ORXY FINANCE AND INVESTMENTS P. LTD, MUMBAI V. ITO 8(2)-4, MUMBAI

ITA 3815/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7629 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T C SUBRAMANIAN
• Assessee Lawyers: DEEPAK TRALSHAWALE
• Keywords: Application of stay; Reasonable cause
• Section: 142(1); 133A; 234B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 3815/MUM/2011 ASSESSMENT YEAR : 2007-08 ORYX FINANCE AND INVESTMENTS PVT. LTD., APPE LLANT LOK BHAVAN, LOK BHARATI COMPLEX, MAROL MAROSHI ROAD, ANDHERI (E), MUMBAI 400 059. (PAN AAACOO662K) VS. INCOME TAX OFFICER-8(2)-4, RESPONDENT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 APPELLANT BY : MR. DEEPAK TRALSHAWALE RESPONDENT BY : MR. T.C. SUBRAMANIAN DATE OF HEARING : 12/03/2012 DATE OF PRONOUNCEMENT : 28/03/20 12 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-17, MUMBAI, PASSED ON 14 TH JANUARY, 2011 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED FOUR GROUNDS OF APPEAL, THE SUM AND SUBSTANCE OF WHICH IS AGAINST THE ACTION OF THE CIT (A) IN CONFIRMING THE PENALTY OF RS. 8,24,529/- IMPOSED BY THE AO U/S 221 OF THE ACT. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO NO TED THAT THE ASSESSEE HAD NOT FILED RETURN OF INCOME FOR THE YEA R NOR MADE PAYMENT OF ADVANCE TAX. A SURVEY U/S 133A WAS CONDU CTED ON ITA NO. 3815/MUM/11 ORYX FINANCE AND INVESTMENT PVT. LTD. 2 11/09/2008 AT THE REGISTERED OFFICE OF THE ASSESSEE AT LOK BHAVAN, ANDHERI, MUMBAI 59 WHERE DIRECTORS REPORT, AUDIT ORS REPORT PROFIT & LOSS ACCOUNT AND BALANCE SHEET FOR THE YEAR ENDIN G 31/03/07 WAS FOUND. ON PERUSAL OF THE SAID DOCUMENTS, THE AO NOT ICED THAT THE ASSESSEE HAD EARNED PROFIT OF RS. 10,80,29,921/- MA INLY BY WAY OF SALE OF SHARES OF LOK HOUSING & CONSTRUCTION LTD. T HE AO NOTED THAT ALTHOUGH CAPITAL GAIN WAS EXEMPT U/S 10(3), THE ASS ESSEE WAS LIABLE TO PAY MAT ON THE SAME IN VIEW OF THE PROVISIONS OF SE CTION 115JB AS AMENDED BY THE FINANCE ACT, 2006 WITH EFFECT FROM 0 1/04/07. THEREFORE, NOTICE U/S 142(1) DATED 17/09/08 WAS ISS UED FOR FILING RETURN OF INCOME FOR AY 2007-08. IN COMPLIANCE THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2007-08 ON 03/10/08 DECLARI NG TOTAL INCOME AT RS. 10,80,29,921/- U/S 115JB WITH TAX PAYABLE OF RS. 1,21,20,957/- WITHOUT WORKING OUT INTEREST U/S 234A , 234B AND 234C. HOWEVER, THE SELF-ASSESSMENT TAX WAS NOT PAID . THEREFORE, THE AO VIDE HIS ORDER DATED 21/10/09 TREATED THE ASSESS EE AS ASSESSEE IN DEFAULT U/S 140A(3). THE RETURN WAS PROCESSED U/S 1 43(1) ON 14/11/08 AND DEMAND OF RS. 1,64,90,573/- WAS RAISED AND SHOW CAUSE NOTICE DATED 10/11/08 WAS ISSUED TO EXPLAIN A S TO WHY PENALTY U/S 221(1) RWS 140A(3) SHOULD NOT BE IMPOSED FOR TH E DEFAULT. IN REPLY, THE ASSESSEE FILED A LETTER DATED 10/11/08 C ITING ACUTE SHORTAGE OF FUNDS AND POINTED OUT THAT THROUGH A COMPOSITE P ETITION THE ASSESSEE HAD MADE AN OFFER TO LIQUIDATE IN INSTAMEN TS, RS. 70 CRORE OF TAX LIABILITY FOR THE ENTIRE LOK GROUP BY 31/03/09. THE AO NOTED THAT THE SUM OF RS. 10,82,75,187/- ON SALE OF SHARES WER E DIVERTED FOR MAKING LOANS & ADVANCES OF RS. 11,53,88,210/- TO LO K HOLDING & CONSTRUCTION LTD. AND RS. 74,88,628/- TO ANOTHER GR OUP CONCERN VIZ. PARKER AGENCY. THE AO, THEREFORE, HELD THAT THE RE ASON OF NON- AVAILABILITY OF FUNDS WAS NOT VALID AND FURTHER IN THE NEXT FY THE ASSESSEE RECEIVED BACK RS. 70,71,995/- FROM PARKER AGENCIES WHICH WAS ALSO ADVANCED TO M/S LOK HOUSING & CONSTRUCTION LTD. AS ITA NO. 3815/MUM/11 ORYX FINANCE AND INVESTMENT PVT. LTD. 3 INTEREST FREE LOAN. HE FURTHER NOTED THAT THE ASSES SEE HAD ALSO MADE ADVANCES FOR INVESTMENTS OF RS. 1,70,60,930/- IN TH E PREMISES OF LOK NIRMAN PROJECT OF LOK HOUSING & CONSTRUCTION CO. LT D. IN PERIOD RELEVANT TO AY 2008-09. THUS, THE ASSESSEE DID NOT BOTHER TO CLEAR ITS TAX LIABILITY AND INSTEAD PARKED A SUBSTANTIAL AMOU NT IN THE BUSINESS OF ITS GROUP COMPANIES BY WAY OF PAYMENT OF INTERES T FREE ADVANCES. THE PETITION OF STAY OF DEMAND WAS ALSO REJECTED BY A LETTER DATED 20/11/08 BY THE AO AND A MINIMUM PENALTY OF 5% WORK ED OUT TO RS. 8,24,529/- OF TAXES DUE OF RS. 1,64,90,573/- WAS LE VIED. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E CIT(A). 4. BEFORE THE CIT(A), THE AR OF THE ASSESSEE SUBMIT TED THAT NON- PAYMENT OF TAX WAS PURELY DUE TO SHORTAGE OF FUNDS, AS THE ASSESSEE HAD ADVANCED FUNDS TO THE SISTER CONCERNS TO HELP T HEM TIDE OVER THEIR LIABILITIES TO VARIOUS BANKS AND FINANCIAL INSTITUT IONS. HE FURTHER SUBMITTED THAT THE ADVANCES WERE MADE WITH A HOPE T HAT THE ASSESSEE WOULD GET BACK THE AMOUNTS FROM THESE SISTER CONCER NS BUT DUE TO THE GENERAL MELT DOWN IN THE REAL ESTATE MARKET, THE SI STER CONCERNS COULD NOT RAISE THE FUNDS AND REPAY TO THE ASSESSEE. HE R ELIED UPON SOME CASE LAWS BEFORE THE CIT(A) IN SUPPORT OF ASSESSEE S CASE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) HELD AS UNDER:- 3.2 SUBMISSION HAS BEEN CONSIDERED. THE APPELLANT HAD STATED THAT THE SETBACK IN THE REAL ESTATE MARKETS HAD ADV ERSELY AFFECTED THE SISTER CONCERN WHICH IN TURN CAUSED SH ORTAGE OF FUNDS FOR THE APPELLANT. HOWEVER, IT IS SEEN THAT E VEN AFTER A PERIOD OF THREE YEARS ADMITTED TAX FOR THE RELEVANT EAR HAS NOT BEEN CLEARED. IN VIEW OF THE FINDING OF THE A.O. IT HAS TO BE HELD THAT THE REASON OF FINANCIAL HARDSHIP EXPRESSED BY THE APPELLANT WAS NOT JUSTIFIED AND NO EARNEST ATTEMPT HAD BEEN M ADE TO CLEAR ARREARS. THE ACTION OF THE ASSESSING OFFICER IN LEV YING PENALTY IS SUSTAINED. IN VIEW OF THE DECISIONS CITED INCLUDING THAT OF THE HONBLE ITAT IN THE CASE OF GREAT VALUE FOODS VS. A CIT IN ITANO.16(ASRLL2OO8 WHEREIN IT HAS BEEN HELD THAT TH E PENALTY U/S.221(1) WAS NOT LEVIABLE FOR DEFAULT IN PAYMENT OF INTEREST, SUCH INTEREST HAS TO BE EXCLUDED FROM THE LEVY. THE ASSESSING ITA NO. 3815/MUM/11 ORYX FINANCE AND INVESTMENT PVT. LTD. 4 OFFICER IS DIRECTED TO RESTRICT THE LEVY TO TAX POR TION AND EXCLUDE INTEREST CHARGED ULS.234A, 234B & 234C. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SEVERE CASH CRUNCH AND NON-AVAILABILITY OF FUNDS W AS A GENUINE HARDSHIP WHICH WAS A REASONABLE CAUSE WITHIN THE ME ANING OF SECTION 221 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSE E ALTERNATIVELY SUBMITTED THAT PENALTY MAY BE REDUCED TO 2.5% BY CO NSIDERING THE DECISION OF THE TRIBUNAL IN ITS SISTER CONCERN CASE , NAMELY, M/S OZONE FINANCE AND INVESTMENT IN ITA NO. 5790/MUM/09 FOR A Y 2007-08 ORDER DATED 9 TH SEPTEMBER, 2010 WHEREIN THE TRIBUNAL HELD THAT WE ARE OF THE OPINION THAT THERE IS NO GOOD AND SUFFIC IENT REASON TO GIVE EXEMPTION FROM THE PROVISIONS OF PENALTY AS PER FIR ST PROVISO TO THE SECTION. HOWEVER, CONSIDERING THE FACT THAT THE ASS ESSEE IS STILL REMITTING THE AMOUNTS OF TAX BY WAY OF INSTALMENTS, IN THE INTEREST OF JUSTICE WE REDUCE THE PENALTY TO A ROUND SUM AMOUNT OF RS. 5,00,000/- WHICH SHALL MEET THE ENDS OF JUSTICE. 6. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 7. AFTER HEARING THE PARTIES, PERUSING THE RECORD A ND THE ORDERS OF THE AUTHORITIES BELOW, IT IS OBSERVED THAT THE CIT( A) APPROVED THE FINDING OF THE AO THAT THE REASON FOR FINANCIAL HAR DSHIP EXPRESSED BY THE ASSESSEE WAS NOT JUSTIFIED AND NO EARNEST ATTEM PT HAD BEEN MADE TO CLEAR ARREARS. WE REFER TO THE PROVISIONS OF SEC TION 221(1), WHICH READ AS UNDER:- 221. [(1) WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEMED T O BE IN DEFAULT IN MAKING A PAYMENT OF TAX, HE SHALL, IN ADDITION TO THE AMOUNT OF THE ARREARS AND THE AMOUNT OF INTEREST PAYABLE UNDER SUB-SECTION (2) OF SECTION 220 , BE LIABLE, BY WAY OF PENALTY, TO PAY SUCH AMOUNT AS THE [ASSESSING] OFFI CER MAY DIRECT, AND IN THE CASE OF A CONTINUING DEFAULT, SUCH FURTHER AMOUNT OR AMO UNTS AS THE [ASSESSING] OFFICER ITA NO. 3815/MUM/11 ORYX FINANCE AND INVESTMENT PVT. LTD. 5 MAY, FROM TIME TO TIME, DIRECT, SO, HOWEVER, THAT T HE TOTAL AMOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX IN ARREARS : 8. ON PERUSAL OF THE SECTION 221(1), IT IS CLEAR TH AT WHEN AN ASSESSEE IS IN DEFAULT IN MAKING PAYMENT OF TAX, HE IS LIABLE TO PAY PENALTY. ACCORDINGLY THE AO HAD IMPOSED PENALTY OF 5% AND THE SAME WAS CONFIRMED BY THE CIT(A). AS SUBMITTED BY THE LE ARNED COUNSEL FOR THE ASSESSEE, IN THE CASE OF ASSESSEES SISTER CONC ERN (SUPRA) SIMILAR PENALTY HAS BEEN REDUCED TO 2.5% FROM 5% BY THE TRI BUNAL. THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ASSESSEES SISTER CONCERN, THE PENALTY OF 5% IMPOSED BY THE AO HAS BE EN REDUCED TO 2.5%. THUS, THE GROUND RAISED BY THE ASESSSEE IS PA RTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF MARCH, 2012. SD/- SD/- (RAJENDRA SINGH) (V. DU RGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 28 TH MARCH, 2012 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, C BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.