ACIT, New Delhi V. Shri Rakesh Kumar Garg, New Delhi

ITA 5198/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91005 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 27-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M B REDDY
• Keywords: Recovery proceedings; Search and seizure; Opportunity of being heard; Initiation of penalty proceedings; Reasonable cause
• Section: 143(3); 131

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO. 5198/DEL/2013 ASSESSMENT YEAR: 2009-10 ACIT, VS. RAKESH KUMAR GARG, CENTRAL CIRCLE-12, ROOM NO. 330, G-15, MAHARANI B AGH, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI. NEW DELHI. AADPG0991M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. M.B. REDDY, CIT DR RESPONDENT BY : SH. SUDESH GARG, ADV. DATE OF HEARING: 16.02.2015 DAT E OF PRONOUNCEMENT: 11.05.2015 ORDER PER SHRI C.M. GARG, J.M. THIS APPEAL BY THE REVENUE HAS BEEN DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XXXI, DATE D 10.06.2013 FOR A.Y. 2009-10 BY WHICH PENALTY ORDER VIDE DATED 31.0 5.2012 U/S 140A(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) HAS BEEN SET ASIDE BY DELETING THE PENALTY IMPOSED ON THE ASSESSEE. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 2 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND FACTS; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD . CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 140A(3) OF TH E I.T. ACT IMPOSED BY THE AO OF RS. 4,12,62,460/- ON ACCOUNT O F NON PAYMENT OF SELF ASSESSMENT TAX WHICH WAS SHOWN AS P AYABLE IN THE RETURN OF INCOME FILED AMOUNTING TO RS. 4,12,62 ,460/-. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2009-10 ON 03.09.2010 DECLARING AN INCOME OF RS. 9,39,00,720/- WITHOUT PAYMENT OF SELF ASSESSMENT TA X OF RS. 4,12,62,460/- WHICH WAS SHOWN AS PAYABLE IN THE RET URN OF INCOME. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND, THEREAFTER, THE AO ISSUED A SHOW CAUSE NOTICE U/S 140A(3) OF THE ACT O N 23.11.2011 ASKING THE ASSESSEE TO SHOW CAUSE WHY HE SHOULD NOT BE TRE ATED AS AN ASSESSEE IN DEFAULT AS PER PROVISIONS OF SECTION 14 0A(3) OF THE ACT. THE AO HAD ALSO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 140A(3) OF THE ACT SHOULD NOT BE IMPOSED FOR NOT CO MPLYING WITH THE PROVISIONS OF SEC. 140A(1) OF THE ACT. AFTER RECEI VING REPLY FROM THE ASSESSEE THE AO IMPOSED PENALTY OF RS. 4,12,62,460/ - U/S 140A(3) OF THE ACT VIDE HIS ORDER DATED 31.05.2012. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE CI T(A) WHICH WAS ALLOWED BY PASSING THE IMPUGNED ORDER AND THE AO WA S DIRECTED TO 3 DELETE THE PENALTY. THE ASSESSEE RAISED FOLLOWING MAIN AND SUBSTANTIAL GROUNDS BEFORE CIT(A) DURING THE FIRST APPELLATE PR OCEEDINGS: (I) THAT ON THE BASIS OF THE FACTS AND CIRCUMSTANCES OF THE CASE. THE AO HAS GROSSLY ERRED IN IMPOSING THE PENALTY OF RS. 4,12,62,460/- WHICH IS ILLEGAL AND LIABLE TO BE QUA SHED; (II) THAT THE PERVERSITY OF THE ORDER IS ALSO EVIDENT AS PENALTY ORDER HAS BEEN PASSED U/S 140A(3) INSTEAD OF SECTION 221 OF THE ACT. THEREFORE, THE SAME IS LIABLE TO BE QUASHED ON THIS ACCOUNT ALSO. 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE REJECTED THE LEGAL OBJECTION OF THE AS SESSEE THAT THE PENALTY ORDER HAS BEEN PASSED U/S 140A(3) OF THE AC T INSTEAD OF SECTION 221OF THE ACT AND, THEREFORE, THE SAME IS LIABLE TO BE QUASHED. THE CIT(A) REJECTED THIS LEGAL CONTENTION OF THE ASSESS EE IN PARAGRAPH NO. 3.6 OF THE IMPUGNED ORDER BY HOLDING THAT THE PROVI SIONS OF SECTION 292B OF THE ACT WOULD COVER SUCH INADVERTENT MISTAKES IN QUOTING THE CORRECT SECTION OF THE ACT AS THE ASSESSEE HAD PARTICIPATED IN THE PROCEEDINGS WITHOUT RAISING ANY OBJECTION. 6. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS BY PASSING THE IMPUGNED ORDER BY ACCEPTING SUBMISSIONS AND EXPLANATIONS OF THE ASSESSEE ON THE ISSUE. NOW THE AGGRIEVED RE VENUE IS BEFORE THIS TRIBUNAL IN THE SECOND APPEAL WITH THE GROUNDS AS R EPRODUCED HEREINABOVE. 4 7. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORT ING THE PENALTY ORDER SUBMITTED THAT NO SUPPORTING DOCUMENT IN REGA RD TO SHORTAGE AND SCARCITY OF THE FUNDS OR LIQUIDITY CRUNCH WAS FILED BEFORE THE AO AND THE BANK ACCOUNTS OF THE ASSESSEE WERE ATTACHED IN THE MONTH OF MARCH, 2011 BECAUSE THE ASSESSEE WAS NOT MAKING THE PAYMEN T OF DEMAND RAISED AFTER COMPLETION OF ASSESSMENT PROCEEDINGS. THE LD. DR ALSO SUBMITTED THAT THE UNDISCLOSED INCOME WAS ADMITTED BY THE ASSESSEE VOLUNTARILY TO COVER UP THE INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH OPERATION AND THE SAME WAS ADMITTE D BY THE ASSESSEE IN HIS STATEMENT RECORDED U/S 132(4) AND SECTION 13 1 OF THE ACT. THE LD. DR VEHEMENTLY CONTENDED THAT THE PAYMENT OF TAX CAN NOT BE DELAYED BY SAYING THAT IT HAS TO MAKE PAYMENT ON INCOME WHICH IS NOT LINKED TO IT AND WAS SHOWN IN THE RETURN OF INCOME ONLY FOR THE SAKE OF COMMITMENT MADE BY WAY OF SURRENDER AND THE SAID SURRENDERED I NCOME SHOWN IN THE RETURN OF INCOME WAS VOLUNTARILY OFFERED BY THE ASSESSEE. THEREFORE, THE ASSESSEE WAS UNDER OBLIGATION TO PAY TAX ON THE RETURNED INCOME BEFORE FILING THE RETURN OF INCOME AS REQUIRED U/S 140A(1) OF THE ACT AND THE NON PAYMENT OF TAX ATTRACTS UNAVOIDABLE PENALTY U/S 140A(3) OF THE ACT. THE LD. DR SUPPORTING THE CONCLUSION OF THE A O ALSO SUBMITTED THAT THE ASSESSEE WILL FULLY DID NOT MAKE THE PAYMENT OF ADMITTED TAX LIABILITY 5 AND COMMITTED DEFAULT WITHIN THE PROVISIONS OF SECT ION 140A(3) OF THE ACT. THEREFORE, PENALTY IS LEVIABLE ON THE ASSESSE E. 8. THE LD. DR ALLEGING IMPUGNED ORDER SUBMITTED THA T THE CIT(A) RIGHTLY REJECTED LEGAL OBJECTION OF THE