SUBVIJAY INTERNATIONAL P. LTD, MUMBAI V. ITO WD 8(3)(2), MUMBAI

ITA 5503/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8609 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 18-08-2010
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: M P SHARMA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SI NGH(AM) ITA NO.5503/M/2009 ASSESSMENT YEAR 2008-09 M/S.SUBVIJAY INTERNATIONAL PVT. LTD. THE ITO WARD -8(3)(2) 52, GAZEBO HOUSE, OPP.GULMOHAR CROSS ROAD AAYKAR BH AVAN NO.7, VILE PARLE (W), MUMBAI M.K.ROAD, MUMBAI 400 020. PAN : AAACS 5747 D APPELLANT RESPONDENT ASSESSEE BY : SHRI M.P. SHARMA REVENUE BY : SHRI S.K. SINGH O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 10.08.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2008-0 9. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING LEVY OF PENALTY UNDER SECTION 221(1) OF THE INCOME-TAX ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E AO FROM PERUSAL OF RECORDS NOTED THAT THE ASSESSEE WAS REQUIRED TO PAY SELF ASSESSMENT TAX OF RS.75,76,480/- UNDER SECTION 140A OF THE INCOME-TAX ACT ON THE BASIS OF TOTAL INCOME RETURNED FOR THE ASSESSMENT YEAR 2008-09 ON 30.9.2008. THE AO THEREFORE ISSUED A SHOW-CAUSE LETTER DATED 6.11.200 8 ASKING THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHOULD NOT BE IMPOSED UND ER SECTION 221(1) OF THE INCOME-TAX ACT. AS PER THE AO THE ASSESSEE DID NOT FURNISH ANY EXPLANATION 2 AND AO THEREFORE LEVIED MINIMUM PENALTY @ 5% OF THE DEMAND DUE WHICH CAME TO RS.3,78,824/-. THE ASSESSEE DISPUTED THE DE CISION OF THE AO AND SUBMITTED BEFORE CIT(A) THAT THE ASSESSEE HAD SUBMI TTED REPLY TO THE AO VIDE LETTER DATED 18.11.2008 IN WHICH REQUEST HAD BEEN M ADE FOR GRANT OF INSTALLMENT WHICH HAD BEEN ALLOWED BY THE AO AND TH E ASSESSEE HAD PAID THE INSTALLMENT GRANTED FOR THE MONTH OF NOVEMBER, 2008 . THE ASSESSEE HAD FINANCIAL DIFFICULTIES DUE TO WHICH REQUEST HAD BEE N MADE WHICH HAD BEEN GRANTED AND THEREFORE NO PENALTY SHOULD HAVE BEEN L EVIED. CIT(A) HOWEVER NOTED FROM THE COPY OF LETTER DATED 18.11.2008 FILE D BEFORE THE LATTER THAT THE SAID LETTER HAD NOT BEEN FILED WITH REFERENCE TO TH E SHOW-CAUSE NOTICE DATED 6.11.2008 AS THERE WAS NO MENTION OF THE SAID NOTIC E IN THE LETTER. HE THEREFORE AGREED WITH THE AO THAT NO EXPLANATION HAD BEEN REC EIVED FROM THE ASSESSEE TO THE SHOW-CAUSE NOTICE. CIT(A) ALSO OBSERVED THAT SU BSEQUENT PAYMENT COULD NOT BE THE BASIS FOR NO PENALTY AS ON THE DATE OF L EVY OF PENALTY THE ASSESSEE HAD NOT MADE THE PAYMENT. NO EVIDENCE HAD ALSO BEEN FILED REGARDING FINANCIAL DIFFICULTIES. CIT(A) ALSO NOTED THAT THE ASSESSEE W AS HAVING SALE PROCEEDS OF THE PROPERTY SOLD BY HIM AND THEREFORE THERE WAS NO FIN ANCIAL CRISIS. CIT(A) THEREFORE CONFIRMED THE PENALTY LEVIED BY THE AO AG GRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LEARNED AR FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT THE ASSESSEE HAD GIVEN EXPLANATION VIDE LETTER DATED 18.11.2008 IN WHICH REQUEST FOR INSTAL LMENT HAD BEEN MADE. CIT(A) HAD ALSO GRANTED INSTALLMENTS WHICH HAD BEEN PAID AND THEREFORE NO PENALTY SHOULD BE IMPOSED. THE LEARNED DR ON THE OT HER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 3 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY UNDER SECTION 221(1) OF THE INCOME-TAX ACT FOR DEFAULT IN NON PAYMENT OF SELF A SSESSMENT TAX. UNDER THE PROVISIONS OF SECTION 140A, AN ASSESSEE IS REQUIRED TO PAY THE TAX PAYABLE ON THE BASIS OF INCOME RETURNED BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND IN CASE THE TAX IS NOT PAID THE ASSESSEE UNDER THE PROVISIONS OF SECTION 140A(3) IS DEEMED TO BE AN ASSESSEE IN DEFAULT AND IN SUCH CASES PENALTY IS LEVIABLE UNDER SECTION 221(1) FROM TIME TO TIME SO HOWEVER THAT TOTAL AMOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX. HOWEV ER AS PER THE SECOND PROVISO TO SECTION 221 IN CASE THE ASSESSEE PROVES TO THE SATISFACTION OF THE AO THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASON S NO PENALTY IS REQUIRED TO BE LEVIED. 5. IN THIS CASE THE AO HAS LEVIED THE PENALTY ON TH E GROUND THAT THE ASSESSEE HAD FAILED TO FILE ANY EXPLANATION. THE CA SE OF THE ASSESSEE IS THAT IT HAD GIVEN REPLY VIDE LETTER DATED 18.11.2008 WHICH HAD NOT BE CONSIDERED. THE AO HAD NOT CONSIDERED THE REPLY GIVEN IN THE SAID L ETTER ON THE GROUND THAT THE SAID LETTER WAS NOT IN REFERENCE TO THE SHOW-CAUSE LETTER DATED 6.11.2008 ISSUED BY THE AO. IN OUR VIEW THE APPROACH OF THE A O IS ERRONEOUS. THE SAID LETTER HAD BEEN RECEIVED BY THE AO BEFORE THE DATE OF LEVY OF PENALTY WHICH HAD ALSO BEEN ACTED UPON HIM AS THE AO DID GRANT INSTAL LMENT TO THE ASSESSEE VIDE ORDER DATED 19.11.2008 AS REQUESTED BY THE ASSESSEE IN THE LETTER DATED 18.11.2008. ANY COMMUNICATION RECEIVED FROM THE ASS ESSEE BEFORE THE DATE OF PASSING OF THE ORDER IF FOUND RELEVANT HAS TO BE CO NSIDERED WHILE PASSING THE ORDER. IN THE LETTER DATED 18.11.2008 THE ASSESSEE HAD CLEARLY MENTIONED THAT THE ASSESSEE COULD NOT PAY THE SELF ASSESSMENT TAX AS THE ASSESSEE HAD TAKEN TERM LOAN FROM BANK WHICH HAD TO BE DISCHARGED DURI NG THE CURRENT YEAR. THE 4 ASSESSEE ALSO MENTIONED THAT IT HAD APPLIED FOR LOA N FROM BANK FOR PAYING THE TAX WHICH IT WAS EXPECTING TO RECEIVE AND THEREFORE REQUEST FOR GRANT OF INSTALLMENT HAD BEEN MADE. AO DID ACCEDE TO THE REQ UEST OF THE ASSESSEE AND GRANTED INSTALLMENT WHICH SHOWS THAT THE AO WAS ULT IMATELY SATISFIED ABOUT THE FINANCIAL CONDITIONS OF THE ASSESSEE FOR NOT PAYING THE SELF ASSESSMENT TAX. THOUGH THE AO IN THE LETTER DATED 19.11.2008 A COPY OF WHICH HAS BEEN PLACED ON RECORD DID MENTION THAT HE WAS UNABLE TO UNDERST AND AS TO WHY THE TAX WAS NOT PAID WHEN THE ASSESSEE HAD EARNED CAPITAL GAIN. BUT WITHOUT ASKING FOR ANY FURTHER EXPLANATION HE DID GRANT THE INSTALLMENT WH ICH SHOWS THAT THE AO WAS SATISFIED ABOUT THE CLAIM OF FINANCIAL DIFFICULTIES IN PAYING THE TAX. THERE IS NO MATERIAL PLACED ON RECORD BY THE REVENUE TO SHOW TH AT INCOME FROM CAPITAL GAIN WAS AVAILABLE FOR PAYMENT OF SELF ASSESSMENT TAX AN D THAT IT HAD NOT BEEN UTILIZED EARLIER IN THE BUSINESS. IN ANY CASE THE A O HAVING BEEN SATISFIED THAT IT WAS A FIT CASE FOR GRANT OF INSTALLMENT DUE TO FINA NCIAL DIFFICULTIES IN OUR VIEW THE AO WAS NOT JUSTIFIED IN COMING TO THE CONCLUSION TH AT THE DEFAULT WAS NOT FOR GOOD AND SUFFICIENT REASONS AND IN LEVYING PENALTY UNDER SECTION 221(1). CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES , IN OUR VIEW, LEVY OF PENALTY IS NOT JUSTIFIED. WE THEREFORE SET ASIDE THE ORDER OF CIT(A) CONFIRMING THE PENALTY AND THE PENALTY LEVIED IS THUS DELETED. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. 7. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 04.02.2011. SD/- SD/- ( D.K. AGARWAL) (RAJEND RA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 04.02.2011 AT :MUMBAI 5 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR I BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK