Indus Valley Housing, CHENNAI V. ACIT, CHENNAI

ITA 611/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9485 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 13-03-2014
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: T BANUSEKAR
• Keywords: Opportunity of being heard; Principle of natural justice; Reasonable cause
• Section: 153A; 234B; 148; 90; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' # , $ %& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NO. 611/MDS/2014 / ASSESSMENT YEAR : 2010-11 M/S. INDUS VALLEY HOUSING, A-68, ANNA NAGAR EAST, CHENNAI 600 102. PAN AACFI2508P ( /APPELLANT) VS THE ASSISTANT COMMISSIONER OF INCOME-TAX, BUSINESS CIRCLE-XIII, CHENNAI. ( /RESPONDENT) / APPELLANT BY : SHRI T. BANUSEKAR, CA / RESPONDENT BY : MS. VIJAYA PRABHA, JCIT / DATE OF HEARING : 18.02.2016 ! / DATE OF PRONOUNCEMENT : 22.04.2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DA TED 21.1.2014 FOR THE ASSESSMENT YEAR 2010-11. - - ITA 611/14 2 2. THE MAIN GROUND RAISED BY THE ASSESSEE IS WITH R EGARD TO CONCURRING OF LEVY OF PENALTY U/S.221(1) BY THE COM MISSIONER OF INCOME-TAX(APPEALS). FURTHER, THE ASSESSEE HAS RAI SED AN ADDITIONAL GROUND, WHICH IS AS FOLLOWS: THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING AND ENHANCING LEVY OF PENALTY U/S.221(1) OF THE ACT. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT AFTER THE ORDER U/S.143(1) OF THE ACT DATED 26.07.2012 WAS PASSED THERE COULD NOT BE ANY DEFAULT OF NON-PAYMENT OF SELF-ASSESSMENT TAX. 2.1 THE ASSESSEE HAS FILED PETITION FOR ADMISSION O F ADDITIONAL GROUND THAT THE ABOVE LEGAL GROUND CHARGING OF LEVY OF PENALTY WAS NOT RAISED ON EARLIER OCCASION BEFORE THIS TRIB UNAL DIE TO LACK OF PROPER PROFESSIONAL ADVICE AND THE OMISSION TO I NCLUDE THIS GROUND ON THE PART OF THE ASSESSEE AT THE TIME OF F ILING OF THE APPEAL IS NOT WILFUL OR WANTON. FURTHER, IT WAS S TATED THAT THE ADDITION GROUND INVOLVES A LEGAL ISSUE, WHICH DOES NOT REQUIRE INVESTIGATION OF ANY FRESH FACT FOR ADJUDICATION OF THE SAME. HE RELIED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT (229 ITR 283 ), WHEREIN IT WAS HELD THAT A LEGAL GROUND CAN BE RAISED AT ANY S TAGE OF APPEAL. THUS, HE PRAYED FOR ADMISSION OF ADDITIONA L GROUND. - - ITA 611/14 3 2.2 ON THE OTHER HAND, THE LD. DR OBJECTED THE ADMI SSION OF THE ADDITIONAL GROUND. HOWEVER, IN OUR OPINION, TH E ISSUE RAISED BY THE ASSESSEE DOES NOT REQUIRE ANY INVESTIGATION OF FACTS AND THE FACTS ARE ALREADY ON RECORD. AS SUCH, WE DO NO T AGREE WITH THE ARGUMENT OF THE LD. DR THAT IT SHOULD NOT BE AD MITTED. ACCORDINGLY, RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD CITED SUPRA , WE ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION, AS THE ASSE SSEE IS PREVENTED BY SUFFICIENT CAUSE FOR NOT RAISING THIS ADDITIONAL GROUND AT THE TIME OF FILING OF ORIGINAL APPEAL. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D ITS RETURN FOR THE ASSESSMENT YEAR 2010-11 ON 2.8.2011 DECLARI NG A TOTAL INCOME OF ` 17,58,90,439/-. AS PER THE RETURN OF INCOME FILE BY THE ASSESSEE, THE INCOME-TAX PAYABLE INCLUDING CESS WAS ` 4,00,97,432/-. THE TOTAL TAXES PAID INCLUDING TDS WAS ` 37,57,871/-. WHEN THE RETURN WAS FILED ON 2.8.2011 , THE TOTAL TAX PAYABLE WAS ` 4,78,48,702/-. THE RETURN WAS PROCESSED ON 26.7.2012 WHERE THE TAX DEMAND WAS RAISED AT ` 4,69,71,250/-. 