ASSESSEE BU T THE CIT(A) WAS NOT CORRECT AND JUSTIFIED IN ACCEPTING THE REASONS FOR DELAY OF PAYMENT OF TAX BECAUSE REASONS SHOWN BY THE ASSESSEE DURING PENALT Y PROCEEDINGS WERE NOT BONAFIDE AND SUSTAINABLE. THE LD. DR FINA LLY SUBMITTED THAT THE IMPUGNED ORDER MAY BE SET ASIDE BY RESTORING THE PE NALTY ORDER OF THE AO. 9. THE LD. DR HAS PLACED RELIANCE ON THE RATIO OF T HE FOLLOWING JUDGMENTS AS RELIED BY THE AO FOR LEVY OF PENALTY: A) COMMISSIONER OF INCOME TAX VS. DEVEDAYAL STAINL ESS STEEL INDIA PVT. LTD. (1991) 189 ITR 506 (BOM.); B) COMMISSIONER OF INCOME TAX VS. PITAMBARDAS (J.) & CO. (1995) 216 ITR 172 (BOM.); C) TAYLOR INSTRUMENT CO. (INDIA) LTD. VS. COMMISSI ONER OF INCOME TAX (1998) 232 ITR 771 (DEL.); D) GOVINDA CHETTY (V.) VS. COMMISSIONER OF INCOME TAX (1998) 231 ITR 615 (MAD.); E) RAMACHANDRA PESTICIDES P. LTD. VS. COMMISSIONER OF INCOME TAX (2006) 285 ITR 045 (KARN.); F) INCOME TAX OFFICER VS. A.M.S. SALIMARICAR (2001 ) 247 ITR 808 (SC). 10. REPLYING TO THE ABOVE CONTENTIONS OF THE LD. DR THE LD. COUNSEL OF THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE BENEFIT OF THE RATIO OF 6 THE JUDGMENTS RELIED BY THE AO IS NOT AVAILABLE FOR THE REVENUE AS THE PROVISIONS OF SECTION 140A(3) OF THE ACT HAVE CHANG ED SUBSTANTIALLY SEVERAL TIMES EVEN PRIOR TO 1989 AND THE JUDGMENTS RELIED AND FOLLOWED BY THE AO ARE RELATED TO THE ASSESSMENT YEARS WHICH ARE PRIOR TO A.Y. 1989-90. THE LD. DR IN HIS REJOINDER SUBMITTED THA T THE AO RIGHTLY PLACED RELIANCE ON THE DECISIONS/JUDGMENTS TO SUPPORT LEVY OF PENALTY. HOWEVER, HE COULD NOT CONTROVERT THE FACT THAT THER E WERE SUBSTANTIAL CHANGES IN THE SECTION 140A OF THE ACT PRIOR TO 198 9. 11. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND VIGILANT PERUSAL OF SAID JUDGMENT WE NOTE THAT JUDGMENTS IN THE CASE OF CIT VS. DEVI DAYAL STAINLESS STEEL INDIA (P) LTD. (SUPRA), CIT V S. J. PITAMBARDAS (SUPRA), TAYLOR INSTRUMENT CO. VS. CIT (SUPRA), V. GOVINDA CHETTY VS. CIT (SUPRA) AND RAMCHANDRA PESTICIDES VS. CIT (SUPR A) ARE RELATED TO THE ASSESSMENT YEARS WHICH ARE PRIOR TO A.Y. 1989-9 0 PERIOD AND ADMITTEDLY PROVISION OF SECTION 140A OF THE ACT HAV E BEEN AMENDED SEVERAL TIMES HENCE, WE RESPECTFULLY NOTE THAT THE RATIO OF THESE JUDGMENTS CANNOT BE APPLIED BLINDLY IN VIEW OF SUBS EQUENTLY AMENDMENTS IN SECTION 140A OF THE ACT. WE ALSO NOT E THAT THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF ITO VS. A.M.S. SALIMARICER (SUPRA) THE CONSTITUTIONAL VALIDITY OF SECTION 140A OF THE ACT WAS UPHELD WHICH IS NOT A SUBJECT MATTER BEFORE US AND THE HONBLE SUPR EME COURT OBSERVED 7 THAT THE ISSUE IS NO MORE RELEVANT AS THE PROVISION S HAVE BEEN REPEALED LONG AGO. 12. THE LD. COUNSEL OF THE ASSESSEE SUPPORTING THE IMPUGNED ORDER HAS RAISED SEVERAL ARGUMENTS ON LEGAL AND ON MERITS WHICH MAY BE SUMMARISED AS UNDER: (I) THE AO IN THE NOTICE VIDE DATED 23.11.2011 HAS SHOW CAUSED THE ASSESSEE WHY A PENALTY U/S 140A(3) OF THE ACT SHOUL D NOT BE IMPOSED BUT SAID THE PROVISION DOES NOT AT ALL PROVIDE FOR IMPOSITION OF ANY PENALTY AS SECTION 140A OF THE ACT FALL WITHIN CHAP TER XIV OF THE ACT WHICH RELATES TO PROCEDURE FOR ASSESSMENT OF TAX WHICH DOES NOT RELATE TO THE PROVISION/IMPOSITION OF PENALTY; (II) NO PENALTY U/S 140A OF THE ACT CAN BE IMPOSED AS THIS IS NOT A PENALTY IMPOSING PROVISION AND THE AO IN THE PENALT Y ORDER HAS ONLY REFERRED TO SECTION 140A OF THE ACT FOR IMPOSITION OF IMPUGNED PENALTY WHICH IS NOT SUSTAINABLE. THE LD. COUNSEL SUBMITTE D THAT FOR THIS REASON ONLY THE APPEAL OF THE REVENUE DESERVES TO BE DISMI SSED AS THE PENALTY ORDER PASSED ONLY U/S 140A(3) OF THE ACT CANNOT BE ACCEPTED AS AN ORDER PASSED U/S 140A(3) R.W.S. 221 OF THE ACT; (III) IT WAS ALSO SUBMITTED ON BEHALF OF THE ASSES SEE THAT PENALTY NOTICE AND ORDERS IMPOSING PENALTY MUST BE STRICTLY IN ACC ORDANCE WITH THE 8 PROCEDURE LAID DOWN AS PER LAW AND EVEN SMALLEST OF DEVIATION FROM THE SAME MAKE THEM NON-SUSTAINABLE; (IV) THE SECTION 140A OF THE ACT HOLDS ASSESSEE IN DEFAULT FOR BOTH TAX AND INTEREST AND PENALTY U/S 221 OF THE ACT CAN BE IMPOSED ONLY FOR NON- PAYMENT OF TAX AND THIS MAJOR DISTINCTION INDICATES THAT TWO CANNOT BE USED IN CONJUNCTION WITH EACH OTHER. PENALTY FOR N ON PAYMENT OF TAX CAN BE IMPOSED ONLY U/S 221 OF THE ACT AS PER RATIO LAI D DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GREAT VA LUE FOOD (2014) 41 TAXMANN.COM 72 (P&H) AND BY HONBLE BOMBAY HIGH COU RT IN THE CASE OF PB HATHIRAMANI 207 ITR 483 (BOM.); (V) PENALTY ORDER WITH ALLEGATION OF NON PAYMENT O F TAX CANNOT BE CONSIDERED TO BE AN ORDER U/S 221 OF THE ACT AS PRO CEDURE REQUIRED U/S 221 OF THE ACT HAS NOT BEEN FOLLOWED BY THE AO AND HENCE THE ASSESSEE WAS DEPRIVED OF RIGHT TO SHOW A GOOD AND REASONABLE CAUSE FOR NON PAYMENT OF TAX AT THE TIME OF FILING RETURN AS REQU IRED BY PENALTY PROVISION OF SECTION 221(1) OF THE ACT AND FIRST & SECOND PROVISIO THERETO. (VI) THE AO IGNORED THE FACT THAT ON THE DATE OF P ENALTY ORDER THE ASSESSEE HAD PAID ENTIRE AMOUNT OF TAX PAYABLE; (VII) IN THE LIGHT OF ORDER OF THE HONBLE HIGH CO URT DATED 12.8.2013 IN ITA NO. 384/2013 CIT VS. RAKESH KUMAR (THE ASSESSEE HIMSELF) THE ARGUMENT OF ACUTE CASH LIQUIDITY PROBLEM OF THE RES PONDENT WAS ACCEPTED BY THE HONBLE HIGH COURT AND THE CIT(A) W AS DIRECTED TO 9 ADMIT THE APPEAL OF THE ASSESSEE FOR ADJUDICATION O N MERITS, HENCE THIS CAUSE WAS RIGHTLY ACCEPTED BY THE CIT(A) AS GOOD AN D REASONABLE CAUSE FOR ALLOWING APPEAL OF THE ASSESSEE; (VIII) THERE WAS A PAYMENT OF RS. 5,000/- AS INSTA LMENT ON 2.12.2011 WHICH ALSO SHOWS CASH CRUNCH AND LIQUIDITY PROBLEM AND AT THE SAME TIME THIS ACT