELLERY PVT. LTD., 138, SHREEJI CHAMBERS, 1 ST FLOOR, TATA ROAD NO.2, OPERA HOUSE, MUMBAI- 400 004 PAN: AADCM8568R VS. ACIT 5(2), AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : DR. DANIEL, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 24.01.2018 DATE OF PRONOUNCEMENT : 27.03.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 16.03.2011 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE ARE A S UNDER: I. OBJECTION AGAINST LEVY OF PENALTY UNDER SECTION 221 (1) OF THE INCOME TAX ACT, 1961, AMOUNTING TO RS.7,88,986/ -. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE COMMISSIONER OF INCOME TAX (APPEALS), HEREINAFTER REFERRED AS THE C IT (APPEALS), HAS ERRED BY NOT DELETING THE PENALTY OF RS. 7,88,986/- LEVIE D BY THE ASSESSING OFFICER, ON THE GROUND THAT THE SELF ASSESSMENT TAX FOR THE A.Y.2009-10 WAS NOT PAID BEFORE FILING THE RETURN OF INCOME. ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 2 2. THE LEARNED CIT (APPEALS) FAILED TO CONSIDER TH E FINANCIAL CRISIS FACED BY THE APPELLANT COMPANY. FURTHER, THE LEARNED CIT (APPEAL S) FAILED TO APPRECIATE THAT THE APPELLANT COMPANY HAS MADE PAYMENT OF TOTAL SEL F ASSESSMENT TAX WITHIN THE TIME ALLOWED BY THE ASSESSING OFFICER. ALSO, TH E LEARNED CIT (APPEALS) FAILED TO UNDERSTAND THAT THE PENALTY ORDER WAS PAS SED EVEN BEFORE THE EXPIRY OF THE TIME ALLOWED BY THE ASSESSING OFFICER TO MAK E PAYMENT OF SELF ASSESSMENT TAX. 3. THE APPELLANT COMPANY RESPECTFULLY SUBMITS THAT THE DEFAULT IN PAYING SELF ASSESSMENT TAX U/S 140A OF THE ACT IS DUE TO GOOD A ND SUFFICIENT REASON AND, THEREFORE, PENALTY U/S 221(1) BE DROPPED. II. THE APPELLANT CRAVES, LEAVE TO ADD, ALTER, AMEN D OR DELETE ANY OF THE GROUNDS OF APPEAL. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE VAR IOUS GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF PE NALTY OF RS.7,88,986/- BY THE LD. CIT(A) AS LEVIED BY THE AO O N THE GROUND THAT SELF ASSESSMENT TAX FOR A.Y. 2009-10 WAS NOT PAID BEFORE FILING OF INCOME TAX RETURN. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME FOR A.Y. 2009-10 DECLARING AN INCOME OF RS.92,12,466/- AND THE TAX PAYABLE WAS RS.31,55,945 /-/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE A CT. THE AO NOTICED AFTER PERUSAL OF THE RECORD THAT SELF AS SESSMENT TAX WAS NOT PAID BY THE ASSESSEE BEFORE FILING THE RETU RN OF INCOME TAX WHICH WORKED OUT TO RS.31,55,945/- AS PER INCOME TAX COMPUTATION FORM AND ACCORDINGLY A NOTICES WERE ISS UED UNDER SECTION 221(1) OF THE ACT DATED 11.02.10 AND 04.03.10 REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY THE PEN ALTY SHOULD NOT BE LEVIED UNDER SECTION 221(1) OF THE ACT WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 15.03.10 BY SUBMITTING THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 3 IN GEM STUDDED JEWELLERY WHICH IS PASSING THROUGH A VERY DIFFICULT TIME DUE TO RECESSION WORLD OVER. AS A RE SULT THE PROFITABILITY OF THE BUSINESS WAS REDUCED ENORMOUSL Y AFFECTING THE OVERALL CASH FLOW OF THE COMPANY. THE ASSESSEE ALSO SUBMITTED THAT ARRANGEMENT IS BEING MADE TO PAY THE ENTIRE OUTSTANDING DEMAND ALONG WITH INTEREST FOR WHICH FO UR POST DATED CHEQUES WERE ISSUED IN FAVOUR OF THE REVENUE TO BE PAID IN FOUR INSTALLMENTS BY 29.03.10. THE CONTENT IONS OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND HE REJ ECTED THE SUBMISSIONS OF THE ASSESSEE BY OBSERVING THAT NO EV IDENCES TO PROVE THE FINANCIAL STRINGENCIES HAVE BEEN FILED AN D FINALLY IMPOSED PENALTY EQUAL TO 25% OF THE TAX OUTSTANDIN G WHICH WORKED OUT TO RS.7,88,986/-. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DISMI SSED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE DE TAILED SUBMISSIONS WHICH HAVE BEEN INCORPORATED IN PARA 2.7 OF THE APPELLATE ORDER BY OBSERVING AND HOLDING AS UNDER: 2.8 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF TH E ASSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. AFTER CONSIDERING THE ENTIRE FACTS, I DO NOT FIND ANY MERIT IN THE ARGUMENTS OF THE APPELLANT. THE RE CORD DOES NOT SHOW THAT THE FINANCIAL CONDITION OF THE APPELLANT WAS SO BAD THA T HE COULD NOT PAY TAX ON THE COMPUTED INCOME IN TIME. IT WAS REQUIRED TO PAY AD VANCE TAX ON THE DATE FIXED AND ULTIMATELY, SELF ASSESSMENT TAX ALONGWITH RETURN OF INCOME. HOWEVER, IT HAS FAILED TO PAY RS. 31,55,945/-. THE SITUATION OF FINANCIAL PROBLEM WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER BEFORE FILING THE R ETURN OF INCOME AND THE APPELLANT HAD APPROACHED THE ASSESSING OFFICER, AFTER COMMITT ING THE DEFAULT AND GIVEN FOUR POST DATED CHEQUES. THE APPELLANT HAD RELIED ON SEV ERAL CASE LAWS WHICH ARE DISTINGUISHABLE ON FACTS. THE APPELLANT HAS FILED G ENERAL EXPLANATION THAT THERE WAS RECESSION, THEREFORE, THEY WERE UNABLE TO PAY T HE TAX IN TIME. THE APPELLANT HAS FAILED TO PROVE WITH EVIDENCE THAT THEY WERE SI NCERE AND PARTICULAR FOR MAKING PAYMENT OF TAX IN TIME AND THEY MADE ANY SIN CERE EFFORT TO PAY TAX ALONG WITH THE RETURN OF INCOME; BUT FAILED TO DO S O. SO IN VIEW OF THE AFORESAID FACTS AND IN THE ABSENCE OF ANY WILL SUPPORTED REAS ONABLE CAUSE AND THE FACT THAT THE ASSESSING OFFICER HAS LEVIED 25% PENALTY, I FIND NO FURTHER SCOPE TO INTERFERE IN THE PENALTY ORDER PASSED BY THE ASSESS ING OFFICER DATED 22.03.2010. ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 4 6. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT DUE TO GLOBAL RECESSION IN THE GEMS AND JEWELLERY INDUSTRY THE BUSINESS OF THE ASSESSEE WAS IMPACTED ADVERSELY AND AS A RESULT FINANCIAL POSITION OF THE ASSESSEE BECAME V ERY STRESSED AS THE ASSESSEE WAS INTO THE BUSINESS OF MANUFACTU RING GEMS AND STUDDED JEWELLERY AND EXPORTING THE SAME. DUE T O THE OVERALL RECESSION IN THE INTERNATIONAL MARKET THE L IQUIDITY POSITION OF THE COMPANY BECAME FROM BAD TO WORSE AN D RECOVERY FROM THE DEBTORS OF THE COMPANY WAS SLOWED DOWN AND THE ASSESSEE COULD HARDLY RECEIVED ANY PAYMENTS FROM THE SUNDRY DEBTORS TO PAY OFF THE SUNDRY CREDITORS AND SUPPLIERS FOR GETTING RAW MATERIALS TO KEEP THE BUS INESS GOING AND THIS WAS THE SOLE REASON FOR NON-PAYMENT OF SEL F ASSESSMENT TAX. THE LD. A.R. ALSO FILED BEFORE THE BE NCH THE STATEMENT OF FUND FLOW DURING OCTOBER 2009 TO MARCH 2010 BY SHOWING INFLOWS AND OUTFLOWS DURING THESE MONTHS WH ICH PROVED THAT OVERALL BALANCE WAS NEGATIVE. SIMILARLY , THE CASH FLOW STATEMENT WAS FILED IN RESPECT OF THE