3.1 IN THE MEANTIME, THERE WAS A SURVEY U/S.133A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 5.12.20 12. AT THE - - ITA 611/14 4 TIME OF SURVEY, SHRI OM PRAKASH AGARWAL, ONE OF THE PARTNERS OF THE FIRM ADMITTED TOTAL INCOME OF ` 6,95,42,787/- FOR THE ASST. YEAR 2009-10 AND ` 17,58,90,439/- FOR THE ASST. YEAR 2010-11. AS THE ASSESSEE FAILED TO PAY THE DEMAND RAISED, NO TICE U/S.221(1) OF THE ACT DATED 26.9.2012 WAS ISSUED BY THE AO POSTING THE CASE FOR HEARING ON 17.10.2012. THERE WAS NO RESPONSE FROM THE ASSESSEE, A LETTER DATED 5.12.201 2 WAS ISSUED PROPOSING LEVY OF PENALTY U/S.221(1) OF THE ACT AND DATE OF HEARING WAS FIXED ON 10.12.2012. HOWEVER, THERE WAS NO RESPONSE AND ACCORDINGLY, THE AO LEVIED PENALTY OF ` 47,84,870/- @ 10% OF SELF-ASSESSMENT TAX PAYABLE OF ` 4,78,48,702/-. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER BEFOR E THE CIT(APPEALS). 4. THE CIT(APPEALS) OBSERVED THAT IT IS A FIT CASE FOR NOT ONLY LEVY OF PENALTY BUT ALSO FOR ENHANCING IT . ACCORD INGLY, HE CONFIRMED THE PENALTY AND ENHANCED THE PENALTY AT 2 5% OF SELF- ASSESSMENT TAX PAYABLE AT ` 1,19,62,175/-. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE PRIMARY OBJECTION OF THE LD. AR IS THAT THE NOTICE DATED 5.12.2012 ISSUED BY THE AO TO THE ASSESSEE ON 8.12.2012 - - ITA 611/14 5 MENTIONING THE ASSESSMENT YEAR 2012-13 THOUGH THE ASSESSMENT INVOLVED WAS FOR THE ASST. YEAR 2010-11 . ACCORDING TO THE LD. AR, THERE IS NO PROPER NOTICE FOR THE AS ST. YEAR 2010- 11 FOR LEVYING PENALTY U/S.221(1) OF THE ACT. FURT HER, IT IS SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED EARLIE R NOTICE DATED 26.9.2012 AND ACCORDING TO HIM, THERE IS VIOL ATION OF NATURAL JUSTICE IN LEVYING THE PENALTY. FURTHER, I T IS SUBMITTED THAT THE ASSESSEE WAS FACING FINANCIAL CRISIS DURING THE PERIOD AND MADE THE PAYMENT OF SELF-ASSESSMENT TAX BY INSTALME NTS AS FOLLOWS : FURTHER, HE SUBMITTED THAT THE ASSESSEE RECEIVED TH E FOLLOWING AMOUNTS ON SALE OF DELUXE APARTMENT AND BUILDING : 2008-09 ` 73,15,200.00 2009-10 ` 12,40,90,310.00 2010-11 ` 4,75,00,000.00 TOTAL ` 17,89,05,510.00 =============== DATE OF PAYMENT CHALLAN NO. INCOME-TAX INTEREST 30.08.2012 11002 24,00,000/- - 26.09.2012 11387 24,00,000/- - 18.10.2012 10204 72,00,000/- - 22.11.2012 10504 72,00,000/- - 20.12.2012 10431 1,71,39,561/- 28,60,439/- 04.01.2013 14362 - 1,52,17,724/- TOTAL 3,63,39,561/- 1,80,78,163/- - - ITA 611/14 6 5.1 THE LD. AR HAS ALSO FILED DETAILS OF PAYMENT MA DE FOR ACQUIRING THIRUVANMIYUR PROPERTY, WHICH IS AS FOLLO WS : F.Y 2009-10 ` 4,50,00,000.00 F.Y 2010-11 ` 36,25,00,000.00 F.Y 2011-12 ` 1,40,00,000.00 TOTAL ` 42,15,00,000.00 =============== ACCORDING TO THE LD. AR, THE ABOVE TABLES CLEARLY S HOW THAT THE ASSESSEE IS IN EXPANSION OF BUSINESS AND INVESTED H UGE MONEY IN THE PROJECT, WHICH IS EARNING OF INCOME FROM THE PROJECT. HE