ALSO SHOWS HONESTY AND SINCERITY OF T HE ASSESSEE AS A TAX ABIDING CITIZEN AND THE NEGLIGIBLE CASH BALANCE AVA ILABLE IN THE BANK ACCOUNTS OF THE ASSESSEE AT THE TIME OF FILING RETU RN ALSO SUPPORT THE CAUSE OF CASH CRUNCH AND LIQUIDITY PROBLEM WHICH WA S A GOOD AND STRONG SUFFICIENT CAUSE FOR DELAY IN PAYMENT OF TAX AND HE NCE PENALTY IS NOT IMPOSABLE; (IX) THE AMOUNT SURRENDERED BY THE ASSESSEE DURING SEARCH AND SEIZURE OPERATION WAS ABNORMALLY HIGH WHICH RESULTE D INTO HIGH TAX DEMAND AND THE SAME WAS NOT RELATED TO NORMAL BUSIN ESS OPERATIONS OF THE ASSESSEE WHICH CAUSED UNAVOIDABLE DELAY IN PAYM ENT OF TAX WHICH WAS BEYOND CONTROL OF THE ASSESSEE DUE TO GOOD AND SUFFICIENT REASONABLE CAUSE; (X) ORDER OF PENALTY PASSED WITH THE APPROVAL OF T HE ADDITIONAL COMMISSIONER OF INCOME TAX IS BAD IN LAW. 10 13. THE LD. COUNSEL OF THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS TO SUPPORT THE SAID CONTENTIONS OF THE ASSESSEE AND TO SUPPORT THE IMPUGNED ORDER: (A) AGIO PHARMACEUTICALS LTD. VS. ACIT (2013) 39 T AXMANN.COM 124 (MUM. TRIB.); (B) JEHANGIR LENTIL ESTATES PVT. LTD. (2014) 44 TA XMANN.COM 463 (MUM. TRIB.); (C) VIRAL LAMINATES LTD. (2006) 5 SOT 160 (AHD. TRI B.); (D) RAMCHANDRA PESTICIDES P. LTD. VS. CIT, (2006) 2 85 ITR 45 (KARN.). 14. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND CONTENTIONS OF BOTH THE SIDES AND VIGILANT PERUSAL OF THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US, INTER ALIA, PENALTY NOTICE, PENAL TY ORDER, IMPUGNED ORDER OF THE CIT(A) WRITTEN SUBMISSIONS OF THE ASSE SSEE AND CASE LAWS RELIED BY BOTH THE SIDES, AT THE VERY OUTSET, WE NO TE THAT THE AO ISSUED NOTICE VIDE DATED 23.11.2011 WHICH IS REPRODUCED BE LOW FOR THE SAKE OF CLARITY: IN THE ABOVE SUBJECT REFERENCE YOUR ATTENTION IS DRAWN TOWARDS RETURN OF INCOME SUBMITTED IN THIS OFFICE ON 3 RD SEPTEMBER, 2010. FROM THE DOCUMENTS AND DETAILS FILED, IT HAS BEEN P ERUSED THAT AS PER COMPUTATION CHART ANNEXED WITH THE RETURN OF IN COME FILED FOR THE A.Y. 2009-10, TAX PAYABLE HAS BEEN SHOWN AT RS. 4,12,62,460/-. AS PER PROVISIONS OF SEC. 140A(1) O F THE INCOME TAX ACT, 1961, THE ASSESSEE IS LIABLE TO PAY SUCH T AX TOGETHER WITH INTEREST PAYABLE UNDER ANY PROVISION OF THE ACT BEF ORE FURNISHING THE RETURN OF INCOME AND SUCH RETURN OF INCOME SHAL L BE 11 ACCOMPANIED BY PROOF OF PAYMENT OF SUCH TAX AND INT EREST. WHEREAS IN YOUR RETURN THIS AMOUNT OF TAX AMOUNTING TO RS. 4,12,62,460/- HAS BEEN SHOWN AS PAYABLE. NO EVIDENCE IN RESPECT OF TAX PAYABLE OF RS. 4,12,6 2,460/- HAS BEEN SUBMITTED WITH THE RETURN OF INCOME RATHER THE AMOUNT HAS BEEN SHOWN AS PAYABLE. PROVISIONS OF SUB SECTION 3 OF SECTION 140A, PROVIDES AS UNDER: IF ANY ASSESSEE FAILS TO PAY THE WHOLE OR ANY PART OF SUCH TAX OR INTEREST OR BOTH IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (1), BE SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSE QUENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAUL T IN RESPECT OF THE TAX OR INTEREST OR BOTH REMAINING UNPAID, AN D ALL THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY. IN VIEW OF THE ABOVE PROVISIONS, YOU WERE REQUIRED TO PAY SELF ASSESSMENT TAX AND TO FURNISH THE EVIDENCE ALONG WI TH THE RETURN OF INCOME FOR THE A.Y. 2009-10. STATE AS TO WHY YO U SHOULD NOT BE TREATED ASSESSEE IN DEFAULT AS PROVIDED UNDER SE CTION 140A(3) OF THE ACT. FURTHER, SHOW CAUSE AS TO WHY A PENALTY U/S 140A(3) SHOULD NOT BE IMPOSED UPON YOU FOR NOT COMPLYING WITH THE PROVISIONS OF SECTION 140A(1) OF THE INCOME TAX ACT, 1961 AND NOT MAKING FULL PAYMENT OF SELF ASSESSMENT TAX. FOR FILING THE REPLY TO THE ABOVE SHOW CAUSE, YOUR CASE STANDS FIXED IN THE O/O OF THE UNDERSIGNED ON 1 ST DECEMBER, 2011 AT 1.00 P.M. YOU MAY FURNISH EVIDENCE OF THE TAX PAID AS C OMPUTED IN THE RETURN OF INCOME. IN CASE NO SUCH EVIDENCE IS SUBM ITTED OR NO COMPLIANCE IS MADE, PROCEEDINGS U/S 140A(3) FOR IMP OSING PENALTY WILL BE CONSIDERED AND DECIDED ON MERITS. 15. FROM PENALTY ORDER WE FURTHER OBSERVE THAT THE ASSESSEE SUBMITTED FOLLOWING REPLY DURING THE PENALTY PROCEE DINGS BEFORE THE AO: WE ACKNOWLEDGE THE RECEIPT OF THE CAPTIONED NOTIC E AND IN PURSUANCE TO THAT WE BEG TO SUBMIT THAT THE ASSESSE E HAS SUBMITTED ITS RETURN OF INCOME FOR THE A.Y. 2009-10 ON 3 RD SEPTEMBER, 2010 AND THE RETURN WAS FILED WITH THE A MOUNT OF RS. 4,12,62,460/- AS TAX PAYABLE. THE ASSESSEE HAS DEPOSITED AN AMOUNT OF RS. 4,12,62,460/- TO THE INCOME TAX DE PARTMENT AND THE DETAIL OF SAME AS GIVEN BELOW: DATE OF CHALLAN PARTICULAR S BSR CODE CHALLA N NO. AMOUNT (RS.) 09.09.201 HDFC 051030 54266 10,00,000.00 12 0 BANK LTD. 8 07.03.2011 HDFC BANK LTD. 051030 8 5167 7 50,00,000.00 23.04.2011 HDFC BANK LTD. 051030 8 51234 10,00,000.00 27.04.2011 HDFC BANK LTD. 051030 8 53572 10,00,000.00 30.04.2011 HDFC BANK LTD. 051030 8 58382 5,00,000.00 05.05.2011 HDFC BANK LTD. 051030 8 52571 10,00,000.00 13.05.2011 HDFC BANK LTD. 051030 8 51183 10,00,000.00 18.05.2011 HDFC BANK LTD. 051030 8 51215 8,00,000.00 28.05.2011 HDFC BANK LTD. 051030 8 50717 10,00,000.00 31.05.2011 HDFC BANK LTD. 051030 8 52560 5,00,000.00 06.06.2011 HDFC BANK LTD. 051030 8 53079 10,00,000.00 18.06.2011 HDFC BANK LTD. 051030 8 51050 5,00,000.00 02.12.2011 STATE BANK OF INDIA 000432 9 01009 5,000.00 05.12.2011 STATE BANK OF INDIA 000432 9 15720 5,00,000.00 05.12.2011 STATE BANK OF INDIA 000432 9 15989 5,00,000.00 06.12.2011 STATE BANK OF INDIA 000432 9 09810 10,00,000.00 07.12.2011 STATE BANK OF INDIA 000432 9 09221 10,00,000.00 08.12.2011 STATE BANK OF INDIA 000432 9 21946 1,00,000.00 12.12.2011 HDFC BANK LTD. 051030 8 54702 14,00,000.00 03.02.2012 HDFC BANK LTD. 051030 8 52193 10,00,000.00 10.02.2012 HDFC BANK LTD. 051030 8 52166 25,00,000.00 11.02.2012 HDFC BANK LTD. 051030 8 50988 25,00,000.00 16.02.2012 HDFC BANK LTD. 051030 8 51115 80,00,000.00 16.02.2012 HDFC BANK LTD. 051030 8 51167 84,57,460.00 TOTAL 4,12,62,460.0 0 THE ASSESSEE HAS DEPOSIT THE SAME BUT DEPOSIT THE S AME LATE DUE TO THE FOLLOWING REASONS: A) THE ASSESSEE IS SUFFERING THE LIQUIDITY CRUNCH AND FIND IT DIFFICULT TO PAY THE SELF ASSESSMENT TAX. B) THE CASH GENERATION SOURCE OF THE BUSINESS HAS BEEN CLOSED. 