SOVIKA AVIATION SERVICES PVT. LTD., MUMBAI V. DCIT RANGE 1(3)(1), MUMBAI

ITA 5111/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9932 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 30-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 11-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAIDR
• Assessee Lawyers: JAYESH DEDIAAR
• Keywords: Reasonable cause

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL IBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./5111/MUM/2016 , /ASSESSMENT YEAR: 2012-13 M/S. SOVIKA AVIATION SERVICES PVT. LTD. B/2, PAREKH MAHAL, 80 VEER NARIMAN ROAD,MUMBAI-400 020. PAN:AALCS 3724 K VS. DCIT,RANGE-1(3)1 AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SAURABH KUMAR RAI-DR ASSESSEE BY: SHRI JAYESH DEDIA-AR / DATE OF HEARING: 24/08/2017 / DATE OF PRONOUNCEMENT: 01/09/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 132/5/2016 OF CIT(A)-3, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF PROVIDING SERVICES TO MUMBAI INTERNATIONAL AIRPORT LTD.,FILED ITS RETURN OF INCO ME ON 28/9/2012 DECLARING INCOME OF RS.1.73 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT LEVYING PENALTY OF RS.10.00 LAKHS U/S. 221 (1) R.W.S. 140A(3)OF THE ACT.FROM THE RETURN OF INCOME,THE ASS ESSING OFFICER(AO)FOUND THAT THE ASSESSEE HAD SHOWN SELF ASSESSMENT TAX (SAT)PAYABLE AT RS.18.02 LAKHS. HE ISSUED IT A SHOW CAUSE NOTICE AS TO WHY PENALTY U/S. 221(1) R.W .S 140A(3) SHOULD NOT BE LEVIED FOR NON - PAYMENT OF SAT,WHILE FILING THE RETURN. THE ASSESSE E IN ITS REPLY,DT.2/2/2015,STATED THAT IT HAD PAID THE SAT ON 25/10/2010, THAT IT HAD ALSO PAID I NTEREST,THAT IT COULD NOT PAY TAX IN TIME DUE TO FINANCIAL DIFFICULTIES.AFTER CONSIDERING THE SUB MISSION OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE HAD FIXED DEPOSIT OF RS.25.63 LAKHS FOR A PERIOD OF ONE YEAR FROM DEC.2011 TO DEC. 2012,THAT IT HAD ADVANCED LOANS TO ITS SISTER CONCE RN,THAT IT HAD FAILED TO DISCHARGE ITS LEGAL AND STATUTORY LIABILITY AND FINALLY LEVIED PENALTY OF R S.10 LAKHS VIDE HIS ORDER DT.31/3/2015. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE ELABORATE SUBMISSI ON.IT ALSO RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING AVAILABLE MATERIAL,HE HELD THAT IN THE QUANTUM PROCEEDING THE FAA HAD OBSERVED THAT THE ASSESSEE HAD MADE INTEREST FREE ADVANCES TO SISTER CONCERNS AND OTHERS, THAT IT HAD CLAIMED PAYMENT OF INTEREST ON BANK AN D OVERDRAFT FACILITIES AND TERM LOANS, THAT IT 5111/M/16- M/S.SOVIKA AVIATION SERVICES PVT.LTD. 2 HAD SUFFICIENT FUNDS TO ADVANCE LOANS TO ITS GROUP CONCERNS ON ONE HAND AND ON THE OTHER HAND IT HAD NO FUNDS TO MAKE PAYMENT OF TAX DUE TO GOVT. , THAT IT DID NOT PAY DUE TAXES WELL IN TIME, THAT IT HAD NOT ESTABLISHED THE FACT THAT DEF AULT WAS DUE TO GOOD AND SUFFICIENT REASON, THAT FINANCIAL DIFFICULTIES FOR MAKING PAYMENT OF TAX AT THE TIME OF FILING OF RETURN WAS NOT RELIABLE. CONFIRMING THE ORDER OF THE AO, HE DISMIS SED THE APPEAL FILED BY THE ASSESSEE . 4. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) STATED THAT THE ASSESSEE HAD PAID RS.18.8 LAKHS ALONGWITH INTEREST ON 25.10.2012,THAT THE S HOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE IN JANUARY, 2015,THAT ASSESSEE HAD SUFFERED LOSSES ,THAT THE FINANCIAL POSITION OF THE ASSESSEE WAS NOT SOUND,THAT THE PAYMENT WAS MADE BY THE SIST ER CONCERN ON BEHALF OF THE ASSESSEE, THAT IN THE EARLIER YEARS IT HAD NEVER DEFAULTED, THAT T HE TRIBUNAL HAD DELETED THE ADDITION MADE IN THE QUANTUM PROCEEDINGS WHILE DECIDING THE APPEAL ITA/5112/MUM/2016 DT.31/5/2017.HE RELIED UPON THE CASE OF KAMLESH M. KANUNGO HUF(73 TAXMANN.COM36).THE DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE FAA A ND STATED THAT THERE WAS NO REASONABLE CAUSE FOR NOT PAYING THE TAXES AFTER EARNING INCOME FOR THE YEAR