FURTHER SUBMITTED THAT THESE FACTS TO BE CONSIDERED BEFORE LEVYING PENALTY U/S.221(1) OF THE ACT. 5.2 HE RELIED ON THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. MUNNI LAL & COMPANY (298 ITR 250 ), WHEREIN IT WAS HELD THAT : IN ORDER TO LEVY PENALTY U/S.221 R/W.S.201, OBLIGA TION IS CAST UPON THE AO TO BE SATISFIED THAT THE DEFAULT B Y THE ASSESSEE WAS WITHOUT GOOD AND SUFFICIENT REASON; ASSESSEE-CONTRACTOR HAVING NOT DEDUCTED TAX AT SOUR CE AS REQUIRED BY S.194C(2) UNDER BONA FIDE BELIEF THA T NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE SINCE THE SUB-CONTRACTORS DID NOT HAVE TAXABLE INCOME PENALTY UNDER S.221 WAS NOT LEVIABLE. 5.3 HE ALSO RELIED ON THE JUDGMENT OF THE KERALA HI GH COURT IN THE CASE OF CIT V. CHEMBARA PEAK ESTATES LTD. (183 ITR 471), - - ITA 611/14 7 WHEREIN IT WAS OBSERVED THAT WANT OF SUFFICIENT LIQUID FUNDS WAS REASONABLE CAUSE, DELETION OF PENALTY UNDER S.221 W AS JUSTIFIED. FURTHER, THE LD. AR RELIED ON THE JUDGMENT OF THE M ADRAS HIGH COURT IN THE CASE OF A & M AGENCIES V. CIT & ORS. ( 239 ITR 136) FOR THE PROPOSITION THAT IF THE PENALTY IS LEVIED A FTER LONG PERIOD OF ONE YEAR, IT IS BARRED BY LIMITATION. HE DREW OUR ATTENTION TO THE SEQUENCE OF EVENTS AS FOLLOWS : DATE PARTICULARS REMARKS 31 . 07 . 2010 DUE DATE FOR FILING RETURN OF INCOME FOR THE AY 2010-11 U/S . 139(1) 02 . 08 . 2011 DATE OF FILING OF RETURN OF INCOME BY THE ASSESSEE FOR THE AY 2010-11 31 . 03.2012 DUE DATE FOR FILING RETURN OF INCOME FOR THE AY 2010-11 U/S . 139(4) 26 . 07.2012 INTIMAT I ON U/S . 143 ( 1 ) FOR THE AY 2010 11 26 . 09 . 2012 DATE OF ISSUE OF SHOW CAUSE NOTICE DEFAULT IN PAYMENT OF DEMAND RAISED U/S . 221 (1) IN SUMMARY ASSESSMENT FOR THE AY 2010-11 08 . 10 . 2012 ISSUE OF SECOND NOTICE OF HEARING (AS NOT RECEIVED BY ASSESSEE MENTIONED I N NOTICE DATED 05.12 . 2012) 05 . 12 . 2012 PROPOSAL FOR LEVY OF PENALTY DEFAULT IN PAYMENT OF SELF ASSESS M EN T U/S.221 (1) TAX FOR THE A Y 2012 -13 05 . 1 2 . 2012 SURVEY IN THE PREMISES OF APPELLANT 08 . 02.2013 DATE OF ORDER U/S.221 (1) 5.4 THE LD. AR RELIED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF METTUR CHEMICALS & INDUSTRIAL CORPORATION LTD. V. INSPECTING ASST. COMMISSIONER (150 ITR 341) , FOR THE - - ITA 611/14 8 PROPOSITION THAT THE ORDER PASSED BY THE AO TREATIN G THE ASSESSEE IS IN DEFAULT AND WITHOUT PASSING AN ORDER THAT THE ASSESSEE IS IN DEFAULT, PENALTY CANNOT BE LEVIED. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE FIRST NOTICE ISSUED U/S.221(1) OF THE ACT DATED 26.9.2012 CLEARLY SHOWS THE ASSESSMENT YEAR AS 2010-11 AND THAT NOTIC E WAS ACKNOWLEDGED BY SHRI OM PRAKASH AGARWAL ON 27.9.201 2. IN THE NOTICE U/S.221(1) OF THE ACT DATED 8.10.2012, I T IS ALSO CLEARLY STATED THE ASST. YEAR 2010-11. SINCE, THERE WAS NO RESPONSE FOR THESE TWO NOTICES, LETTER DATED 5.12.2012 WAS ISSUE D TO THE ASSESSEE, WHICH WAS RECEIVED ON 8.12.2012. IN THAT LETTER, INADVERTENTLY THE ASSESSMENT YEAR WAS TYPED AS 2012 -13 INSTEAD OF 2010-11. IN THAT LETTER, NOTICE U/S.221(1) DA TED 8.10.2012 WAS REFERRED TO BY THE AO AND IT WAS CLEARLY WRITTE N THE