13 C) ALL THE BANK ACCOUNT HAS BEEN SEIZED BY THE INCOME TAX DEPARTMENT DUE TO WHICH THE ASSESSEE WAS LEFT WITH NO MEANS TO PAY THE TAX. D) THAT THE DEMAND HAS EMANATED DUE TO THE SURRENDER M ADE AT THE TIME OF SEARCH, IN ADDITION TO THE DISCREPAN CIES IF ANY, THOSE WERE FOUND AT THE TIME OF THE SEARCH AND AFTE R THE SEARCH TO COVER UP THOSE DISCREPANCIES, BUT THE ASS ESSEE WAS MADE TO PAY FOR THE SURRENDERED AMOUNT UNLINKED WITH THE INCRIMINATORY DOCUMENTS FOUND BUT ALSO FOR THE COMMITMENT MADE FOR THE SURRENDER AND AS SUCH THE ASSESSEE WAS MADE TO PAY TAXES FOR THE DISCREPANCIE S AS WELL AS FOR THE DISCREPANCIES WHICH WERE NOT IN THE BOOKS BUT WHICH WERE MADE TO PAY AS PER THE SURRENDER THE REBY MAKING IT DIFFICULT TO COMPLY WITH THE BOTH AS SUCH THE AMOUNT WAS PAID WITH SOME DELAY. OUR VIEW IS SUPPORTED BY THE FOLLOWING CASE LAWS : SECTION 140A HELD, THAT THE PROVISO TO SECTION 14 0A(3) ENJOINED UPON THE ITO TO AFFORD A REASONABLE OPPORT UNITY TO THE ASSESSEE OF BEING HEARD BEFORE THE DECIDED T O IMPOSE A PENALTY. THAT CLEARLY IMPLIED THAT IT WAS OPEN T O THE ASSESSEE TO SHOW THAT THE DEFAULT IN PAYMENT OF TAX WAS DUE TO A REASONABLE CAUSE AND NO PENALTY COULD BE LEVIE D IN THE CIRCUMSTANCES OF THE CASE. ADDL. CIT VS. FREE WHEE LS INDIA LTD. (1982) 9 TAXMAN 18 (1992) 28 CTR 85: (1982) 13 7 ITR 385 (DEL) ILLUSTRATIONS: WHETHER A REASONABLE CAUSE WHERE THE FAILURE TO PAY SELF ASSESSMENT TAX WAS DU E TO FINANCIAL DIFFICULTIES PENALTY UNDER THE ABOVE SECT ION WAS HELD TO BE UNJUSTIFIED CIT VS.MYSORE FERTILISER CO. , (1984) 39 CTR 292: (1985) 22 TAXMAN 133 : (1984) 145 ITR 9 1 (MAD.); CIT VS. INDO AMERICAN ELECTRICALS LTD., (19 85) 21 TAXMAN 433: (1985) 45 CTR 146 155 ITR 63 (CAL.). IN THE FACTS OF THE FOLLOWING CASES, PAUCITY OF FUN DS WAS HELD TO BE A GOOD AND SUFFICIENT REASON FOR THE NON -PAYMENT OF TAXES. CIT VS. CHEMBARA PEAK ESTATES LTD. (1989 ) 47 TAXMAN 166: (1989) 80 CTR 69: (1990) 183 ITR 471 (KER); CIT VS. JAIPUR ELECTRO P. LTD. (1990) 183 IT R 476 (RAJ) CIT VS. BHIKAJI RAMCHANDRA (1990) 183 ITR 478 (BOM) THE ASSESSEE IS IN GENUINE HARDSHIP DUE TO WHICH TH ERE IS DELAY OF TAX DUE U/S 140A. HOWEVER, THE SAME HAS B EEN DEPOSITED, THEREFORE, IT IS REQUESTED BEFORE YOUR G OOD-SELF TO KINDLY NOT TO LEVY AND PENALTY U/S 140A(3). 14 16. FROM OPERATIVE PART OF THE PENALTY ORDER, WE NO TE THAT THE PENALTY WAS IMPOSED BY THE AO WITH THE FOLLOWING CONCLUSION AND FINDINGS: 4. REPLY FILED ON BEHALF OF THE ASSESSEE COMPANY HAS BEEN CONSIDERED AND DISCUSSED WITH THE AUTHORIZED REPRES ENTATIVE OF THE ASSESSEE COMPANY. IN THE REPLY, THE ASSESSEE C OMPANY HAS SUBMITTED THAT IT HAS DEPOSITED THE TAX LIABILITY ON THE ADMITTED INCOME SHOWN IN THE RETURN OF INCOME, BUT DELAYED. FOR THE DELAY IN DEPOSITING THE TAX, IT HAS CONTENDED TO BU ILD UP ITS CASE IN VIEW OF SHORTAGE OF FUNDS. HOWEVER, NO SUPPORTI NG DOCUMENTS IN THIS REGARD HAVE BEEN FILED TO SHOW SCARCITY OF FUNDS OR LIQUIDITY CRUNCH. FURTHER, THE ASSESSEE HAS TAKEN THE PLEA OF ATTACHMENT OF BANK ACCOUNT MADE BY THE DEPARTMENT F OR RECOVERY OF OUTSTANDING DEMAND. IN THIS REGARD, IT IS TO BE BROUGHT ON RECORD THAT THE BANK ACCOUNTS OF THE ASS ESSEE WERE ATTACHED IN MARCH2011 AS THE ASSESSEE WAS NOT MAKI NG THE PAYMENT OF DEMAND RAISED AFTER COMPLETION OF ASSESS MENT PROCEEDINGS WHEREAS THE LIABILITY OF TAX U/S 140A(1 ) WAS RAISED IN PRIOR PERIOD I.E. APRIL TO SEPTEMBER, 2009. THE ASSESSEE HAS CONTENDED THAT IT COULD NOT PAY THE TAX WITHIN TIME ON INCOME SURRENDERED DURING SEARCH AND HAD DEPOSITED DUE TAX AFTER SOME DELAY. THIS CONTENTION OF THE ASSESSEE CANNOT BE A CCEPTED AS THE UNDISCLOSED INCOME WAS ADMITTED BY THE ASSESSEE VOL UNTARILY TO COVER UP THE INCRIMINATING DOCUMENTS FOUND DURING S EARCH OPERATION. THE SAME WAS ADMITTED BY THE ASSESSEE I N THE STATEMENT RECORDED U/S 132(4) AND U/S 131 OF THE AC T. FURTHER, THE PAYMENT OF TAX CANNOT BE DELAYED BY SAYING THAT IT HAS TO MAKE PAYMENT ON INCOME WHICH IS NOT LINKED TO IT AN D WAS SHOWN IN THE RETURN OF INCOME ONLY FOR THE SAKE OF COMMIT MENT MADE FOR SURRENDER. THE INCOME IN THE RETURN OF INCOME WAS VOLUNTARILY OFFERED BY THE ASSESSEE AND IT IS OBLIGATORY TO PAY THE TAX ON THE INCOME ADMITTED BEFORE FILING OF RETURN OF INCOME. THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE FOR JUSTIFYING T HE NON PAYMENT OF ADMITTED TAX LIABILITY U/S 140A(1) WITHIN THE TI ME LIMIT AS PER PROVISIONS OF ACT, IS NOT CORRECT AND THEREFORE, RE JECTED. NOTHING HAS BEEN COME FORWARD FROM THE REPLY OF THE ASSESSE E COMPANY TO JUSTIFIY THE DEFAULT COMMITTED U/S 140A(3) IN VIEW OF THE DETAILS FURNISHED IN THE RETURN OF INCOME FOR THE A.Y. 2009 -10. THE CONTENTIONS GIVEN DO NOT CARRY ANY FORCE AND HELP T HE ASSESSEE 15 COMPANY TO BUILD UP ANY REASONABLE CAUSE FOR DELAY IN PAYMENT OF ADMITTED TAX LIABILITY. FROM THE ABOVE DETAILS AND DISCUSSION, IT IS HELD THAT THE ASSESSEE COMPANY WILFULLY DID N OT MAKE THE PAYMENT OF ADMITTED TAX LIABILITY AND COMMITTED DEF AULT WITHIN THE PROVISIONS OF SECTION 140A(3) OF THE INCOME TAX ACT, 1961. FURTHER, THE ASSESSEE HAS RELIED UPON THE