UNDER APPEAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US SECTION 221 OF THE ACT PROVIDES FOR IMPOSITION OF PENALTY FOR DEFAULTS IN PAYMENT OF TAX INCLUDING ADVANCE TAX U/S.210.BUT,THE LIABILITY TO PAY PENALTY DOES NOT A RISE MERELY UPON PROOF OF DEFAULT.THE SECTION REQUIRES A REASONABLE OPPORTUNITY TO BE GIV EN TO THE ASSESSEE OF BEING HEARD BEFORE IMPOSING ANY PENALTY.THE SECTION FURTHER PROVIDES T HAT WHERE THE AO IS SATISFIED THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS, NO PEN ALTY SHALL BE LEVIED.THUS, THE IMPOSITION OF PENALTY IS NOT AN AUTOMATIC CONSEQUENCE OF THE DEFA ULT.THE EXPRESSION 'MAY DIRECT' IN SECTION 221 OF THE ACT ALSO INDICATES THAT THE IMPOSITION O F PENALTY IS NOT MANDATORY,BUT IT IS DISCRETIO -NARY.THE DISCRETION,OF COURSE,WILL HAVE TO BE EXER CISED JUDICIOUSLY ACCORDING TO WELL-KNOWN PRINCIPLES.IN OTHER WORDS,THE EXERCISE OF DISCRETIO N IS NOT TO BE ARBITRARY BUT IS DEPENDENT ON THE FACTS AND CIRCUMSTANCES OF THE CASE.THE EXPLANA TION TO SEC.221(1)OF THE ACT SPECIFICALLY PROVIDES THAT THE PENALTY SHALL NOT CEASE TO BE LEV IABLE ON AN ASSESSEE MERELY BY REASON OF THE FACT THAT BEFORE THE LEVY OF SUCH PENALTY,THE ASSES SEE HAS PAID THE TAX,AND PUTS THE POSITION BEYOND DOUBT THAT NOT -WITHSTANDING THE FACT THAT T HE TAX AND INTEREST HAS ALREADY BEEN PAID BY THE ASSESSEE,IT CAN STILL BE LIABLE FOR PENALTY UND ER SECTION 221(1).BUT,IF THE ASSESSEE CAN PROVE THAT NON-PAYMENT OF TAX WAS BECAUSE OF GOOD AND REA SONABLE CAUSE,THE AO IS EMPOWERED NOT TO LEVY PENALTY. IN THE CASE UNDER CONSIDERATION,PENALTY WAS IMPOSED UPON FOR THE DEFAULT IN PAYMENT OF ADVANCE TAX WITHIN THE TIME PROVIDED UNDER THE ACT. THIS DEFAULT WAS NOT WIPED OUT BY THE 5111/M/16- M/S.SOVIKA AVIATION SERVICES PVT.LTD. 3 ASSESSEE BY DEPOSITING THE TAX AFTER THE PRESCRIBED TIME.THUS,THERE WAS NO MERIT IN ITS SUBMISSION THAT NO PENALTY CAN BE IMPOSED AS THERE WAS NO DEFAULT AT THE TIME WHEN PENALTY PROCEEDINGS WERE INITIATED.IN OUR OPINION,THE FACTS OF THE MATTER UNDER CONSIDERATION ARE DIFFERENT FROM FACTS OF THE CASE RELIED UPON BY THE ASSESSEE I.E. KAMLESH M. KANUNGO HUF (SUPRA).IN THAT CASE THE TRIBUNAL WAS DEALING WITH DEFAULT IN PAYMENT OF TDS,WHEREAS IN THE MATTER BEFORE US,ISSUE IS OF NON-PAYMENT OF SAT.IN OUR OPINION,THE BOTH THE ISSUES ARE TOTALLY DIFFERENT.HENCE,THE ORDER RELIED UPON BY IT IS OF N O HELP TO THE ASSESSEE. LASTLY,WE WOULD LIKE TO DELIBERATE UPON THE ISSUE O F REASONABLENESS OF THE DEFAULT.AS PER THE ASSESSEE IT WAS FACING FINANCIAL DIFFICULTIES AND H ENCE COULD NOT PAY TAX IN TIME.WE FIND THAT THE IT HAD NOT DENIED THE FACT THAT IT HAD ADVANCED LOAN TO SISTER CONCERNS AND OTHERS. THUS,THERE IS NO DOUBT THAT IT HAD SUFFICIENT FUNDS AT ITS DISPOSAL,BUT ITS PRIORITIES WERE DIFFERENT.INSTEAD OF PAYING TAXES DUE TO SOVEREIGN, IT DECIDED NOT TO WITHDRAW MONEY FROM SISTER CONCERNS FOR THE REASONS BEST KNOWN TO IT.ON E MORE THING,IT HAD ALREADY EARNED THE PROFIT FOR THE YEAR UNDER CONSIDERATION AND THUS IT HAD IN ITS POSSESSION SUFFICIENT RESOURCES TO PAY THE SAT.IT HAD SHOWN TAXABLE INCOME OF RS.1.73 CRORES FOR THE YEAR UNDER APPEAL.THE FAA HAS GIVEN A FINDING OF FACT THAT IT HAD FDR OF ABOUT 25 LAKHS DURING THE PERIOD.SO,IN OUR OPINION,THERE WAS NO GOOD OR REASONABLE CAUSE FOR T HE ASSESSEE FOR NOT PAYING SAT IN TIME.THE FAA HAS RIGHTLY UPHELD THE ORDER OF THE AO .AS HIS ORDER IS NOT SUFFERING FROM ANY LEGAL OR FACTUAL INFIRMITY,SO,CONFIRMING THE SAME,W E REJECT THE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT,APPEAL F ILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPTEMBER, 2017. 01 , 2017 SD/- SD/- ( (( ( /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 01.09.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR I BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.