ABOVE PE RIOD WHICH SHOWED THAT THE BANK BALANCE OF THE ASSESSEE WAS IN NEGATIVE TO THE TUNE OF RS.4,98,77,642/-. THE LD. A.R. SUBMITTED THAT THE AO IMPOSED THE PENALTY DESPITE THE FACT THAT TH E AO ALLOWED THE ASSESSEE TO PAY THE OUTSTANDING TAX IN FOUR EQUAL INSTALLMENTS FOR WHICH THE POST DATED CHEQUES WERE ISSUED IN FAVOUR OF THE REVENUE WHICH WERE DULY CLEARED AS C OMMITTED BY THE ASSESSEE. THE DETAIL WHEREOF WERE ALSO FILED BEFORE THE BENCH. THE LD. A.R. PRAYED THAT SINCE THE ASSESSEE HAS CLEARED THE INSTALLMENTS ON THE STIPULATED DATED TH E PENALTY AS ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 5 IMPOSED BY THE AO IS WITHOUT ANY BASIS AND DESERVED TO BE DELETED. THE LD. A.R. RELIED ON A SERIES OF DECISIO NS NAMELY; 1. ITO VS. DEVSONS (P) LTD. (2008) 113 ATTJ (DEL) 6 15 2. JCIT VS. VIRAL LAMINATES (P) LTD. (2006) 5 SOT 16 0 (AHD.) 3. ACIT VS. AVDESH KUMAR PARVINDER S. KOCHAR (2008) 117 TTJ (DEL) 137 4. RAMCHANDRA PESTICIDES PVT. LTD. VS. CIT (2006) 28 5 ITR 45 (KARN.) 7. ON THE OTHER HAND, THE LD. D.R., RELIED HEAVILY ON TH E ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT THE A SSESSEE COULD NOT PROVE BEFORE THE AUTHORITIES BELOW THAT I TS FINANCIAL POSITION WAS SO BAD THAT EVEN THE TAXES COULD NOT B E PAID BEFORE FILING THE RETURN. THE LD. D.R. SUBMITTED THA T THE ASSESSEE FAILED TO PAY THE ADVANCE TAXES ON THE SPE CIFIC DATES AND ULTIMATELY SHOWING HUGE AMOUNT OF TAX OUTSTANDI NG TO THE TUNE OF RS.31,55,945/- WHICH REMAINED UNPAID EVEN THE RETURN OF INCOME WAS FILED. THE LD. D.R. CONTENDED THA T THE ASSESSEE HAS COMPLETELY FAILED TO MAKE OUT ANY PRIM A-FACIE CASE TO SHOW THEIR FINANCIAL STRINGENCIES IN THE BU SINESS OF THE ASSESSEE AND IT IS ONLY AFTER COMMITTING THE DEFAUL T BY WAY OF NON PAYMENT ON OR BEFORE FILING THE RETURN, THE ASSE SSEE ISSUED FOUR POST DATED CHEQUES IN FAVOUR OF THE DEP ARTMENT AND THUS, THERE WAS NO REASONABLE CAUSE FOR NON IMPO SITION OF PENALTY AND FINALLY PRAYED THAT THE ORDER OF LD. CI T(A) BE UPHELD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD INCLUDING THE DECISION CITED BY THE LD. A.R. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE IS IN TH E BUSINESS ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 6 OF MANUFACTURING OF GEMS AND JEWELLERY AND EXPORTS THEREOF. THE SELF ASSESSMENT TAX OF RS.31,55,945/- WAS OUTSTA NDING AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE FOR WHICH FOUR POST DATED CHEQUES WERE ISSUED BY THE ASSESSEE IN F AVOUR OF THE REVENUE OF RS.8,50,000/- EACH WHICH WERE CLEARED ON 12.03.10, 19.03.10, 26.03.10 AND 31.03.10 AS COMMITTED. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE A CT. THE AO IMPOSED PENALTY EQUAL TO 25% OF THE TAX OUTSTAND ING ON THE GROUND THAT ASSESSEE COMMITTED A DEFAULT IN THE PAYMENT OF TAXES IN TERMS OF THE PROVISION OF SECTION 140A OF THE ACT WHICH WAS UPHELD BY THE LD. CIT(A) ON THE GROUND TH AT ASSESSEE FAILED TO SHOW ANY REASONABLE CAUSE IN THE FORM OF FINANCIAL DIFFICULTIES IN ITS BUSINESS AND THUS NO REASONABLE CAUSE WAS PROVED FOR DELETION OF PENALTY. CONTRARY TO THIS, WE FIND FROM THE RECORDS PLACED BEFORE US THAT THE ASS ESSEE THROUGHOUT THE PERIOD COMMENCING FROM 01.10.09 