DECISIONS OF VARIOUS COURTS WHICH CLEARLY STATES THAT FAILURE TO DEPOSIT THE ADMITTED TAX LIABILITY MUST BE ON PART OF SCARCITY OF FUNDS AND THE ASSESSEE HAS FAILED TO ESTABLISH THE SAME FOR NON PAYMENT OF ADMITTED TAX LIABILITY U/S 140A(1) OF THE ACT. 5. FURTHER MORE THE DEFAULT ON THE PART OF THE ASSE SSEE COMPANY HAS ALSO BEEN EXAMINED IN VIEW OF THE FOLLO WING CASE LAWS AND DECISION OF DIFFERENT COURTS: A) COMMISSIONER OF INCOME TAX VS. DEVEDAYAL STAINL ESS STEEL INDIA PVT. LTD. (1991) 189 ITR 506 (BOM.); B) COMMISSIONER OF INCOME TAX VS. PITAMBARDAS (J.) & CO. (1995) 216 ITR 172 (BOM.); C) TAYLOR INSTRUMENT CO. (INDIA) LTD. VS. COMMISSI ONER OF INCOME TAX (1998) 232 ITR 771 (DEL.); D) GOVINDA CHETTY (V.) VS. COMMISSIONER OF INCOME TAX (1998) 231 ITR 615 (MAD.); E) RAMACHANDRA PESTICIDES P. LTD. VS. COMMISSIONER OF INCOME TAX (2006) 285 ITR 045 (KARN.); F) INCOME TAX OFFICER VS. A.M.S. SALIMARICAR (2001 ) 247 ITR 808 (SC). 6. KEEPING IN VIEW THE DETAILED DISCUSSION IN VIEW OF THE ASSESSEE, I AM OF THE CONSIDERED OPINION THAT THE A SSESSEE HAS FAILED TO ESTABLISH ANY REASONABLE CAUSE OF NON PAY MENT OF ADMITTED TAX LIABILITY U/S 140A(1) OF THE INCOME TA X ACT, 1961 WITHIN THE TIME LIMIT PRESCRIBED BY THE INCOME TAX ACT, 1961 AND IS IN DEFAULT WITHIN THE PROVISION OF SEC. 140A(3) OF THE ACT. MOREOVER, FAILURE ON THE PART OF THE ASSESSEE HAS A LSO BEEN EXAMINED IN VIEW OF THE DECISIONS OF HONBLE APEX C OURT AND HIGH COURTS AS MENTIONED ABOVE. THEREFORE, THE ASS ESSEE IS HELD IN DEFAULT FOR NOT MAKING PAYMENT OF ADMITTED TAX L IABILITY OF RS. 4,12,62,460/- WITHIN THE TIME LIMIT AS PRESCRIBED B Y THE PROVISIONS OF INCOME TAX ACT, 1961. A PENALTY OF A N AMOUNT EQUAL TO ADMITTED TAX LIABILITY IS IMPOSED U/S 140A (3) OF THE INCOME TAX ACT, 1961. 16 17. WE FURTHER OBSERVE THAT THE CIT(A) GRANTED RELI EF FOR THE ASSESSEE WITH THE FOLLOWING FINDINGS AND DETERMINATION: 3.5 THE AR HAS FURTHER ARGUED UPON THE MEANING O F GOOD AND SUFFICIENT REASONS FOR LEVYING PENALTY UNDER T HE ACT. HE HAS ALSO MADE DETAILED SUBMISSIONS THAT THE PROVISI ONS OF SECTION 140A(3) SHOULD BE READ HARMONIOUSLY IN FAVO UR OF THE APPELLANT AND THAT LEVY OF PENALTY IS NOT AN AUTOMA TIC CONSEQUENCE OF A DEFAULT. HE HAS RELIED UPON THE F OLLOWING DECISIONS OF THE HONBLE HIGH COURTS IN SUPPORT OF HIS ARGUMENTS: RAMACHANDRA PESTICIDES PRIVATE LIMITED VS. CIT (200 6) 285 ITR 45 (KAR.); ADDL. CIT VS. SARVARAYA TEXTILES PRIVATE LIMITED (1 982) 137 ITR 369 (AP); ADDL. CIT VS. FREE WHEELS INDIA LTD. (1982) 137 ITR 378 (DEL.) 3.6 I AGREE WITH THE AR THAT THE AO HAS NOT MENTIO NED THE CORRECT PROVISIONS OF THE ACT WHILE PASSING THE PEN ALTY ORDER. BEING A PENALTY MATTER, THE APPELLANT HAD THE RIGHT TO KNOWN UNDER WHICH SECTION OF THE ACT HE WAS BEING ASKED T O SHOW CAUSE AND UNDER WHICH SECTION HE WOULD BE ULTIMATEL Y PENALISED UNDER THE ACT. IT IS POSSIBLE THAT PROVI SIONS OF SECTION 292B OF THE I.T. ACT WOULD COVER SUCH INADV ERTENT MISTAKES IN QUOTING THE CORRECT SECTION OF THE ACT AS THE APPELLANT HAD PARTICIPATED IN THE PROCEEDINGS WITHO UT RAISING ANY OBJECTION. 3.7 IN THE INSTANT CASE, THERE IS NO DENYING OF THE FACT THAT THE APPELLANT HAD SURRENDERED A LARGE SUM AS UNDISCLOSE D INCOME IN THE COURSE OF THE SEARCH IN RAJDURBAR GROUP OF C ASES. DUE TO SUCH SUDDEN ACTION AND RESULTING TAX BURDEN, THE APPELLANT SEEMS TO HAVE FACED LIQUIDITY CRUNCH. HE HAS HOWEV ER DISCHARGED THE LIABILITY IN INSTALMENTS AS AND WHEN HE GOT FUNDS. THE FACT THAT, THE APPELLANT DEPOSITED AN A MOUNT AS LOW AS RS. 5,000/- IN ONE OF THE INSTANCES WHILE DISCHA RGING HIS TAX LIABILITY SHOWS THAT THE APPELLANT WAS REALLY FACIN G LIQUIDITY CRUNCH AND THIS IS WHY HE HAD TO POSTPONE THE PAYME NT OF SA TAX. 3.8 THE AR HAS FILED COPY OF ORDER OF DELHI BENCH O F HONBLE ITAT, IN THE APPELLANTS CASE, DECIDED AGAINST THE REFUSAL OF CIT(A) TO ADMIT THE APPEAL FILED AGAINST ASSESSMENT ORDER, FOR THE SAME ASSESSMENT YEAR, FOR NON PAYMENT OF ADMITT ED TAX 17 BEFORE FILING THE APPEAL. IN THE SAID ORDER, THE H ONBLE ITAT HAS CONSIDERED THE ISSUE OF NON PAYMENT OF ADMITTED TAX AND THE CONSEQUENT REFUSAL OF ADMISSION OF APPEAL BY CI T(A) AND HAS HELD THAT APPEAL SHOULD BE ADMITTED AND DECIDED ON MERITS. 3.9 IT IS ALSO NOTED THAT THE AO HAS INITIATED THE ACTION OF LEVYING PENALTY AFTER HE COMPLETED THE ASSESSMENT U /S 143(3) AND THAT TOO AFTER A GAP OF ALMOST A YEAR. ONCE A DEMAND NOTICE U/S 156 HAS BEEN ISSUED ON COMPLETION OF ASS ESSMENT, THE APPELLANT GETS 30 DAYS TIME TO PAY THE TAXES DU E AS PER THE DEMAND NOTICE. THE INTIMATION OF FRESH PENAL PROCE EDINGS FOR DEFAULT OF SA TAX PAYMENT AFTER GAP OF ALMOST A YEA R OF COMPLETION OF ASSESSMENT AND AFTER A GAP OF 14 MONT HS OF FILING THE RETURN THUS, SHOWS THAT THE AO HAS NOT C ONSIDERED THE DEFAULT VERY SERIOUSLY. 3.10 LOOKING TO ALL THE CIRCUMSTANCES AND THE COND UCT OF THE APPELLANT IN MAKING TAX PAYMENTS IN 24 INSTALLMENTS , INCLUDING AS SMALL A SUM AS RS. 5000/-. I AM OF THE VIEW THA T THE APPELLANT MUST HAVE FACED LIQUIDITY CRUNCH DUE TO A LARGE SUM OF ADDITIONAL INCOME OFFERED DURING THE SEARCH UNDE R RAJDURBAR GROUP. THE APPELLANT HAS MADE THE PAYMEN TS OF THE TAXES DUE, AS AND WHEN HE COULD ORGANIZE THE FUNDS. THOUGH THE BANK ACCOUNTS HAD BEEN ATTACHED DURING A DIFFER ENT PERIOD. IT CANNOT BE DENIED THAT SEARCH ACTION AND ATTACHME NT OF BANK ACCOUNTS TOGETHER, DO, CREATE SOME KIND OF DISTURBA NCE IN THE CONDUCT OF ANY BUSINESS WHICH MIGHT HAVE ADDED TO L IQUIDITY PROBLEMS. FURTHER THE APPELLANT HAS PAID OFF THE D UES IN SEVERAL INSTALMENTS BEFORE THE LEVY OF PENALTY. AS ON THE DATE OF LEVY OF PENALTY, THE APPELLANT HAD PAID OFF THE ENTIRE DUES. HENCE, THE AO SHOULD HAVE BEEN A LITTLE SYMPATHETIC BEFORE LEVYING THE PENALTY AT THE RATE OF HUNDRED PERCENT OF THE UNPAID TAX. 3.11 MOST IMPORTANTLY, I CONSIDER THAT, HONBLE ITA T HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF THE APPELLAN T WHEN IT DIRECTED CIT(A) TO ADMIT THE APPEAL AND DISPOSE IT OFF ON MERITS. 