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

ITA 5239/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5890 (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. 5239/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 ORYX FINANCE AND INVESTMENT PVT.LTD, LOK BHARATI COMPLEX, MAROL MAROSHI RD, ANDHERI(E), MUMBAI-400 059 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAACO 0662 K 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.1,19,30,677/- 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.1,49,41,467/- INCLUDING THE EARLIER PENALTIES OF RS. 8,24,529/- AND 37,35,367/- LEVIED U/S 221(1) OF THE ACT. AFTER REJECTING THE EXPLANATION OFFERED BY THE ASSESSEE ON THE REASON OF FINANCIAL HARDSHIP , THE AO AFTER REDUCING AGGREGATE PENALTIES EARLIER LEVIED FROM THE TOTAL DUES, DETER MINED LEVY OF PENALTY AT RS.1,19,30,677/-. ON APPEAL, THE LD.CIT(A) IN HER O RDER OBSERVED THAT THE AO, WHILE WORKING OUT THE TAX ARREARS AT RS. 2,45,42,887/-, I NCLUDED THE INTEREST U/SS 234A, 234B & 234C AT RS.13,33,310/-, RS.24,24,200/- AND R S.6,12,106/-RESPECTIVELY. HOWEVER, THE TAX COMPONENT DUE WAS ONLY RS.1,21,20, 957/-. AS THE AGGREGATE OF THE PENALTY LEVIED BY THE AO EXCEEDS THE TAX, THE S AME IS VITIATED IN VIEW OF THE PROVISIONS OF SECTION 221 (1) OF THE ACT AND ACCORD INGLY THE LD.CIT(A) DELETED THE ITA NO. 5239/MUM/2010 M/S ORYX FINANCE & INVESTMENT PVT.LTD. ASSESSMENT YEAR: 2007-08 2 ENTIRE IMPUGNED 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. RS.1,49,41,467/- WHICH INCLUDED THE EARLIER PENALTI ES OF RS. 8,24,529/- AND 37,35,367/- LEVIED U/S 221(1) OF THE ACT AND ALSO T HE INTEREST COMPONENT PAYABLE U/SS 234A, 234B & 234C AT RS.13,33,310/-, RS.24,24, 200/- AND RS.6,12,106/- RESPECTIVELY. IT IS OBSERVED THAT WHILE LEVYING THE IMPUGNED PENALTY, THE AO HAS ALREADY REDUCED THE EARLIER PENALTIES FROM THE DUES . HOWEVER, THE AO HAS NOT EXCLUDED THE INTEREST PAYABLE BY THE ASSESSEE U/SS 234A, 234B & 234C OF THE ACT. IF THE EARLIER PENALTIES AND THE INTEREST COMPONENT FR OM THE TOTAL DUES IS REDUCED, THEN THE TAX COMPONENT DUE IS ONLY RS.1,21,20,957/-. ACC ORDING TO SECTION 221 (1) OF THE ACT, WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING A PAYMENT OF TAX, HE SHALL, IN ADDITION TO THE AMOUNT OF THE ARREARS AND THE AMOUNT OF INTEREST PAYABLE UNDER SUB-SECTION (2) OF SECTION 2 20, 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 OR AMOUNTS AS THE AO MAY, FROM TIME TO TIME, DIRECT, SO, HOWEVER, THAT THE TOTAL AMOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX IN ARREARS. ALSO, SECTION 221 (1) STATES THAT THE TOTA L 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 COMPONENT AND THE SAID TAX O N WHICH PENALTY LEVIED INCLUDES THE INTEREST ALSO. IT IS VERY CLEAR THAT INTEREST C OMPONENT DOES NOT QUALIFY FOR PENALTY UNDER SECTION 221 AS THE SAID SECTION PROVIDES FOR LEVY OF PENALTY ONLY ON TAX COMPONENT. ALSO, IT IS THE LEGAL POSITION THAT THE AGGREGATE OF THE PENALTY LEVIED BY THE AO CANNOT EXCEED THE TAX. HOWEVER, THE MISTAKE COMMITTED BY THE AO IN CALCULATING THE DUES FOR THE PURPOSE OF LEVY OF PEN ALTY, IN OUR VIEW IS A CURABLE DEFECT. THE SAID CURABLE MISTAKE COMMITTED BY THE A O IN RESPECT OF QUANTIFICATION OF THE PENALTY CANNOT BE THE BASIS FOR DELETING THE LE VY OF PENALTY BY THE LD.CIT(A). NEEDLESS TO EMPHASIS THAT THE EXPLANATION OF THE AS SESSEE THAT THE DEFAULT HAS BEEN COMMITTED DUE TO THE REASON OF FINANCIAL HARDSHIP C ANNOT ABSOLVE HIM FROM THE LEVY OF PENALTY U/S 221(1) OF THE ACT IN VIEW OF THE FAC T THAT DURING THE PROCEEDINGS ITA NO. 5239/MUM/2010 M/S ORYX FINANCE & INVESTMENT PVT.LTD. ASSESSMENT YEAR: 2007-08 3 BEFORE US ALSO, THE LD.AR HAS FAILED TO SUBSTANTIAT E THE SAID DEFAULT OF THE ASSESSEE WITH ANY DUE/COGENT REASONS. IN VIEW OF THAT MATTER , WHILE WE HOLD THAT THE ASSESSEES CASE ATTRACTS THE LEVY OF PENALTY U/S 22 1(1) OF THE ACT, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES BY REMITTING THE MA TTER BACK TO THE AO TO QUANTIFY THE AMOUNT OF PENALTY IN ACCORDANCE WITH THE PROVIS IONS OF 221(1) OF THE ACT AS DISCUSSED ABOVE. IN THAT PROCESS, THE AO SHALL GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT AND ORDER AC CORDINGLY. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26TH 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.