ITO 8(2)-4, MUMBAI V. OZONE FINANCE & INVESTMENT P. LTD, MUMBAI

ITA 5236/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5886 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Opportunity of being heard
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI R.C SHARMA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 5236/MUM/2010 ASSESSMENT YEAR: 2007-08 ITO 8(2)-4, ROOM NO. 213/216A, 2 ND FLOOR, AAYAKAR BHAWAN, MUMBAI- 400 020 VS. M/S OZONE FINANCE AND INVESTMENT PVT.LTD, LOK BHARATI COMPLEX, MAROL MAROSHI RD, ANDHERI(E), MUMBAI-400 059 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAACO 0661 L ASSESSEE BY : SHRI DEEPAK TRALSHAWALA REVENUE BY : SHRI M.L.PERUMAL DATE OF HEARING : 13.03.2014 DATE OF PRONOUNCEMENT : 26.03.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)- 17, MUMBAI, DATED 15.03.2010 DELETING THE PENALTY O F RS.1,74,30,021/- LEVIED BY THE AO UNDER SECTION 221(1) OF THE INCOME TAX ACT FOR T HE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED, THE AO NOTED THAT THE ASSESSEE H AD NOT MADE PAYMENT OF OUTSTANDING DUES OF RS.2,45,42,887/- INCLUDING THE EARLIER PENALTIES OF RS. 12,27,144/- AND 58,85,722/- LEVIED U/S 221(1) OF TH E ACT. AFTER REJECTING THE EXPLANATION OFFERED BY THE ASSESSEE ON THE REASON O F FINANCIAL HARDSHIP, THE AO AFTER REDUCING AGGREGATE PENALTIES LEVIED OF RS.71,12,866 /- FROM THE TOTAL DUES OF RS.2,45,42,887/-, DETERMINED LEVY OF PENALTY AT RS. 1,74,30,021/. ON APPEAL, THE LD.CIT(A) IN HER ORDER OBSERVED THAT THE AO, WHILE WORKING OUT THE TAX ARREARS AT RS. 2,45,42,887/-, INCLUDED THE INTEREST U/SS 234A, 234B & 234C AT RS.19,84,357/-, RS.36,07,920/- AND RS.9,10,988/- RESPECTIVELY. HOWE VER, THE TAX COMPONENT DUE WAS ONLY RS.1,80,39,613/-. AS THE AGGREGATE OF THE PENALTY LEVIED BY THE AO EXCEEDS THE TAX, THE SAME IS VITIATED IN VIEW OF THE PROVIS IONS OF SECTION 221 (1) OF THE ACT ITA NO. 5236/MUM/2010 M/S OZONE FINANCE & INVESTMENT PVT.LTD. ASSESSMENT YEAR: 2007-08 2 AND ACCORDINGLY THE LD.CIT(A) DELETED THE ENTIRE IM PUGNED PENALTY. AGGRIEVED BY THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFORE US. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS NOT DISPUTED THAT THE ASSESSEE HAS NOT MADE PAYMENT OF OUTSTANDING DUES OF RS.2,45,42,887/- WHICH INCLUDED THE EARLIER PENALTI ES OF RS. 12,27,144/- AND 58,85,722/- (AGGREGATING TO RS.71,12,866/-) LEVIED U/S 221(1) OF THE ACT AND ALSO THE INTEREST COMPONENT PAYABLE U/SS 234A, 234B & 23 4C AT RS.19,84,357/-, RS.36,07,920/- AND RS.9,10,988/- RESPECTIVELY. IT I S OBSERVED THAT WHILE LEVYING THE IMPUGNED PENALTY, THE AO HAS ALREADY REDUCED THE EA RLIER PENALTIES FROM THE DUES. HOWEVER, THE AO HAS NOT EXCLUDED THE INTEREST PAYAB LE BY THE ASSESSEE U/SS 234A, 234B & 234C OF THE ACT. IF THE EARLIER PENALTIES AN D THE INTEREST COMPONENT FROM THE TOTAL DUES IS REDUCED, THEN THE TAX COMPONENT DUE I S ONLY RS.1, 80,39,613/-. ACCORDING TO SECTION 221 (1) OF THE ACT, WHEN AN AS SESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING A PAYMENT OF TAX, HE SHA LL, IN ADDITION TO THE AMOUNT OF THE ARREARS AND THE AMOUNT OF INTEREST PAYABLE UNDER SUB-SECTIO N (2) OF SECTION 220, BE LIABLE, BY WAY OF PENALTY, TO PAY SUCH AMOUNT AS THE AO MAY DIRECT, AND IN THE CASE OF A CONTINUING DEFAULT, SUCH FURTHER AMOUNT O R AMOUNTS AS THE AO MAY, FROM TIME TO TIME, DIRECT, SO, HOWEVER, THAT THE TOTAL A MOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX IN ARREARS. ALSO, SECTION 221 (1) STATES THAT THE TOTAL AMOUNT OF PENALTY CANNOT EXCEED THE AMOUNT OF TAX IN ARREARS. IT IS NOTED THAT THE AGGREGATE OF THE PENALTY LEVIED BY THE AO EXCEEDS THE TAX COMPON ENT AND THE SAID TAX ON WHICH PENALTY LEVIED INCLUDES THE INTEREST ALSO. IT IS VE RY CLEAR THAT INTEREST COMPONENT DOES NOT QUALIFY FOR PENALTY UNDER SECTION 221 AS THE SA ID SECTION PROVIDES FOR LEVY OF PENALTY ONLY ON TAX COMPONENT. ALSO, IT IS THE LEGA L POSITION THAT THE AGGREGATE OF THE PENALTY LEVIED BY THE AO CANNOT EXCEED THE TAX. HOW EVER, THE MISTAKE COMMITTED BY THE AO IN CALCULATING THE DUES FOR THE PURPOSE OF L EVY OF PENALTY, IN OUR VIEW IS A CURABLE DEFECT. THE SAID CURABLE MISTAKE COMMITTED BY THE AO IN RESPECT OF QUANTIFICATION OF THE PENALTY CANNOT BE THE BASIS F OR DELETING THE LEVY OF PENALTY BY THE LD.CIT(A). NEEDLESS TO EMPHASIS THAT THE EXPLAN ATION OF THE ASSESSEE THAT THE DEFAULT HAS BEEN COMMITTED DUE TO THE REASON OF FIN ANCIAL HARDSHIP CANNOT ABSOLVE HIM FROM THE LEVY OF PENALTY U/S 221(1) OF THE ACT IN VIEW OF THE FACT THAT DURING THE ITA NO. 5236/MUM/2010 M/S OZONE FINANCE & INVESTMENT PVT.LTD. ASSESSMENT YEAR: 2007-08 3 PROCEEDINGS BEFORE US ALSO, THE LD.AR HAS FAILED TO SUBSTANTIATE THE SAID DEFAULT OF THE ASSESSEE WITH ANY DUE/COGENT REASONS. IN VIEW O F THAT MATTER, WHILE WE HOLD THAT THE ASSESSEES CASE ATTRACTS THE LEVY OF PENAL TY U/S 221(1) OF THE ACT, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES BY REMITT ING THE MATTER BACK TO THE AO TO QUANTIFY THE AMOUNT OF PENALTY IN ACCORDANCE WITH T HE PROVISIONS OF 221(1) OF THE ACT AS DISCUSSED ABOVE. IN THAT PROCESS, THE AO SHA LL GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT AND ORDER ACCORDINGLY. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MARCH, 2014. SD/- SD/- (R.C. SHARMA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 26.03.2014. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.