3.12 IN THE ABOVE CIRCUMSTANCES, I DO NOT CONSIDER THAT THE APPELLANT DESERVED TO BE ...............FOR DEF AULT IN PAYMENT OF SELF ASSESSMENT TAX. THE PENALTY IS THEREFORE, DEL ETED. 18 18. AT THE VERY OUTSET, WE FIND IT APPROPRIATE TO D EAL WITH THE LEGAL ISSUE EMERGE FROM PARAGRAPH NO. 3.6 OF THE IMPUGNED ORDER , WHEREIN THE CIT(A) HAS OBSERVED THAT IT IS POSSIBLE THAT PROVIS ION OF SECTION 292B OF THE ACT WOULD COVER SUCH INADVERTENT MISTAKES IN QU OTING THE CORRECT SECTION OF THE ACT AS THE APPELLANT HAD PARTICIPATE D IN THE PROCEEDINGS WITHOUT RAISING ANY OBJECTION. ON THIS ISSUE FROM THE PENALTY NOTICE VIDE DATED 23.11.2011 (AS REPRODUCED HEREINABOVE IN PARA 14 OF THIS ORDER) AND PENALTY ORDER DATED 31.05.2012 (AS REPRODUCED H EREINABOVE IN PARA 16 OF THIS ORDER), IT IS APPARENT THAT THE AO SHOW CAUSED THE ASSESSEE AS TO WHY A PENALTY U/S 140A(3) SHOULD NOT BE IMPOS ED UPON HIM FOR NOT COMPLYING WITH THE PROVISIONS OF SECTION 140A(1) OF THE ACT. FROM OPERATIVE PART OF THE PENALTY ORDER PARA 6, IT IS A LSO CLEAR THAT THE AO IMPOSED PENALTY WITH A BOTTOM LINE THAT THE ASSESSE E IS HELD IN DEFAULT FOR NOT MAKING PAYMENT OF ADMITTED TAX LIABILITY WI THIN THE TIME LIMIT AS PRESCRIBED BY THE PROVISIONS OF THE ACT. THE AO IN THE LAST LINE OF THE OPERATIVE PART OF THE ORDER HAS MENTIONED THAT A PE NALTY OF AN AMOUNT EQUAL TO ADMITTED TAX LIABILITY IS IMPOSED U/S 140A (3) OF THE ACT. 19. IN VIEW OF ABOVE NOTED FACTS, WE OBSERVE THAT T HE SECTION 140A OF THE ACT IS PLACED IN CHAPTER XIV TITLED AS PROCEDU RE FOR ASSESSMENT, WHEREAS SECTION 221 OF THE ACT HAS BEEN PLACED IN C HAPTER XVII COLLECTION AND RECOVERY OF TAX PART D-COLLECTION AND RECOVERY. FROM 19 VIGILANT READING OF PROVISION OF SECTION 140A & 221 OF THE ACT, WE NOTE THAT SECTION 140A(3) STIPULATES THAT IF ANY ASSESSE E FAILS TO PAY THE WHOLE OR ANY PART OF SUCH TAX OR INTEREST OR BOTH IN ACCO RDANCE WITH PROVISIONS OF SUB SECTION (1), HE SHALL, WITHOUT PREJUDICE TO ANY OTHER CONSEQUENCE WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF THE TAX OR INTEREST OR BOTH REMAINED UNPAID, AND ALL THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY. MEANING THEREBY THE PROVISIONS OF SECTION 140A(3) OF THE ACT PROVIDES A SITUATION WHE RE IF ANY ASSESSEE FAILS TO PAY WHOLE OR ANY PART OF SUCH TAX OR INTER EST OR BOTH AS PER PROVISIONS OF SECTION 140A(1) OF THE ACT THEN HE SH ALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF UNPAID TAX OR INTEREST OR BOTH. WHILE FROM THE LANGUAGE USED BY THE LEGISLATION IN SECTIO N 221 OF THE ACT WE CLEARLY OBSERVE THAT THIS PROVISION PROVIDES PENALT Y LEVIABLE AND PAYABLE WHEN THE ASSESSEE IS IN DEFAULT IN MAKING A PAYMENT OF TAX THEN THE AO MAY IMPOSE PENALTY DOES NOT EXCEEDS THE AMOUNT IN A RREARS. FOR THE SAKE OF CLARITY IN OUR OBSERVATIONS AND CONCLUSION, WE FIND IT APPROPRIATE TO REPRODUCE SECTION 221 OF THE ACT AS UNDER: 221. (1)WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING A PAYMENT OF TAX, HE SHALL, IN AD DITION TO THE AMOUNT OF THE ARREARS AND THE AMOUNT OF INTEREST PA YABLE UNDER SUB-SECTION (2) OF SECTION 220, BE LIABLE, BY WAY O F PENALTY, TO PAY SUCH AMOUNT AS THE AO MAY DIRECT AND IN THE CASE OF A CONTINUING DEFAULT, SUCH FURTHER AMOUNT OR AMOUNTS AS THE AO M AY, FROM TIME TO TIME, DIRECT, SO, HOWEVER, THAT THE TOTAL AMOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX IN ARREARS: 20 PROVIDED THAT BEFORE LEVYING ANY SUCH PENALTY, THE ASSESSEE SHALL BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD: PROVIDED FURTHER THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE AO THAT THE DEFAULT WAS FOR GOOD AND SUFFICI ENT REASONS, NO PENALTY SHALL BE LEVIED UNDER THIS SECTION. EXPLANATION FOR THE REMOVAL OF DOUBT, IT IS HEREB Y DECLARED THAT AN ASSESSEE SHALL NOT CEASE TO BE LIABLE TO ANY PEN ALTY UNDER THIS SUB-SECTION MERELY BY REASON OF THE FACT THAT BEFOR E THE LEVY OF SUCH PENALTY HE HAS PAID THE TAX. (2) WHERE AS A RESULT OF ANY FINAL ORDER THE AMOUN T OF TAX, WITH RESPECT TO THE DEFAULT IN THE PAYMENT OF WHICH THE PENALTY WAS LEVIED, HAS BEEN WHOLLY REDUCED, THE PENALTY LEVIED SHALL BE CANCELLED AND THE AMOUNT OF PENALTY PAID SHALL BE R EFUNDED. 20. AS WE HAVE ALREADY NOTED THAT THERE IS NO PROVI SION OR PROCEDURE IN SECTION 140A OF THE ACT FOR IMPOSING PENALTY FOR DEFAULT IN PAYMENT OF DUE TAX AND FROM THE LANGUAGE OF PROVISION OF SECTI ON 221 OF THE ACT, IT IS EXFACIE THAT SUB SECTION (1) PROVIDES THAT WHEN THE ASSESS EE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING A PAYMENT O F TAX THEN HE SHALL BE LIABLE TO PAY SUCH AMOUNT AS THE AO MAY DIRECT BY W AY OF PENALTY AND THE TOTAL AMOUNT OF PENALTY DOES NOT EXCEED THE AMO UNT OF TAX IN ARREARS. FIRST PROVISO TO SECTION 221(1) OF THE ACT PROVIDES THAT BEFORE LEVYING ANY SUCH PENALTY THE ASSESSEE SHALL BE GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD AND SECOND PROVISO PROVIDES THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE AO THAT THE DEFAU LT WAS DUE TO GOOD FOR SUFFICIENT REASONS NO PENALTY SHALL BE LEVIED UNDER THIS SECTION. TH E LEGISLATION HAS ALSO PROVIDES AN EXPLANATION REMOVI NG DOUBT THAT AN ASSESSEE WAS NOT CEASED TO BE LIABLE TO ANY PENALTY UNDER THIS SUB 21 SECTION MERELY BY REASON OF THE FACT THAT BEFORE TH E LEVY OF SUCH PENALTY HE HAS PAID THE TAX. SUB SECTION (2) OF SEC. 221 O F THE ACT FURTHER PROVIDES THAT WHERE AS A RESULT OF ANY FINAL ORDER THE AMOUNT OF TAX, WITH RESPECT TO THE DEFAULT IN THE PAYMENT OF WHICH THE PENALTY WAS LEVIED, HAS BEEN WHOLLY REDUCED, THE PENALTY LEVIED SHALL B E CANCELLED AND THE AMOUNT OF PENALTY PAID SHALL BE REFUNDED. 