TO 3 1.03.10 HAVE NEGATIVE FLOW OF FUNDS AS IS APPARENT FROM FUN D FLOW AND CASH FLOW STATEMENT AS REPRODUCED BELOW: STATEMENT SHOWING FUNDS FLOW DURING THE PERIOD OF O CTOBER 2009 TO MARCH 2010 INFLOW DURING THE MONTH OUTFLOW DURING THE MONTH BALANCE OCTOBER 6,272,441 6,683,052 (410,611) NOVEMBER 16,165,237 61,736,495 (45,571,257) DECEMBER 19,850,924 21,927,511 (2,076,587) JANUARY 15,211,976 15,512,193 (300,217) FEBRUARY 19,981,183 19,269,270 711,913 MARCH 27,947,327 31,030,627 (3,083,300) MIMANSA JEWELLERY PRIVATE LIMITED CASH FLOW STATEMENT 1-10-2009 TO 31-03-2010 PARTICULARS AMOUNT AMOUNT ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 7 BANK BALANCE AS ON 1-10- 2009 852,418 ADD: RECEIPTS RECEIP TS FROM DEBTORS 97,681210 CASH SALES 5,736803 REFUND RECEIVED FROM GEMS AND JEWELLERY PROMO. COUNCIL 121,898 103,539,911 104,392,329 LESS: PAYMENTS PAID TO CREDITORS OF RAW MATERIAL 143,600,161 PAID TO CREDITORS OF SERVICES 3,078,896 PAYMENT OF SALARY TO STAFF 493,901 STATUTORY DUES - PROF. TAX, PF, TDS PAID 201,392 SELF ASSESSMENT TAX PAID 3,400,000 (PAID ON 12-03-2010, 19- 03-2010, 26-03-2010, 29- 03 - 2010 OF RS. 8,50,000/ - ) BANK INTEREST AND FINANCE COST 3,165,739 ADMINISTRATIVE AND SELLING EXPENSES 329,882 154,269,971 BANK BALANCE AS ON 31-03- 2010 (49,877,642) THE AO HAS GRANTED FOUR INSTALLMENTS TO THE ASSESSE E OF RS. 8,50,000/- EACH WHICH WERE CLEARED BY THE ASSESSEE A LONG WITH INTEREST FROM ITS ACCOUNT WITH STANDARD CHARTE RED BANK WHICH WAS PAID OUT OF THE OVERDRAFT FACILITY AVAIL ED FROM THE BANK. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE IN TOTALITY, WE ARE OF THE CONSIDERED VIEW THAT THE ASS ESSEE WAS ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 8 PASSING THROUGH SEVERE FINANCIAL HARDSHIPS DURING T HE ABOVE PERIOD WHICH IS A SUFFICIENT AND REASONABLE CAUSE F OR NON PAYMENT OF TAX. THE CASE OF THE ASSESSEE IS ALSO S UPPORTED BY A NUMBER OF DECISIONS AS REFERRED TO ABOVE. IN THE CASE OF ITO VS. DEVSONS (P) LTD. (SUPRA), IT IS HELD THAT PE NALTY IMPOSED BEFORE EXPIRY OF PERIOD GRANTED TO THE ASSE SSEE TO MAKE THE PAYMENT OF TAX WAS NOT VALID AND MORE SO W HEN ASSESSEE HAD SHOWN FINANCIAL DIFFICULTIES AND HAS M ADE A REASONABLE OFFER FOR MAKING THE PAYMENT IN INSTALLM ENTS. IN THE CASE OF JCIT VS. VIRAL LAMINATES (P) LTD. (SUPRA) THE CO- ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT ASSESS EE, THOUGH HAVING FAILED TO PAY SELF ASSESSMENT TAX, PAID THE O UTSTANDING TAX IN ACCORDANCE WITH SCHEDULE OF PAYMENT AGREED B EFORE THE AO AND LIQUIDATING THE ENTIRE LIABILITY NO PENALTY UNDER SECTION 221(1) IS LEVIABLE. IN VIEW OF THESE FACTS AND THE RATIO LAID DOWN BY THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL, WE ARE OF THE VIEW THAT THERE WAS SUFFICIE NT REASON FOR NON PAYMENT OF SELF ASSESSMENT TAX AND THE ORDE R OF CIT(A) AFFIRMING THE ORDER OF AO CAN NOT BE SUSTAIN ED. ACCORDINGLY WE REVERSE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.03.2018. SD/- SD/- (JOGINDER SNGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27.03.2018. * KISHORE, SR. P.S. ITA NO.3808/M/2011 M/S. MIMANSA JEWELLERY PVT. LTD. 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.