ASST. YEAR AS 2010-11, BEING SO, THE PLEA OF THE ASSESSEE S COUNSEL THAT THERE WAS NO NOTICE FOR THE ASST. YEAR 2010-11 . HE RELIED ON THE PROVISIONS OF SEC. 220(2) OF THE ACT TO HOLD TH AT ANY SUCH CLERICAL MISTAKE TO BE RECTIFIED IN THE VIEW OF THE PROVISIONS OF THE ACT. FURTHER, THE LD. DR SUBMITTED THAT THERE IS N O MERIT IN THE CONTENTION OF THE LD. AR IN STATING THAT THE ASSESS EE HAS NOT - - ITA 611/14 9 RECEIVED THE NOTICE DATED 26.9.2012, BECAUSE THE AS SESSEE HAS ACKNOWLEDGED THE RECEIPT OF NOTICE DATED 26.9.2012. REGARDING THE MERITS OF THE CASE, HE SUBMITTED THAT FIRST SHO W CAUSE NOTICE WAS ISSUED ON 26.9.2012 U/S.221(1) OF THE ACT AND B EFORE THAT THE ASSESSEE PAID ONLY ` 61,57,871/-. AFTER ISSUING NOTICE U/S.221(1) OF THE ACT, THE ASSESSEE HAS PAID ` 5,20,17,724/-. FURTHER, HE SUBMITTED THAT IN THE SWORN STATEMENT R ECORDED FROM SHRI OM PPRAKASH AGARWAL, ONE OF THE PARTNERS OF TH E FIRM ON 5.12.2012, IN ANSWER TO QUESTION NO.13, STATED AS U NDER : BALANCE OF 41,062 SQ.FT. WAS SOLD TO DABC FOR A CONSIDERATION OF ` 17,87,06,700/- AT THE RATE OF ` 4350/- SQ.FT. IN THE YEAR 2009-10 AY 2010-11 IT IS PERTINENT TO REFER TO THE AGREEMENT FOR SALE ENTERED INTO ON 01.04.2009 BETWEEN THE APPELLANT (VENDOR) A ND M/S. DELUXE APARTMENTS AND BUILDING COMPANY REGARDING THE SALE FOR A CONSIDERATION OF ` 17,87,06,700/-. IT WAS MENTIONED IN THE AGREEMENT THAT THE PURCHASER HAS ALREADY PAID ` 83,15,050/- AND THE BALANCE SALE CONS I DERATION ` 17,03,91,650/- WITHIN A PERIOD OF 24 MONTHS AND AS PER FOLLOWING SCHEDULE. ON OR BEFORE 30.06.2009 ` 50,00,000 ON OR BEFORE 30.09.2009 ` 2,00,00,000 ON OR BEFORE 31 . 12.2009 ` 4,00,00,000 ON OR BEFORE 31 . 03.2010 ` 5,53,91,650 EVEN AS ON 01 . 04.2009, THE APPELLANT RECEIVED RS.83 ,1 5 , 050 /- FROM THE PURCHASER BUT ADVANCE TAX OF RS.15 LAKHS WAS PAID ONLY ON 15.12.2009. AFTER - - ITA 611/14 10 THAT, THE APPELLANT PAID ONLY ON 30 . 08.2012 I . E. AFTER THE FILING OF RETU R N FOR AY 2010-11 ON 02.08.2011 . THE ABOVE PAYM E N T SCH EDULE PROMISED BY THE BUYER OF THE LAND L EAVES US WITH NO DOUBT THAT THE A PPELLANT WAS HAV I NG SUFFICIENT FUNDS TO PAY THE ADVANC E TA X AN ASSESSMENT TAX, ETC. IN TIME. BUT THE APPELLANT FOR THE REASONS BEST TO IT CHOSE TO PAY T HE TAXES VERY LATE THAT TOO AFTER THE INITIAT I ON O F PENA LTY PROCEEDINGS U/S 221(1) OF THE ACT. THE ABOVE DETAILS REVEA L S THA T THERE IS NO GOOD AND SUFFICIENT REASONS FOR THE DELAY I N PAYMENT OF TA X ES . IT IS A CASE WHERE THE ASSESSEE WAS DELIBERATELY FAILING TO MAKE THE PAYMENT OF TAX . THE DEFAULT WAS WILLFUL , EXPLANATION TO SEC.221 OF THE ACT READS AS UNDER: FOR THE R E MOVAL OF DOUBT , IT IS HEREBY DECLARED THAT AN ASS E SSEE SHALL NOT CAUSE TO BE LIABL E TO ANY PENALTY UNDER THIS SUB-SECTION MERELY B Y R EA SON OF T H AT BEFORE THE L E VY OF SUCH PENALTY HE HAS PAID THE TAX . THE RETURN OF THE FIRM FOR AY 2012-13 WAS FILED ON 31 . 