21. TURNING TO THE LEGAL ISSUE BEFORE US AS WE HAVE ALREADY NOTED THAT THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE U/S 140A(3) OF HTE ACT AND THE PENALTY ORDER WAS ALSO PASSED BY IMPOSING P ENALTY U/S 140A(3) OF THE ACT AND THERE IS NO MENTION OF SECTION 221 O F THE ACT EITHER IN THE NOTICE DATED 23.11.2011 NOR IN THE PENALTY ORDER DA TED 31.05.2011 AS REPRODUCED HEREINABOVE. THE CIT(A) IN PARA 3.6 OF THE IMPUGNED ORDER HAS HELD THAT THE PROVISIONS OF SECTION 292B OF THE ACT WOULD COVER SUCH INADVERTENT MISTAKES IN QUOTING THE CORRECT SECTION OF THE ACT. AS WE HAVE ALREADY NOTED THAT AS PER FIRST PROVISO TO SEC TION 221(1) OF THE ACT IT IS MANDATORY THAT BEFORE LEVYING SUCH PENALTY THE A SSESSEE SHALL BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD AND S ECOND PROVISO TO THE SAID SUB SECTION FURTHER PROVIDES THAT WHERE THE AS SESSEE PROVES TO THE SATISFACTION OF THE AO THAT THE DEFAULT WAS FOR GO OD AND SUFFICIENT REASON THEN NO PENALTY SHALL BE LEVIED UNDER THIS PROVISO . 22 22. IN VIEW OF LANGUAGE USED BY THE LEGISLATURE IN FIRST AND SECOND PROVISO TO SUB SECTION (1) OF SECTION 221 OF THE AC T, IT IS AMPLE CLEAR THAT NO PENALTY CAN BE LEVIED WITHOUT AFFORDING A REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND IF ASSESSEE SUCCEED S TO PROVE TO THE SATISFACTION OF THE AO THAT THE DEFAULT WAS FOR GO OD AND SUFFICIENT REASON THEN NO PENALTY SHALL BE LEVIED ON THE ASSE SSEE U/S 221 OF THE ACT. IN THE LIGHT OF LEGAL PROVISION IF ASSESSEE H AS NOT BEEN SHOW CAUSED U/S 221 OF THE ACT THEN IT IS A CLEAR VIOLATION OF MANDATORY PROVISION OF FIRST PROVISO TO SECTION 221(1) OF THE ACT AND WHEN ASSESSEE HAS NOT BEEN SHOW CAUSED U/S 221 OF THE ACT THEN IT CANNOT BE PRESUMED THAT THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO DISCHARGE THE REQUIRED ONUS INCUMBANT UPON HIM TO PROVE TO THE SATISFACTION OF THE AO THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASON AS REQ UIRED PER SECOND PROVISO OF THE ACT. THUS, IN OUR HUMBLE OPINION IF THE NOTICE FOR INITIATION OF PENALTY PROCEEDINGS TO THE ASSESSEE HAS NOT BEEN ISSUED U/S 221 OF THE ACT AND THAT TOO THE PENALTY ORDER HAS ALSO NOT BEEN PASSED U/S 221 OF THE ACT THEN THIS MISTAKE IS NOT COVERED UNDER T HE UMBRELLA OF PROVISIONS OF SECTION 292B OF THE ACT. 23. COMING TO THE MERITS OF THE CASE FROM THE PENAL TY ORDER, WE NOTE THAT THE AO HAS REJECTED THE CAUSE OF SHORTAGE OF F UNDS, LIQUIDITY CRUNCH 23 AND SHORTAGE OF CASH AVAILABLE AT THE TIME OF FILIN G RETURN BY OBSERVING THAT NO SUPPORTING DOCUMENTS IN THIS REGARD HAVE BE EN FILED. THE AO HAS ALSO REJECTED THE PLEA OF THE ASSESSEE THAT THE ASSESSEES BANK ACCOUNTS WERE ATTACHED BY THE DEPARTMENT FOR RECOVE RY OF OUTSTANDING DEMAND BY OBSERVING THAT THE BANK ACCOUNTS OF THE A SSESSEE WERE ATTACHED IN THE MONTH OF MARCH, 2011 AS THE ASSESSE E WAS NOT MAKING PAYMENT OF DEMAND RAISED AFTER COMPLETION OF ASSESS MENT PROCEEDINGS. THE AO HAS ALSO TURNED DOWN THE ANOTHER PLEA OF THE ASSESSEE THAT THE HUGE UNDISCLOSED INCOME WAS ADMITTED BY THE ASSESSE E AND HE VOLUNTARILY ADMITTED AND SURRENDERED BIG AMOUNTS TO COVER UP THE INCRIMINATING DOCUMENTS FOUND DURING THE SEARCH OPE RATION WHICH FURTHER RESULTED INTO HUGE TAX DEMAND WHICH WAS OBVIOUSLY A N ABNORMAL DEMAND AND THE SAME WAS NOT RELATED WITH THE NORMAL BUSINESS OF THE ASSESSEE. THE AO HAS REJECTED THIS CONTENTION OF T HE ASSESSEE BY OBSERVING THAT IN THE RETURN OF INCOME SAID INCOME WAS VOLUNTARILY SURRENDERED AND OFFERED FOR TAX AND THE ASSESSEE WA S UNDER OBLIGATION TO PAY TAX ON THE ADMITTED AND SURRENDERED INCOME B EFORE FILING THE RETURN AND, THEREFORE, ASSESSEE IS LIABLE TO PAY PE NALTY U/S 140A(3) OF THE ACT. 24. FROM VIGILANT PERUSAL FROM THE OPERATIVE PART O F THE IMPUGNED ORDER OF THE CIT(A), WE NOTE THAT UNDISPUTEDLY ALL DUE TAXES WERE PAID BY 24 THE ASSESSEE BEFORE PASSING AND LEVYING PENALTY ORD ER AND THERE WAS NO ARREAR OF TAX AGAINST THE ASSESSEE AS ON 31.05.2012 WHEN THE PENALTY ORDER WAS PASSED. THE LD. DR HAS NOT CONTROVERTED THIS FACT THAT THE ASSESSEE PAID ENTIRE AMOUNT OF TAX UPTO 16.02.2012 IN 24 INSTALMENTS, WHEREIN ON 02.12.2011 THERE WAS A PAYMENT OF RS. 5, 000/- WHICH SHOWS THAT THE APPELLANT WAS REALLY FACING LIQUIDITY CRUN CH. FROM THE COPIES OF THE BANK STATEMENTS OF THE RELEVANT PERIOD APRIL, 2 010 TO MARCH, 2011, PLACED BEFORE AUTHORITIES BELOW, WE NOTE THAT THE A SSESSEE WAS OPERATING 5 BANK ACCOUNTS WITH RBS BANK, DENA BANK, FEDERAL BANK, INDIAN OVERSEAS BANK & UNION BANK, WHEREIN THE TOTA L BALANCE AS ON THE DATE OF FILING OF RETURN SHOWN WAS LESS THAN RS . 2.5 LACS AND THIS FACT HAS NOT BEEN CONSIDERED AND CONTROVERTED BY THE AO. THIS FACT ALSO SUPPORTS GOOD AND REASONABLE CAUSE OF THE ASSESSEE FOR NON PAYMENT OF TAX AT THE TIME OF FILING OF RETURN. 25. AT THIS JUNCTURE, WE RESPECTFULLY TAKE COGNIZAN CE OF THE ORDER OF THE HONBLE HIGH COURT OF DELHI DATED 12.08.2013 IN ASS ESSEES OWN CASE I.E. ITA NO. 384/DEL/2013 (SUPRA) , WHEREIN THE HONBLE HIGH COURT UPHELD THE CONCLUSION OF THE TRIBUNAL WHICH DIRECTE D THE CIT(A) TO HEAR THE FIRST APPEAL OF THE ASSESSEE ON MERITS. THE RE LEVANT OPERATIVE PART OF THE ORDER OF HONBLE HIGH COURT READS AS UNDER: 25 TRIBUNAL IN THE IMPUGNED ORDER HAS FOUND AND HELD THAT THERE WAS A FINANCIAL CONSTRAINT FACED BY RESPONDEN T ASSESSEE. THEREFORE, HE TOOK TIME TO ARRANGE FOR M ONEY BUT THE SAID AMOUNT WAS DULY PAID BEFORE THE APPEAL WAS DISMISSED BY THE FIRST APPELLATE AUTHORITY. IT HAS BEEN HELD THAT THE APPEAL SHOULD HAVE BEEN TREATED AS VALIDLY FILED ON THE DATE WHEN THE TAX AMOUNT WAS PAID. TRIBUNAL AL SO EXAMINED THE QUESTION WHETHER DELAY IN FILING OF TH E FIRST APPEAL SHOULD BE CONDONED IN VIEW OF THE FACTUAL PO SITION. AFTER EXAMINING THE FACTUAL MATRIX, TRIBUNAL CONDON ED THE DELAY AND DIRECTED CIT(APPEALS) TO HEAR THE APPEAL ON MERITS AS IT WAS ADMITTED THAT THE TAX AMOUNT HAS B EEN PAID. IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD THAT THER E WAS A FINANCIAL CONSTRAINT AND LIQUIDITY CRUNCH RAISED BY THE ASSES SEE AT THE TIME OF FILING OF RETURN WHICH IS A GOOD AND SUFFICIENT REASON T O PROVE AND EXPLAIN THE DEFAULT OF THE ASSESSEE IN MAKING PAYMENT OF TAX AT THE TIME OF FILING RETURN WHICH WAS WRONGLY REJECTED BY THE AO. 26. ON A SPECIFIC QUERY FROM THE BENCH THE LD. DR C OULD NOT ASSIST US WHETHER ANY DEFECT NOTICE AS PER EXPLANATION (AA) O F SECTION 139(9) OF THE ACT WAS ISSUED TO THE ASSESSEE POINTING OUT DEF ECTS IN THE RETURN BY THE DEPARTMENT. IN ABSENCE OF ANY DETAIL, WE MAY O BSERVE THAT THE DEPARTMENT HAS NOT ISSUED ANY NOTICE UNDER SAID PRO VISION OF THE ACT POINTING OUT DEFECT IN THE RETURN FILED BY THE ASSE SSEE. AT THE COST OF REPETITION, WE MAY AGAIN POINT OUT THAT THE AO NEIT HER ISSUED ANY NOTICE U/S 221 OF THE ACT NOR LEVIED PENALTY U/S 221 OF TH E ACT WHICH RESULTED A GREAT PREJUDICE AGAINST THE ASSESSEE BECAUSE THE AS SESSEE WAS NOT 26 PROVIDED DUE OPPORTUNITY OF HEARING AS TO WHY PENAL TY U/S 221 OF THE ACT SHOULD NOT BE IMPOSED UPON HIM AND AT THE SAME TIME ASSESSEE WAS ALSO PREVENTED TO ESTABLISH, PROVE AND TO DISCHARGE ITS ONUS TO SHOW THAT THERE WAS A GOOD AND SUFFICIENT REASON FOR NON PAYM ENT OF TAX AS REQUIRED AS PER SECOND PROVISO TO SEC. 221(1) OF TH E ACT. 27. IN VIEW OF ABOVE, WE RESPECTFULLY FOLLOW THE RA TIO OF THE DECISION OF ITAT MUMBAI A BENCH IN THE CASE OF AGO PHARMACEUT ICALS LTD. VS. ACIT (SUPRA), WHEREIN IT WAS HELD THAT WHERE THE AS SESSEE HAS FILED THE RETURN OF INCOME ON 28.09.2009 AND PAID SELF ASSESS MENT TAX U/S 140A OF THE ACT ON 19.01.2010 THEN SINCE ASSESSEE HAD PA ID SELF ASSESSMENT TAX IMMEDIATELY WHEN FACT REGARDING NON PAYMENT OF TAX CAME TO ITS NOTICE THEN THE ASSESSEE WAS NOT LIABLE FOR PENALTY U/S 221 OF THE ACT. IN THE PRESENT CASE UNDISPUTEDLY THE ASSESSEE HAD PAID ENTIRE DEMAND OF TAX BY WAY OF LAST INSTALMENT PAID ON 16.02.2012 AN D THIS FACT WAS ALSO NOTICED BY THE AO WHILE PASSING THE IMPUGNED PENALT Y ORDER. HOWEVER, WE ALSO HOLD IN VIEW OF EXPLANATION TO SUB SECTION (1) OF SECTION 221 OF THE ACT THE ASSESSEE DOES NOT SECURE ANY IMMUNITY F ROM LEVY OF PENALTY ONLY ON THE GROUND THAT HE HAD PAID ENTIRE AMOUNT O F TAX ARREARS BEFORE LEVY OF PENALTY MEANING THEREBY THERE WAS NO AMOUNT OF TAX REMAINED UNPAID AGAINST THE ASSESSEE WHEN THE PENALTY ORDER WAS PASSED BY THE AO. 27 28. TO SUM UP, WE ARE INCLINED TO HOLD THAT THE NO PENALTY NOTICE WAS ISSUED TO THE ASSESSEE U/S 221 OF THE ACT AND THE P ENALTY ORDER WAS ALSO NOT PASSED U/S 221 OF THE ACT AND THERE IS NO PENAL TY PROVISION U/S 140A OF THE ACT AND THE AO MISUNDERSTOOD THE RELEVANT PR OVISION OF THE ACT WHILE ISSUING NOTICE AND IMPOSING PENALTY AGAINST T HE ASSESSEE. CONSEQUENTLY THE ASSESSEE WAS ALSO NOT PROVIDED DUE OPPORTUNITY OF HEARING PRIOR TO IMPOSING PENALTY U/S 221 OF THE AC T AS REQUIRED BY FIRST PROVISO TO SECTION 221(1) OF THE ACT AND AT THE SAM E TIME THE ASSESSEE WAS ALSO DENIED OPPORTUNITY OF HEARING TO DISCHARGE ITS ONUS AND TO SHOW GOOD AND SUFFICIENT CAUSE FOR NON PAYMENT OF TAX AT THE TIME OF FILING OF RETURN AS REQUIRED SECOND PROVISO TO SECT ION 221(1) OF THE ACT TO AVOID PENALTY, WHICH IS ALSO A CLEAR VIOLATION OF T HE MANDATORY PROVISIONS OF THE ACT BY THE AO AND THUS, PENALTY ORDER CANNOT BE HELD AS IN ACCORDANCE WITH LAW AND SUSTAINABLE AND THE FIRST A PPELLATE AUTHORITY I.E. CIT(A) WAS QUITE JUSTIFIED AND CORRECT IN DEMOLISHI NG THE SAME. 29. IN VIEW OF THE OBSERVATIONS OF THE HONBLE HIGH COURT OF DELHI IN THE JUDGMENT DATED 12.8.2013 IN ASSESSEES OWN CASE (SUPRA), WE ARE ALSO IN AGREEMENT WITH THE CONCLUSION OF THE CIT(A) THAT THE ASSESSEE WAS FACING FINANCIAL CONSTRAIN AND ACUTE LIQUIDITY CRUNCH AND THERE WAS A GOOD AND SUFFICIENT CAUSE FOR THE ASSESSEE FOR NO N PAYMENT OF TAX 28 WHICH WAS INCORRECTLY REJECTED BY THE AO WHILE WRON GLY IMPOSING PENALTY U/S 140A(3) OF THE ACT. WE ARE UNABLE TO SEE ANY I NFIRMITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGN ED ORDER OF THE CIT(A) WHICH DELETED THE PENALTY AND THUS, WE UPHOLD THE S AME. ACCORDINGLY, GROUND NOS. 1 & 2 OF THE REVENUE BEING DEVOID OF ME RITS IS BEING DISMISSED. 30. IN THE RESULT, THE APPEAL OF THE REVENUE BEING DISMISSED. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 11.05.2015 SD/- SD/- (B.C. MEENA) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11.05.2015 *KAVITA, P.S. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR 29 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 29.04.2015, 06.05.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 08.05.2 015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 11.05.2015 4. DRAFT APPROVED BY THE SECOND MEMBER 11.05.2015 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 15.05 .2015 6. DATE OF PRONOUNCEMENT OF ORDER 11.05.2015 7. DATE OF FILE SENT TO THE BENCH CLERK 15.05.2014 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER