DCIT, Bangalore V. M/s Falcon Tyres Limited, Mysore

ITA 402/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86017 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-02-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 21-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI , JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 402 / BANG/20 14 (ASSESSMENT YEAR: 20 11 - 12 ) DEPUTY COMMISSIONER OF INCOME - TAX LTU, BANGALORE. APPELLANT VS. M/S.FALCON TYRES LTD. K R S ROAD, METAGALLI, MYSORE - 570016. RESPONDENT PAN: AAACF 7258 E APPELLANT BY: SHRI C.H.SUNDAR RAO, CIT(DR) RESPONDENT BY: NONE. DATE OF HEARING : 03/02/2015 . DATE OF PRONOUNCEMENT: 13 / 02/2015 . O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), LTU, BANGALORE, DATED 30/12/2013 DELETING THE PENALTY IMPOSED BY THE AO U/S 221 READ WITH SEC.140A(3) OF THE INCOME - TA X ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT'] FOR NON - PAYMENT OF SELF - ASSESSMENT TAX U/S 140A OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF TYRES AND ITA NO . 402 /BANG/20 1 4 M/S.FALCON TYRES LTD. PAGE 2 OF 5 TUBES. IT FURNISH ED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING A TOTAL INCOME OF RS. 69,97,52,530/ - AND THE SELF - ASSESSMENT TAX PAYABLE U/S 140A WAS A SUM OF RS.22,40,48,309/ - . THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE, THOUGH HAS FURNISHED ITS RETURN OF INCOME ON 30/9/2011 , HAS FAILED TO PAY THE SELF - ASSESSMENT TAX. THEREFORE, THE COMPANY WAS ASKED TO PAY ENTIRE SELF - ASSESSMENT TAX DUE TO THE GOVERNMENT. THE ASSESSEE - COMPANY FURNISHED A LETTER DATED 22/12/2011 SUBMITTING THAT IT HAD TO DEFER T HE DISCHARGE OF THE SELF - ASSESSMENT TAX AS THE WORKING CAPITAL FUNDS WERE GETTING LOCKED UP IN INVENTORIES AND ALSO THAT IT WOULD DISCHARGE THE LIABILITY TO START WITH AT THE RATE OF RS.1 CRORE PER MONTH. THE AO, THEREAFTER, ISSUED A NOTICE U/S 221 (1) RE AD WITH SEC.140A(3) ON 6/1/2012 REQUIRING THE ASSESSEE TO SHOW CAUSE BY 16/1/2012 AS TO WHY PENALTY U/S 2 21(1) SHOULD NOT BE LEVIED. BY LETTER DATED 9/1/2012, THE ASSESSEE FURNISHED A REPLY SUBMITTING THE SAME REASONS AND POSSIBLE COURSE OF ACTION FROM IT S END AS MENTIONED IN ITS LETTER DATED 22/12/2011. IT FURTHER REQUESTED FOR TIME TO MEET THE PENDING TAX OBLIGATION. THE AO, HOWEVER, REFUSED TO GRANT ANY FURTHER INSTALMENT AND REQUIRED THE ASSESSEE TO PAY THE OUTSTANDING DUES IMMEDIATELY. AFTER HEARING THE ASSESSEE, THE AO OBSERVED THAT THE ASSESSEE - COMPANY HAD PAID RS.9 CRORES DURING THE ASSESSMENT PROCEEDINGS AND THAT IN SPITE OF HAVING SUFFICIENT CASH AND BANK BALANCE, THE ASSESSEE HAS FAILED TO MEET THE OUTSTANDING ITA NO . 402 /BANG/20 1 4 M/S.FALCON TYRES LTD. PAGE 3 OF 5 DEMAND AND THAT THE EXCESS CASH AV AILABLE WITH THE ASSESSEE WAS DIVERTED TO VARIOUS OTHER PURPOSES WITHOUT PAYING SELF - ASSESSMENT TAX. THUS OBSERVING , THE AO HAS LEVIED THE PENALTY OF RS.25 LAKHS U/S 221 OF THE ACT . 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) EXPLAINI NG THAT THE TOTAL TAX PAID BY THE ASSESSEE INCLUDING ADVANCE - TAX OF RS.3 CRORES WAS RS.12 CRORES AND THAT IT WAS IN FINANCIAL DIFFICULTIES DUE TO WHICH IT COULD NOT MEET THE OUTSTANDING DEMAND OF TAX. AS REGARDS THE AVAILABILITY OF SUFFICIENT CASH AND BAN K BALANCE AS OBSERVED BY THE AO, THE ASSESSEE EXPLAINED THAT THE MAJOR PORTION OF THE AMOUNT WAS ON ACCOUNT OF CHEQUES ON HAND AND NOT THE C ASH IN THE HANDS OF THE ASSESSEE AND FROM THE DETAILS OF THE AVAILABILITY OF CASH WITH THE ASSESSEE, IT IS CLEAR TH AT FUNDS WERE NOT SUFFICIENT TO MEET THE OUTSTANDING LIABILITY. TAKING NOTE OF THE ASSESSEE S SUBMISSION, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE AND DELETED THE PENALTY. WHILE DELETING THE PENALTY, THE CIT(A) HAS CONSIDERED THE PREVIOUS HISTORY OF THE ASSESSEE AND HELD THAT THE DE FAULT IN THE CURRENT YEAR IS AN ISOLATED INSTANCE. AGAINST THE RELIEF GIVEN BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT TH E ASSESSEE, HAVING RETURNED THE INCOME, WAS REQUIRED TO PAY SELF - ASSESSMENT TAX AND SINCE IT HAS FAILED TO MAKE THE PAYMENT, PENALTY U/S 221 READ WITH SEC.140A(3) WAS JUSTIFIED. HE SUBMITTED THAT EVEN ITA NO . 402 /BANG/20 1 4 M/S.FALCON TYRES LTD. PAGE 4 OF 5 DURING THE FIRST APPELLATE PROCEEDINGS BEFORE THE CIT( A) , THE ASSESSEE HAS FAILED TO MAKE PAYMENT OF THE ENTIRE OUTSTANDING DEMAND AND AS OBSERVED BY THE CIT(A), ONLY A SUM OF RS.12 CRORE WAS PAID, LEAVING MORE THAN 50% AS UNPAID. IN THESE CIRCUMSTANCES, HE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELE TING THE ENTIRE PENALTY. 5. THOUGH THE NOTICES OF HEARING HAVE BEEN SERVED ON THE ASSESSEE BY RPAD AS WELL AS THROUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE, NONE APPEARED FOR THE ASSESSEE. IN VIEW OF THE SAME, WE PROCEEDED TO HEAR AND DISPOSE OF T HE APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE EX PARTE QU A THE ASSESSEE. 6. IT IS CLEAR FROM THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE CIT(A) THAT OUT OF THE TOTAL TAX DEMAND OF RS.24 CRORES, THE ASSESSEE HAS PAID ONLY RS . 12 CRORES AS SELF - ASSESSMENT TAX. THE FINANCIAL DIFFICULTIES OF THE ASSESSEE HAVE INVARIABLY NOT AFFECTED THE FUNCTIONING OF THE ASSESSEE. THE ASSESSEE HAS NOT FILED ANY APPLICATION BEFORE THE AUTHORITY SEEKING EXTENSION OF TIME FOR PAYING SELF - ASSESSMEN T TAX. THE HISTORY OF THE ASSESSEE WITH REGARD TO TAX PAYMENT IN THE EARLIER ASSESSMENT YEARS MAY BE ONE OF THE REASONS FOR EXTENDING THE TIME BUT IN OUR OPINION, IT CANNOT BE THE S OLE GROUND FOR DELETING THE PENALTY LEVIED U/S 221 OF THE ACT. IN OUR OPI NION, THE CIT (A) HAS NOT CONSIDERED THAT THE ASSESSEE HAS FAILED TO PAY MORE THAN 50% OF THE OUTSTANDING SELF - ASSESSMENT TAX. IN VIEW OF THE ITA NO . 402 /BANG/20 1 4 M/S.FALCON TYRES LTD. PAGE 5 OF 5 SAME, WE DEEM IT FIT AND PROPER TO RESTRICT THE PENALTY IMPOSED BY THE AO TO A SUM OF RS.1 5 LAKHS. 7. IN T HE RESULT, THE REVENUE S APPEAL IS PARTLY ALLOWED. S D/ - SD/ - (JASON P BOAZ ) ( SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPO NDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGAL ORE