07.2012 AND THE RETURN WAS SIGNED BY MR.OM PRAKASH AGARWAL . IN TH E RETURN, IT WAS MENTIONED THAT THE TAX PAYABLE WAS NIL . THIS BEING THE CASE , WHEN THE L ETTER DATED 05.12.2012 WAS RECEIVED BY THE APPEL L ANT I N W H I CH THE AY WAS WRONGLY WRITTEN AS 2012-13 INSTEAD OF AY 2010-11, T HE APPELLANTS CONTENTION THAT THE NOTICE WAS IGNORED BECAUSE NO PROCEEDI N GS WERE PENDING FOR AY 2012-13 BECOMES UNBELIEVABLE BECAUSE THE FI RM HAVING FILED THE RETURN FOR AY 2012-13 WITH NO TAX PAYABLE. THE APPELLANT WAS CERTAINLY AWARE THAT THE PROCEEDINGS RELATED TO AY 2010-11 AND NOT 2012-13 (SINCE - - ITA 611/14 11 NO DEMAND WAS PAYABLE AS PER RETURN FOR AY 20 1 2 - 13) . AS ON 31 . 03.201, THE APPELLANT HAD ENOUGH FUNDS WHICH ARE AS UNDER: 31 . 03.2010 31 . 03.2009 MR. V. KUMARAVEL 4,50,00,000 NIL MR . S. UMAPATHY 40,00,000 10,00,000 TAMIL NADU MERCANTILE BANK 6,36,34,423 1,55,09,063 CHITRA CONSTRUCTION 1,00,90,000 NIL DABC 4,73,01,190 NIL BB ASIA IMPEX PVT. LTD . 1,18,26,584 1,80 , 00,636 PETROP L AST INDUSTRIES LTD. NIL 2,14,21, 656 ASSETS SIDE AS ON 31 . 03.2009 WAS ` 8,72,03,826/- AND I NCREASED TO ` 21,24,24,810/-. IN THE CIRCUMSTANCES, PAUCITY OF FUNDS AS ONE OF THE REASONS FOR NOT PAYING THE TAXES IS COMPLETELY RULE D OUT. THEN I T I S I NCONCEIVABLE TO SAY THAT THE APPELLANT FAILED TO PAY THE TAX FOR GOOD AND SUFFICIENT REASONS . RELIANCE WAS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS HYDROFLEX EQUIPMENT LIMITED (2006) 282 ITR 418 WHEREIN IT WAS HELD THAT PENALTY COULD BE LEVIED WHEN THERE WAS NO SUFFICIENT CAUSE FOR NON-PAYMENT OF TAX FOR AY 1997-98. THE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS SMT. VIJAYANTHIMDLA (1977) 108 ITR 882, HELD THAT SECTION 221 OF THE ACT APPLIES T O A CASE OF DEFAULT IN PAYMENT OF ADVANCE TAX ALSO . THE QUESTION REFERRED TO THE MADRAS HIGH COURT WAS - - ITA 611/14 12 ' WHETHER , ON A PROPER INTERPRETATION OF THE PROVISIONS OF SECTION 221 OF THE INCOME-TAX ACT , 1961, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT NO PENAL TY CAN BE LEVIED IF ON THE DATE OF ORDER IMPOSING PENALTY, THERE WAS NO TAX IN ARREARS ?' . THE COURT OBSERVED AS UNDER : IN VIEW OF THIS CONCLUSION OF OURS ON THE SCOPE OF SEC.221 OF THE ACT, THE QUESTION REFERRED TO THI S COURT WILL HAVE TO BE AND I S ANSWERED IN THE NEGATIVE AND AGAINST THE ASSESSEE. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SEC. 140A (1) AND THE EXPLANATION THERETO READ AS F OLLOWS: '140A. (1) WHERE ANY TAX IS PAYABLE ON THE BASIS OF ANY RETURN REQUIRED TO BE FURNISHED UNDER S. 115WD OR S. 115WH OR S. 139 OR S. 142 OR S. 148 OR S. 153A OR, AS THE CASE MAY BE, S. 158BC AFTER TAKING INTO ACCOUNT (I) THE AMOUNT OF TAX, IF ANY, ALREADY PAID UNDER A NY PROVISION OF THIS ACT; (II) ANY TAX DEDUCTED OR COLLECTED AT SOURCE; (III) ANY RELIEF OF TAX OR DEDUCTION OF TAX CLAIMED UNDER S. 90 OR S. 91 ON ACCOUNT OF TAX PAID IN A COUNTRY OUTSIDE I NDIA; (IV) ANY RELIEF OF TAX CLAIMED UNDER S. 90A ON ACCO UNT OF TAX PAID IN ANY SPECIFIED TERRITORY OUTSIDE INDIA REFER RED TO IN THAT SECTION; AND - - ITA 611/14 13 (V) ANY TAX CREDIT CLAIMED TO BE SET OFF IN ACCORDA NCE WITH THE PROVISIONS OF S. 115JAA, THE ASSESSEE SHALL BE LIA BLE TO PAY SUCH TAX TOGETHER WITH INTEREST PAYABLE UNDER A NY PROVISION OF THIS ACT FOR ANY DELAY IN FURNISHING T HE RETURN OR ANY DEFAULT OR DELAY IN PAYMENT OF ADVANCE TAX, BEF ORE FURNISHING THE RETURN AND THE RETURN SHALL BE ACCOM PANIED BY PROOF OF PAYMENT OF SUCH TAX AND INTEREST. EXPLANATION : WHERE THE AMOUNT PAID BY THE ASSESSEE UNDER THIS SUB-SECTION FALLS SHORT OF THE AGGREGATE OF TH E TAX AND INTEREST AS AFORESAID, THE AMOUNT SO PAID SHALL FIR ST BE ADJUSTED TOWARDS THE INTEREST PAYABLE AS AFORESAID AND THE BALANCE IF ANY, SHALL BE ADJUSTED TOWARDS THE TAX P AYABLE.' 8. AS EVIDENT, S. 140A PROVIDES THAT WHERE ANY TAX IS PAYABLE ON THE BASIS OF ANY RETURN TO BE FURNISHED, AFTER TAKI NG INTO ACCOUNT THE AMOUNT OF TAX, WHICH HAS ALREADY BEEN PAID, THE ASS ESSEE SHALL BE LIABLE TO PAY SUCH TAX TOGETHER WITH ANY INTEREST P AYABLE FOR, INTER ALIA, ANY DEFAULT OR DELAY IN THE PAYMENT OF ADVANCE TAX, BEFORE FURNISHING THE RETURN AND PROOF OF PAYMENT OF SUCH TAX AND INT EREST IS TO ACCOMPANY THE RETURN. AS PER THE EXPLANATION, WHERE PAYMENT MADE UNDER S. 140A(1) FALLS SHORT OF THE AGGREGATE OF TH E TAX AND INTEREST PAYABLE AS ENVISAGED BY S. 140A(1), THE AMOUNT PAID SHALL BE FIRST ADJUSTED TOWARDS THE INTEREST PAYABLE AND THE BALAN CE, IF ANY, SHALL - - ITA 611/14 14 BE ADJUSTED TOWARDS THE TAX PAYABLE. 9. SEC. 221 (1) AND THE EXPLANATION THERETO READ AS UNDER : '221. (1) WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEM ED 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-S. (2) OF S. 220, BE LIABLE, BY WAY OF PENALTY, TO PAY SUCH AMOUNT AS THE AO MAY DIRECT, AND IN THE CASE OF A C ONTINUING DEFAULT, SUCH FURTHER AMOUNT OR AMOUNTS AS THE AO M AY, FROM TIME TO TIME, DIRECT, SO, HOWEVER, THAT THE TOTAL A MOUNT OF PENALTY DOES NOT EXCEED THE AMOUNT OF TAX IN ARREARS: PROVIDED THAT BEFORE LEVYING ANY SUCH PENALTY, THE ASSESSEE SHALL BE GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD: PROVIDED FURTHER THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE AO THAT THE DEFAULT WAS FOR GOO D AND SUFFICIENT REASONS, NO PENALTY SHALL BE LEVIED UNDE R THIS SECTION. EXPLANATION : FOR THE REMOVAL OF DOUBT, IT IS HEREBY 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 BEFORE THE LEVY OF SUCH PENALTY HE HAS PAID THE TAX.' 10 THUS, IN CASE OF DEFAULT IN PAYMENT OF SELF-ASS ESSMENT TAX, THE ASSESSEE WOULD BE LIABLE TO PENALTY. THE EXPLANATIO N TO S. 221 (1) - - ITA 611/14 15 SPECIFICALLY PROVIDES THAT JUST BECAUSE HE HAD PAID THE TAX BEFORE THE LEVY OF PENALTY UNDER S. 221(1), HIS LIABILITY TO P AY PENALTY UNDER S. 221(1) SHALL NOT CEASE. 11. NOW, IN THE PRESENT CASE THE ASSESSEE FILED TH E RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 02.08.20 11 ADMITTING TOTAL INCOME OF ` 17,58,90,439/- AND QUANTIFIED SELF-ASSESSMENT TAX A T ` 4,78,48,708/-. AS PER INTIMATION U/S.143(1) OF THE ACT DATED 26.07.2012, THE TOTAL TAX AND INTEREST PAYABLE WAS ` 5,07,29,120/- AND THE TAX PAID UP TO 26.07.2012 AS PER THIS INTIM ATION WAS ` 37,57,671/- AND THUS, THE BALANCE TAX PAYABLE IS AT ` 4,69,71,249/-. SINCE THE ASSESSEE HAS NOT PAID THE SELF-ASSESSMENT TAX OF ` 4,78,48,708/-, THE A.O LEVIED PENALTY U/S.221(1) AT 10% OF ` 4,78,48,708/- WORKED OUT AT ` 47,84,870/-. HOWEVER, THE SAME WAS ENHANCED BY THE LEARNED COMMISSIONER OF INCOME TAX( A) AT 25% OF THAT AMOUNT WORKED OUT ` 1,19,62,175/-. 12. THE SECOND PROVISO TO SEC.221(1) OF THE ACT PR OVIDES THAT IF THE ASSESSEE PROVES TO THE SATISFACTION OF THE A.O THA T THE DEFAULT IN MAKING THE PAYMENT OF TAX WAS FOR GOOD AND SUFFICIE NT REASON, NO - - ITA 611/14 16 PENALTY IS LEVIED. THE CASE OF THE ASSESSEE HAS BE EN THAT THE ASSESSEE HAS BEEN EXPANDING BUSINESS DURING THE FIN ANCIAL YEAR 2008-09 TO 2010-11, RECEIVED COLLECTIONS OF ` 17,89,05,510/-. AS AGAINST THIS TOTAL OUTFLOW OF THE FUND FOR THESE FI NANCIAL YEARS WERE 42.15 CRORES. FURTHER, ASSESSEE HAS PAID THE ENTIRE AMOUNT FOR OF ` 3,63,39,561/- AND INTEREST OF ` 1,80,78,163/- BEFORE 04.01.2013 I.E., BEFORE PASSING OF PENALTY ORDER U/S.221(1) OF THE ACT ON 08.02.2013. THUS, THE EXPLANATION OF THE ASSESSEE IS THAT INSUFFICIENT FUNDS TO PAY THE SELF-ASSESSMENT TAX AND ACCORDING TO THE ASSESSEE, PAYMENT OF BUSINESS COMMITMENT IS FAR MOST IMPORTAN T THAN THE PAYMENT OF TAX, WHICH WAS DISCHARGED WITH INTEREST. 13. FIRST OF ALL, UN-DENYINGLY THE ASSESSEE WAS IN DEFAULT FOR MAKING THE PAYMENT OF TAX AS WELL AS INTEREST LEVIABLE U/S .234A, 234B & 234C OF THE ACT FOR WHICH REASON ONLY PENALTY U/S.2 21(1) OF THE ACT HAS BEEN LEVIED BY THE AUTHORITY. IN THE CASE OF NA CHIMUTHU INDUSTRIAL ASSOCIATION VS. LEARNED COMMISSIONER OF INCOME TAX (123 ITR 611)(MADRAS) WHEREIN IT WAS HELD THAT INCOME WAS EXEMPT AND THAT THERE WAS PAUCITY OF FUNDS ARE RELEVANT CIRCUMSTANC ES FOR DELETION OF PENALTY U/S.221(1) OF THE ACT. FURTHER, IT WAS SEE N THAT THE ASSESSEE - - ITA 611/14 17 IS NOT BEING HABITUAL DEFAULTER WITH NO ADVERSE HIS TORY TAINTED ON THE ASSESSEE GOES TO PROVE THAT THE DEFAULT WAS COMMITT ED WITHOUT MALAFIDE INTENTION AND UNDER EXTREME PAUCITY OF FUN DS, SO WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS AR E PITTED AGAINST EACH OTHER, THE CASE OF SUBSTANTIAL JUSTICE DESERVE S TO BE PREFERRED FOR OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF NON DELIBERATE DELAY AS HELD BY TH E SUPREME COURT IN THE CASE CULCUTTA, LAND ACQUISITION, ANATHNALH V . MST KITTJI REPORTED IN AIR 1987 SC 1353. FURTHER AS HELD BY C ULCUTTA HIGH COURT IN THE CASE OF SHREENIWAS & SONS VS. ITO REP ORTED IN [1974] 96 ITR 562 (CAL) THAT TAX' AND 'INTEREST' ARE DIF FERENT IN CHARACTER. UNDER SECTION 221 OF THE INCOME-TAX ACT, 1961, PENA LTY CAN BE IMPOSED ONLY WHEN THE ASSESSEE IS IN DEFAULT IN MAK ING PAYMENT OF TAX; THAT UNDER SECTION 2(43) OF THE ACT DEFINES TH E TAX; 'INTEREST' IS 'ADDITIONAL TAX' AND THAT SO, NO PENALTY COULD BE IMPOSED FOR DEFAULT IN PAYMENT OF INTEREST UNDER SECTION 221(1). THE S AME VIEW WAS CONFIRMED BY THE BOMBAY HIGH COURT IN THE CASE OF C .I.TVS. P.S.HATHIR RAMANI REPORTED IN 207 ITR 483 AND ALSO AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ASHABEN JAYEND RABHAI SHAH VS. ITO REPORTED IN [1988] 31 TTJ 211 (ITAT[AHM]) WHERE IN OBSERVED - - ITA 611/14 18 THAT THE WORD TAX SHOULD NOT BE INTERPRETED SO AS TO INCLUDE THEREIN INTEREST PAYABLE AND THAT THE AMOUNT OF PEN ALTY SHOULD BE WORKED OUT ONLY ON THE AMOUNT OF THE TAX REMAINING PAYABLE, AS FINALLY DETERMINED. FURTHER, IN THE CASE OF HINDUS TAN STEEL LTD. VS STATE OF ORISSA REPORTED IN 83 ITR 26(SC) WHEREIN H ELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTO RY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DE LIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIO US OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION; AND THAT PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. THE LEARNED ASSESSING OFFICER AS THE LEARNED COMMISSION ER OF INCOME TAX(A) WHILE PASSING THE PENALTY ORDER, THEY HAVE N OT GONE INTO ANY OF THE ABOVE ASPECTS OF THE MATTER, THOUGH THEY WER E PUT BEFORE THE AUTHORITIES BELOW IN DETAIL AS NOTED BY THE LEARNED COMMISSIONER OF INCOME TAX(A) IN HIS ORDER. 14. IN THE PRESENT CASE, THE ASSESSEES CONDUCT, A S DISCUSSED HEREIN ABOVE, DOES NOT AMOUNT TO THE ASSESSEE EITHE R HAVING ACTED DELIBERATELY IN DEFIANCE OF LAW OR IN CONSCIOUS DIS REGARD OF ITS OBLIGATION OR TO CONTUMACIOUS OR DISHONEST CONDUCT. THE EXPLANATION - - ITA 611/14 19 GIVEN BY THE ASSESSEE THAT PAUCITY OF FUND TO MAKE PAYMENT OF SELF- ASSESSMENT TAX ON THE REASON THAT THE ASSESSEE WAS IN THE EXPANSION OF THE PROJECT, WHICH REQUIRES A HUGE AMO UNT AND SURVIVAL AND CONTINUATION OF BUSINESS IS FAR MOST IMPORTANT AND IF THE ASSESSEE MISS THE OPPORTUNITY, ASSESSEE COULD NOT H AVE EARNED THAT OF INCOME DECLARED BY THE ASSESSEE SO AS TO PAY TAX THEREON. IN SUCH CIRCUMSTANCES WE FIND THAT THE LEVY OF PENALTY IN THIS CASE IS NOT PROPER. 15. THUS READING OF SEC.221 OF THE ACT SHOWS THAT THE EXPLANATION WHEREIN AS MAY NOT SHALL WHICH IS SUBJECTIVE OF THE FACT THAT IMPOSITION OF PENALTY IS NEITHER AUTOMATIC NOR MAND ATORY. THE DISCRETION IS LEFT WITH THE A.O TO DECIDE WHETHER T O IMPOSE PENALTY OR NOT, BY CONSIDERING THE EXPLANATION OF THE ASSESSEE . THIS FACT IS EVIDENT FROM THE PROVISIONS OF SECTION ITSELF THAT MANDATORY OPPORTUNITY OF BEING HEARD HAS TO BE GIVEN TO THE A SSESSEE BEFORE IMPOSITION OF PENALTY. THEREAFTER, THE A.O CONSIDER ING THE EXPLANATION OF ASSESSEE HAVE DISCRETION TO IMPOSE PENALTY. AS SEEN FROM THE DISCUSSION IN EARLIER PARA, ASSESSEE EXPLAINED THE REASONS. IN OUR OPINION, THERE EXISTS GOOD AND SUFFICIENT REASON NO T LEVY PENALTY. THE - - ITA 611/14 20 AO WAS NOT GOING BY ANY OF THE EXPLANATION GIVEN BY THE ASSESSEE WITH NON-SPEAKING ORDER TO IMPOSE PENALTY AT 10% OF SELF-ASSESSMENT TAX INCLUDING INTEREST. THE LD. CIT(A) ENHANCED IT TO 25% OF THAT ONE. THE ACTION OF BOTH THE AUTHORITIES IS NOT APPROPRIA TE. SINCE THE ASSESSEE SHOW CAUSE FOR DELAY IN PAYMENT OF SELF-AS SESSMENT TAX, ACCORDINGLY, WE DELETE THE PENALTY U/S.221(1) OF TH E ACT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON FRIDAY , THE 22 ND OF APRIL,2016 AT CHENNAI. SD/- SD/- ( '# $%& ' ) ( ' & ( ) ) *+,-..-/-01234-54-6-37 *+,-234-5889-4 :7 % '; /JUDICIAL MEMBER ';<=>>8?2@-2@A1BC14 '% /CHENNAI, D' /DATED, THE 22 ND APRIL,2016. MPO*/K S SUNDARAM 'E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I*7 /CIT(A) 4. I /CIT 5. GJ$ K /DR 6. $LM /GF.