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

ITA 5237/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59954 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M P MEHWALA
• Keywords: Opportunity of being heard
• Section: 40A(3); 234B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.5237/MUM/2010 (ASSESSMENT YEAR: 2007-08) ACIT RANGE 8(1)(OSD), ROOM NO.204, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ...... APPELLANT VS M/S. OZONE FINANCE & INVESTMENT PVT. LTD., LOK BHAWAN LOK BHARTI COMPLEX, MAROL MAROSHI ROAD, ANDHERI (E), MUMBAI -400 059 ..... RESPONDENT PAN: AAACO 0661 L APPELLANT BY: SHRI ATIQ AHMAD RESPONDENT BY: SHRI M.P. MEHWALA DATE OF HEARING: 22.02.2012 DATE OF PRONOUNCEMENT: 30.03.2012 O R D E R PER R.S. PADVEKAR, JM : IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-17, MUMBAI DATED 15.03.2010 FOR THE A.Y. 2007-08. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUN D: 1.(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN DIRECTING THE AO TO RESTRI CT THE LEVY OF THE PENALTY ONLY TO THE TAX COMPONENT EXCLUDING THE INT EREST U/S.234A, 234B & 234C OF THE ACT . (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT (A) ERRED IN GRANTING RELIEF OF ` 13,75,823/- WITHOUT APPRECIATING THE FACT THAT THE TAX IN ARRE ARS MENTIONED IN ITA NO.5237/MUM/2010 M/S. OZONE FINANCE & INVESTMENT PVT. LTD. 2 SECTION 221(1) SHOULD INCLUDE INTEREST COMPONENT AL SO, AS LEVY OF INTEREST CHARGEABLE U/S.234A, 234B & 234C IS MANDAT ORY . 2. BRIEFLY STATED FACTS ARE AS UNDER. THE A.O. HAS OBSERVED THAT THE ASSESSEE HAD NOT PAID DEMAND RAISED ON PROCESSI NG OF RETURN OF INCOME AMOUNTING TO ` 2,45,42,887/-. THE A.O. HAS ALSO OBSERVED THAT IN THE RETURN OF INCOME FILED FOR THE A.Y. 200 7-08 ON 03.10.2008 THE ASSESSEE HAS DECLARED THE BOOK PROFIT U/S.115JB AT ` 16,07,80,861/- BUT THE ASSESSEE DID NOT PAY ANY TAX BY WAY OF ASSESSMENT TAX TOWARDS THE TAX PAYABLE ON THE SAID INCOME. THE A.O. TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT U/S.1 40A(3) OF THE INCOME-TAX ACT. THE A.O. OBSERVED THAT AS THE ASSES SEE FAILED TO MAKE THE PAYMENT OF ADMITTED TAX AND HENCE, PENALTY U/S. 221 OF THE INCOME-TAX ACT OF ` 12,27,144/- WAS IMPOSED WHICH WAS 5% OF THE OUTSTANDING DEMAND. THEREAFTER ALSO, AS OBSERVED B Y THE A.O,. THE ASSESSEE DID NOT MAKE ANY PAYMENT AND HENCE, ASSESS EES THE BANK ACCOUNTS WERE ATTACHED BY ISSUING NOTICE U/S.226(3) OF THE ACT. THE ASSESSEE MADE PAYMENT OF ` 10 LAKHS ON 19.12.2008 AGAINST THE AGGREGATE DEMAND OF ` 2,57,70,031/- (INCLUDING PENALTY OF ` 12,27,144/- LEVIED U/S.221 OF THE ACT). THE A.O. H AS ALSO OBSERVED THAT INSTEAD OF MAKING THE PAYMENT OF TAX, THE ASSE SSEE DIVERTED SUBSTANTIAL AMOUNT OF SALES PROCEEDS RECEIVED ON TH E SALE OF SHARES FOR MAKING LOANS AND ADVANCES OF ` 11,95,61,343/- TO LOK HOLDING & CONSTRUCTION LTD. AND ALSO MAKING ADVANCE OF ` 59,44,050/- TO OTHER GROUP CONCERNS. THE A.O., THEREFORE, LEVIED THE PE NALTY OF ` 58,85,722/- WHICH WAS 25% OF THE TAX DUE AND NOT PA ID OF ` 2,35,42,887/-. THE LD. CIT (A) UPHELD THE ACTION O F THE A.O. FOR LEVY OF PENALTY U/S.221 BUT DIRECTED THE A.O. TO RESTRICT T HE PENALTY TO THE TAX ELEMENT AND TO LEVY THE PENALTY ON THE INTEREST CHA RGED U/S.234A, 234B & 234C AS WELL AS PENALTY EARLIER LEVIED U/S.2 21. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. THE SHORT CONTROVERS Y IS IN RESPECT OF WHETHER THE LD. CIT (A) WAS JUSTIFIED IN GIVING DIRECTION TO THE A.O. THAT PENALTY SHOULD BE LEVIED ON THE ELEMENT OF PRI NCIPLE TAX AND NOT ITA NO.5237/MUM/2010 M/S. OZONE FINANCE & INVESTMENT PVT. LTD. 3 ON THE INTEREST LEVIED UNDER SEC./S234A, 234B AND 2 34C OR PENALTY EARLIER LEVIED U/S.221(1) OF THE ACT. 4. SEC.221(1) READS AS UNDER: WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING A PAYMENT OF TAX, HE SHALL, IN ADDITION TO T HE AMOUNT OF THE ARREARS AND THE AMOUNT OF INTEREST PAYABLE UNDER SU B-SECTION (2) OF SECTION 220, BE LIABLE, BY WAY OF PENALTY, TO PAY S UCH AMOUNT AS THE ASSESSING OFFICER MAY DIRECT, AND IN THE CASE O F A CONTINUING DEFAULT, SUCH FURTHER AMOUNT OR AMOUNTS AS THE ASSE SSING OFFICER MAY, FROM TIME TO TIME, DIRECT, SO, HOWEVER, THAT T HE TOTAL AMOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX IN ARREAR S : 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 ASSESSING OFFICER THAT THE DEFAULT WAS FOR G OOD AND SUFFICIENT REASONS, NO PENALTY SHALL BE LEVIED UNDER THIS SECT ION. EXPLANATION.FOR THE REMOVAL OF DOUBT, IT IS HER EBY 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. 5. AS PER PROVISIONS OF THE SAID SECTION, IF THE AS SESSEE IS IN DEFAULT OR DEEMED TO BE IN DEFAULT FOR MAKING THE PAYMENT O F TAX AS PER DEMAND RAISED OR OTHERWISE THEN THE A.O. CAN LEVY T HE PENALTY WHICH IS NOT TO EXCEED THE AMOUNT OF TAX IN ARREARS. AS PER THE PROVISIONS OF SEC.220(4) OF THE ACT THE ASSESSEE IS BOUND TO MAKE THE PAYMENT OF THE DEMAND MENTIONED IN THE NOTICE OF DEMAND ISSUED U/S.156 WITHIN TIME LIMIT STATED IN THE SAID NOTICE THEN OTHERWISE THE ASSESSEE SHALL BE DEEMED TO BE IN DEFAULT FOR PAYMENT OF THE TAX. IN SEC.221(1) THE TERM TAX IS USED. THE TERM TAX HAS BEEN DEFINE D IN SEC.2(43) OF THE ACT, WHICH READS AS UNDER: TAX IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1965, AND ANY SUBSEQUENT ASSESSMENT Y EAR ITA NO.5237/MUM/2010 M/S. OZONE FINANCE & INVESTMENT PVT. LTD. 4 MEANS INCOME-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT, AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME -TAX AND SUPER-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS A CT PRIOR TO THE AFORESAID DATE AND IN RELATION TO THE ASSESSMEN T YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006, AND ANY S UBSEQUENT ASSESSMENT YEAR INCLUDES THE FRINGE BENEFIT TAX PAY ABLE UNDER SECTION 115WA. 6. SEC.221(1) IS A PENAL PROVISION AND WE HAVE TO A DHERE TO STRICT INTERPRETATION OF THE PENAL PROVISIONS. AS PER THE LANGUAGE USED IN SEC.221(1), THERE IS NO REFERENCE OF ANY INTEREST P AYABLE OR LEVIED U/SS.234A, 234B & 234C. WE, THEREFORE, HOLD THAT N O PENALTY CAN BE LEVIED U/S.221(1) ON THE INTEREST CHARGED AND OUTST ANDING U/SS.234A, 234B & 234C. 7. SO FAR AS EXCLUSION OF PENALTY LEVIED U/S.221(1) IS CONCERNED, IN OUR OPINION, THOUGH THE SAME IS OUTSTANDING AND THE ASSESSEE IS TO BE TREATED AS ASSESSEE IN DEFAULT NO FURTHER PENALTY ON THE PENALTY CAN BE LEVIED U/S.221(1) OF THE ACT. IN OUR OPINION, T HE EXPRESSION ASSESSEE DEEMED TO BE IN DEFAULT IS USED BY THE L EGISLATURE IN SUB- SEC.(3) TO SEC.140A AND SUB-SEC(4) TO SEC.220 FOR G IVING AN AUTHORITY TO THE A.O./TRO TO RECOVER THE OUTSTANDING TAX EVEN BY USING COERCIVE MEASURES. IN THE LIGHT OF OUR DISCUSSION, WE HOLD T HAT PENALTY U/S.221(1) IS TO BE CONFINED ON ELEMENT OF TAX IN D EFAULT. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT (A). ACCORDI NGLY, THE SAME IS CONFIRMED. REVENUES GROUNDS ARE DISMISSED. 8. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0TH MARCH, 2012. SD/- ( J. SUDHAKAR REDDY ) ACCOUTANT MEMBER SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 30TH MARCH, 2012 ITA NO.5237/MUM/2010 M/S. OZONE FINANCE & INVESTMENT PVT. LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-17, MUMBAI. 4) THE CIT 8, MUMBAI. 5) THE D.R. C BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN