TOP CLASS CAPITAL MARKET LTD ( FORMELRY KNWON AS TOP CLASS EDUCATION FACILITIES & SERVICES P. LTD), MUMBAI V. JT CIT (OSD) RG 1(3), MUMBAI

ITA 505/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92787 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 20-10-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 17-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Question of law

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) . . , , ./ I.T. A. NO. 505 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 10 - 11 ) M/S TOP CLASS CAPITAL MARKET LTD, (FORMERLY KNOWN AS TOP CLASS ED U CAT ION FACILITIES AND SERVICES PVT LTD.) 2 ND FLOOR, BOMBAY MUTUAL BUILDING, D N ROAD, FORT, MUMBAI - 400 0 01 / VS . JT.COMMISSIONER OF INCOME TAX (OSD), RANGE 1(3), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AACCT5800G / APPELLANT BY SHRI JITENDRA JAI N AND SHRI MAHESH O RAJORA / RSPONDENT BY S MT. N V NADKARNI / DATE OF HEARING : 2 1 .4. 201 5 / DATE OF PRONOUNCEMENT : 3 . 6 . 201 5 / O R D E R PER B.R. BASKARAN (AM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 7.1 2 .201 2 PASSED BY LD CIT(A) - 2 , MUMBAI FOR T HE ASSESSMENT YEAR 2010 - 11 , WHEREIN HE HAS PARTIALLY CONFIRMED THE PENALTY LEVIED UNDER SECTION 221(1) OF THE INCOME TAX ACT. 2 . WE HEARD THE PARTIES AND PERUSED THE RECORD. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND INVESTMENT IN SHARES AND SECURITIES AND ALSO DOING FINANCING ITA NO. 505 / MUM/20 1 3 2 BUSINESS . IT FILED ITS RETURN OF INCOM E FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.43.32 CRORES . AS PER RETURN OF INCOME THE SELF ASSESSMENT TAX DUE WAS RS.9.08 CRORES , BUT THE ASSESSEE DID NOT PAY THE SAME AT THE TIME OF FILING OF THE RETURN OF INCOME . H ENCE, THE AO HELD THAT THE ASSESSEE COMPANY AS ASSESSEE IN DEFAULT FOR NON - PAYMENT OF SELF ASSESSMENT TAX BEFORE FILING THE RETURN OF INCOME IN TERMS OF PROVISIONS OF SECTION 140A(3) OF THE ACT. HENCE , THE AO LEVIED PENALTY UNDER SECTION 221(1) OF THE ACT AT 10% OF THE SELF ASSESSMENT TAX DUE FROM THE ASSESSEE , WHICH WORKED OUT TO RS.90.85 LAKHS. 3 . IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) REDUCED THE PENALTY TO 5% OF THE SELF ASSESSMENT TA X . STILL AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. W E NOTICE THAT THE ASSESSEE HAS PAID SELF ASSESSMENT TAX SUBSEQUENT TO THE FILING OF THE RETURN OF INCOME AS PER DETAIL S GIVEN BELOW: DATE OF PAYMENT AMOUNT 15.02.2011 1,00,00,000 18.02.2011 3,00,00,000 12.03.2011 50,00,000 25.03.2011 50,00,000 26.03 .2011 50,00,000 29.03.2011 2,00,00,000 30.03.2011 1,58,54,474 TOTAL 9,08,54,474 THE ASSESSEE S EXPLANATION WAS THAT THOUGH IT EARNED GOOD PROFIT DURING THE YEAR UNDER CONSIDERATION, BUT THE SAME WAS REINVESTED IN OTHER QUOTED SHARES WITH THE EXPECTATI ON OF EARN ING MORE PROFIT. HOWEVER, DUE TO FALL IN ITA NO. 505 / MUM/20 1 3 3 THE STOCK MARKET THE ASSESSEE COMPANY COULD NOT SE LL THE SHARES , SINCE IT MAY RESULT IN HUGE LOSS . H ENCE AT THE TIME OF FILING RETURN OF INCOME, THE ASSESSEE COULD NOT GENERATE ENOUGH CASH TO MAKE PAYMEN T OF S ELF ASSESSMENT TAX. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE HAD MADE MAJOR INVESTMENT S IN THE SHARES OF ADF FOODS LIMITED , AEGIS LOGISTICS LTD AND PRIME FOCUS LTD AND T HESE SHARES WERE PLEDGED BY THE ASSESSEE COMPANY AND HENCE THEY COULD NOT BE T RANSFERRED DURING THE RELEVANT PERIOD. ACCORDINGLY, IT WAS SUBMITTED THAT THE SELF ASSESSMENT TAX COULD NOT BE PAID DUE TO NON - AVAILABILITY OF LIQUID FUNDS ONLY . IT WAS FURTHER SUBMITTED THAT THE SELF ASSESSMENT TAX WAS PAID WITHIN SHORT PERIOD OF 5 MONT HS FROM THE DATE OF FILING OF THE RETURN OF INCOME AND ACCORDINGLY, IT WAS PRAYED THAT THE PENALTY LEVIED UNDER SECTION 221(1) OF THE ACT SHOULD BE DELETED. 5 . THE ASSESSEE HAD ALSO PLACED RELIANCE ON CERTAIN CASE LAWS BEFORE THE TAX AUTHORITIES TO SUPPOR T ITS STAND. 6 . HOWEVER, THE LD.CIT(A) NOTICED THAT THE ASSESSEE HAD MADE INVESTMENT OF RS.50.20 CRORES AND IT HAD ADVANCED LOANS AND ADVANCES TO THE TUNE OF RS.37.67 CRORES AS ON 15.3.2011. THE LD. CIT(A) FURTHER NOTICED THAT THE ASSESSEE HAD STAR TED PAYING SELF ASSESSMENT TAX ONLY AFTER RECEIPT OF NOTICE DATED 15.2.2011 FROM THE AO . A CCORDINGLY, THE LD.CIT(A) TOOK THE VIEW THAT FINANCIAL POSITION OF THE COMPANY IS SOUND AND THE SELF ASSESSMENT TAX WAS NOT PAID ONLY ON ACCOUNT OF INDIFFERENT ATTITU DE OF THE ASSESSEE . ACCORDINGLY, THE LD.CIT(A) EXPRESSED HIS VIEW THAT HE COULD NOT FIND GOOD AND SUFFICIENT REASON FOR NOT PAYING SELF ASSESSMENT TAX IN TIME. HOWEVER , SINCE HE FOUND THAT THE PENALTY LEVIED AT 10% WAS ON HIGHER SIDE, THE LD.CIT(A) REDUC ED IT TO 5% OF THE SELF ASSESSMENT TAX. ITA NO. 505 / MUM/20 1 3 4 7. BEFORE US, THE LD A.R PLACED STRONG RELIANCE ON THE SUBMISSIONS MADE BEFORE THE TAX AUTHORITIES AND ALSO ON THE DECISION RENDERED BY THE CO - ORDINATE BENCH IN THE CASE O F DCIT VS. KAMALA MILLS LTD (ITA NO. 777 5 TO 7777/MUM/2004 DATED 31.10.2007) . HE SUBMITTED THAT THE CO - ORDINATE BENCH IN THE ABOVE SAID CASE HAS DELETED THE PENALTY LEVIED U/S 221(1) OF THE ACT WITH THE OBSERVATION THAT THE PAYMENT OF TAXES MADE WITHIN THE REASONABLE TIME DOES NOT MAKE THE ASSES SEE ASSESSEE IN DEFAULT. HE FURTHER SUBMITTED THAT THE DECISION RENDERED BY THE CO - ORDINATE BENCH IN THE CASE OF KAMALA MILLS LTD HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS OFFERED REASONABLE EXPLANATIO N FOR NOT PAYING THE SELF ASSESSMENT TAX BEFORE FILING RETURN OF INCOME AND IT HAS PAID THE SAME WITHIN THE REASONABLE PERIOD OF TIME. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) SHOULD HAVE DELETED THE PENALTY IN ENTIRETY, INSTEAD OF CONFIRMING THE SAME PARTIALLY. 8. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE FINANCIAL CRUNCH HAS BEEN FOUND TO BE NOT CORRECT BY THE LD CIT(A). 9. THE PROVISIONS OF SEC. 140A(3) PROVIDES THAT THE ASSESSEE SHALL BE DEEMED TO BE IN DEFAULT, IF THE TAX AND INTEREST IS NOT PAID IN ACCORDANCE WITH THE PROVISIONS OF SEC. 140A(1) OF THE ACT. THE PROVISIONS OF SEC. 221 (1) PROVIDES THAT WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING A PAYMENT OF TA X, HE SHALL, IN ADDITION TO THE AMOUNT OF THE ARREARS AND THE AMOUNT OF INTEREST PAYABLE UNDER SEC. 220(2), BE LIABLE TO PAY BY WAY OF PENALTY SUCH SUM AS THE AO MAY DIRECT. THE SECOND PROVISO STATES THAT THE AO SHALL NOT LEVY PENALTY, IF THE ASSESSEE PRO VES THAT THERE WAS GOOD AND SUFFICIENT REASON FOR NON - PAYMENT OF TAX. ITA NO. 505 / MUM/20 1 3 5 10. IN THE INSTANT CASE, THE ONLY REASON FURNISHED BY THE ASSESSEE FOR NON - PAYMENT OF TAX WAS THAT IT WAS NOT HAVING LIQUID FUNDS AND ALL ITS FUNDS WERE LOCKED IN SHARES AND SECURITI ES. HOWEVER, THE LD CIT(A) HAS EXPRESSED THE VIEW IN PARAGRAPH 4.10 OF HIS ORDER THAT THE FINANCIAL POSITION OF THE ASSESSEE IS SOUND, SINCE IT HAD MADE HUGE INVESTMENT IN SHARES AND ALSO BY WAY OF PROVIDING LOANS. IN ANY CASE, THE ASSESSEE DID NOT FURNI SH ANY DOCUMENT EITHER BEFORE US OR BEFORE THE TAX AUTHORITIES TO SUPPORT OF ITS STAND THAT IT WAS NOT HAVING LIQUID FUNDS. HENCE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO FURNISH ANY GOOD AND SUFFICIENT REASON FOR NON - PAYMENT OF SELF ASSESSMENT TAX. 11. THOUGH THE CO - ORDINATE BENCH HAS HELD IN THE CASE OF KAMALA MILLS LTD (SUPRA) THAT THE PAYMENT OF TAX MADE WITHIN THE REASONABLE TIME DOES NOT MAKE THE ASSESSEE AS ASSESSEE IN DEFAULT, YET WE NOTICE THAT THE SAID VIEW IS CONTRARY TO THE EXPR ESS PROVISIONS OF SEC. 140A(3) OF THE ACT. FURTHER, WE NOTICE THAT THE HONBLE HIGH COURT HAS DECLINED TO ADMIT THE APPEAL PREFERRED BY THE REVENUE FOR WANT OF SUBSTANTIAL QUESTION OF LAW. HENCE, WE ARE OF THE VIEW THAT THE ASSESSEE COULD NOT TAKE SUPPOR T OF THE DECISION RENDERED IN THE CASE OF KAMALA MILLS LTD. 12. HOWEVER, WE HAVE NOTICED THAT THE ASSESSEE HAS PAID THE SELF ASSESSMENT TAX BEFORE MARCH, 2011, I.E., WITHIN FIVE MONTHS FROM THE DATE OF FILING OF RETURN OF INCOME. UNDER THESE SET OF F ACTS, THE PENALTY @ 5% OF SELF ASSESSMENT TAX CONFIRMED BY THE LD CIT(A) ALSO APPEARS TO BE ON THE HIGHER SIDE. HENCE, IN ORDER TO PUT THIS MATTER TO REST, WE ARE OF THE VIEW THAT THE PENALTY TO BE LEVIED U/S 221(1) OF THE ACT SHOULD BE RESTRICTED TO 2.5% OF THE SELF ASSESSMENT TAX. WE ORDER ACCORDINGLY. ITA NO. 505 / MUM/20 1 3 6 1 3 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 3RD JUNE , 2015 SD SD ( / AMIT SHUKLA ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 3RD JUNE ,2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CO NCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI