Sh. Raj Kumar, Ludhiana V. DCIT, Ludhiana

ITA 632/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5150 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 24-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: AMANDEEP VATS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.632/CHD/2016 (ASSESSMENT YEAR : 2009-10) SH.RAJ KUMAR VS. THE D.C.I.T., B-XXIII-4905, RAM NAGAR, CENTRAL CIRCLE-II, SAMRALA ROAD, LUDHIANA. LUDHIANA. PAN: ACJPK8424F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMANDEEP VATS RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 22.05.2017 DATE OF PRONOUNCEMENT : 25.05.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER OF CIT(APPEALS)-5, LUDHIANA DATED 15.3.20 16 RELATING TO ASSESSMENT YEAR 2009-10. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THE PRESE NT CASE IS THE CONFIRMATION OF LEVY OF PENALTY UNDER SECTION 221(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) AMOUNTING TO RS.2,40,860/-. THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)- 5, LUDHIANA HAS ERRED IN REJECTING THE APPEAL OF THE APPELLANT AND SUBSTAINED THE IMPOSITION OF PENALTY O F RS.2,40,860/- U/S 221(1) OF THE INCOME TAX ACT, 196 1, IMPOSED BY THE LD. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, LUDHIANA WITHOUT GIVING ANY NOTICE AND 2 WITH GIVING ANY OPPORTUNITY TO THE APPELLANT. THERE FORE, ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-5, LUDHIANA IS ILLEGAL, UNCALLED FOR, UNWAR RANTED AND MAY BE QUASHED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)- 5,LUDHIANAHASERRED IN NOT REDUCING THE PENALTY OF RS.2,40,860/- IMPOSED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, LUDHIANA @ 100% ON TAX, U/S 221 (1) OF THE INCOME TAX ACT, 1961 WHI CH IS VERY EXCESSIVE. WHEREAS THE SAME ASSESSING OFFICER I. E. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, LUDHIANA HAS IMPOSED THE PENALTY @ 10% ON TAX IN THE OTHER CASES. THEREFORE, PENALTY @ 100% IMPOSED U/S 221(1)OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER AND SUBSTAINED BY THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS)-5, LUDHIANA IS ILLEGAL, UN CALLED FOR, UNWARRANTED AND MAY BE DELETED. THAT THE APPELLANT CRAVES TO LEAVE, TO ADD OR TO AM END ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED. 3. BRIEF FACTS RELEVANT TO THE CASE ARE THAT THE R ETURN FOR THE IMPUGNED ASSESSMENT YEAR WAS FILED DECLARIN G INCOME OF RS.15,03,990/- ON 21.10.2010. IT WAS NOT ICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD PAID ON LY RS.2,10,707/- AS TAXES WHILE BALANCE AMOUNT OF RS.2,40,860/- HAD REMAINED UNPAID AT THE TIME OF FI LING OF RETURN. CONSEQUENTLY, A SHOW CAUSE NOTICE WAS ISSU ED TO THE ASSESSEE, IN RESPONSE TO WHICH NO REPLY WAS FIL ED. THE ASSESSING OFFICER, THEREFORE, TREATED THE ASSESSEE AS DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF THE TAX/INTEREST WHICH REMAINED UNPAID AT THE TIME OF F ILING OF 3 RETURN AND, THEREFORE, IMPOSED PENALTY UNDER SECTIO N 221(1) AMOUNTING TO RS.2,40,860/-. 4. AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT (AP PEALS). THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT (APPE ALS) THAT THERE WAS NO CASE FOR LEVY OF ANY PENALTY UNDE R SECTION 221(1) SINCE THOUGH ADMITTEDLY TAX AMOUNTING TO RS.2,,40,860/- HAD NOT BEEN PAID AT THE TIME OF FIL ING OF RETURN OF INCOME, BUT THE SAME HAD BEEN PAID AFTER FEW MONTHS I.E. ON 24.1.2011 AND THE DELAY WAS ON ACCOU NT OF FINANCIAL DIFFICULTIES BEING FACED BY THE ASSESSEE. THE ASSESSEE CONTENDED THAT THE FINANCIAL DIFFICULTIES HAD ARISEN ON ACCOUNT OF SEARCH CONDUCTED ON THE ASSESSEES PR EMISES ON 14.10.2008 DURING THE COURSE OF WHICH A TOTAL SU RRENDER OF RS.1.08 CRORES HAD BEEN MADE BY THE GROUP IN DIF FERENT HANDS INCLUDING RS.13 LACS IN THE CASE OF THE ASSES SEE. THE TOTAL TAX LIABILITY ON ACCOUNT OF THE SURRENDER AMO UNTED TO RS.59,49,118/- WHICH THE GROUP PAID IN INSTALLMENTS ON AVAILABILITY OF CASH WITH THEM. THE ASSESSEE ALSO C ONTENDED THAT NO PROPER OPPORTUNITY WAS GIVEN TO THE ASSESSE E BY THE ASSESSING OFFICER BEFORE IMPOSING THE SAID PENALTY. THE ASSESSEE ALSO CONTENDED THAT IN THE CASE OF M/S MUK ESH UDYOG LIMITED, AN ASSESSEE IN THE SAME GROUP OF COM PANY, PENALTY HAD BEEN IMPOSED @ 10% ON THE SAME SET OF F ACTS AND CIRCUMSTANCES AND FURTHER IN THE CASE OF SHRI S ANJEEV JINDAL, ALSO A PART OF THE GROUP SEARCHED,THE PENAL TY HAD BEEN REDUCED TO NIL BY THE LEARNED CIT (APPEALS). 4 5. THE LEARNED CIT (APPEALS), AFTER CONSIDERING TH E ASSESSEES SUBMISSIONS, HELD THAT THE ASSESSEE HAD NOT SUPPORTED HIS REASON FOR NON PAYMENT OF TAX AT THE TIME OF FILING OF RETURN, WITH RELEVANT EVIDENCES. THE LEA RNED CIT (APPEALS), THEREFORE, HELD THAT THE PLEA OF THE ASS ESSEE COULD NOT BE ACCEPTED AND FURTHER HELD THAT THE EXP LANATION TO SECTION 221(1) OF THE ACT CLEARLY STATED THAT AN ASSESSEE WOULD NOT CEASE TO BE LIABLE TO PENALTY UNDER THIS SECTION MERELY FOR THE REASON THAT BEFORE THE LEVY OF SUCH PENALTY TAX HAD BEEN PAID. THE LEARNED CIT (APPEALS), THER EFORE, HELD THAT SINCE THE DEFAULT IN PAYMENT OF TAXES BEF ORE THE FILING OF RETURN WAS PROVED AND THE ASSESSEE HAD NO T SUBSTANTIATED THE REASON FOR DEFAULT, THE SUBMISSIO NS OF THE ASSESSEE WERE DEVOID OF MERITS AND HENCE UNACCEPTAB LE. HE, THEREFORE, CONFIRMED THE PENALTY LEVIED @ 100% OF THE TAX AMOUNTING TO RS.2,40,860/-. 6. AGGRIEVED BY THE SAME THE ASSESSEE HAS NOW COME UP IN APPEAL BEFORE US. DURING THE COURSE OF HEARI NG THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE ARGUMEN TS MADE BEFORE THE LOWER AUTHORITIES AND RELIED UPON HIS WR ITTEN SUBMISSIONS BEFORE THE LEARNED CIT (APPEALS) PLACED AT PAPER BOOK PAGE NOS. 1 TO 4. THE CONTENTION OF THE ASSESSEE ARISING FROM THE WRITTEN SUBMISSIONS ARE A S UNDER: A) THE UNPAID TAX OF RS.2,40,860/- WAS PAID WITHIN THREE MONTHS OF THE FILING OF THE RETURN OF INCOME . THE RETURN OF INCOME WAS FILED ON 21.101.2010 AND TAXES PAID ALONGWITH THE RETURN OF INCOME AMOUNTED 5 TO RS.2 LACS. THE BALANCE AMOUNT OF RS.2,40,860/- REMAINING UNPAID AT THE TIME OF FILING OF RETURN OF INCOME WAS PAID ON 24.1.2011. THE TAX WAS PAID ON HIS OWN BY THE ASSESSEE WITHOUT ANY RECOVERY PROCEEDING BEING INITIATED ON HIM. B) THE DELAY WAS ON ACCOUNT OF FINANCIAL CONSTRAINT S OF THE ASSESSEE ON ACCOUNT OF SEARCH CONDUCTED ON T HE GROUP DURING WHICH A SURRENDER OF RS.1.08 CRORES WA S MADE AND ALL LIQUID ASSETS INCLUDING CASH OF THE CR EDIT OF THE ASSESSEE WAS SEIZED BY THE DEPARTMENT. THER E WAS HUGE TAX LIABILITY ON ACCOUNT OF THE SURRENDERE D INCOME AMOUNTING TO RS.59,49,11/- WHICH WAS PAID A S AND WHEN THE FINANCES WERE AVAILABLE. C) THE BONAFIDES OF THE ASSESSEE ARE EVIDENT FROM THE FACT THAT ALL TAX LIABILITY HAD BEEN CLEARED A ND MONEY DEPOSITED AS SOON AS IT WAS AVAILABLE AND BEFORE ANY DISCOVERY MADE BY THE DEPARTMENT. D) THAT IN THE CASE OF M/S MUKEKSH UDYOG LIMITED, BELONGING TO THE GROUP, PENALTY @ 10% HAD BEEN LEVI ED ON THE SAME SET OF FACTS. COPY OF THE ORDER WAS PLA CED BEFORE US AT PAPER BOOK PAGE NO.5 E) THAT IN THE CASE OF SHRI SANJEEV JINDAL, ONE OF THE PERSONS BELONGING TO THE GROUP, PENALTY LEVIED @ 10 0% WAS DILUTED BY THE LEARNED CIT (APPEALS) DIRECTING THE ASSESSING OFFICER TO REWORK THE PENALTY @ 10% OF TH E TAX LATE PAID, WHICH ORDER HAS BEEN UPHELD BY THE 6 I.T.A.T. VIDE ITS ORDER IN ITA NO.29/CHD/2015 DATED 19.1.2016.COPIES OF BOTH THE ORDERS WERE PLACED BEF ORE US AT PAPER BOOK PAGE NO.10-18 & 7-9 RESPECTIVELY. 7. THE LEARNED D.R., ON THE OTHER HAND, RELIED UPO N THE ORDER OF THE LEARNED CIT (APPEALS) AND CONTENDE D THAT UNDENIABLY TAX AMOUNTING TO RS.2,40,860/- HAD NOT B EEN PAID AT THE TIME OF FILING OF RETURN OF INCOME ON 24.10.2010 AND THE ASSESSEE HAD NOT PROVED WITH DOCUMENTARY EVIDENCES THE FINANCIAL CONSTRAINTS FACED BY IT FOR NOT PAYING THE SAID TAX ON TIME. FURTHER THE LEARNED D .R. POINTED OUT THAT THE LEARNED CIT (APPEALS) HAD RIGH TLY APPRECIATED THE EXPLANATION TO SECTION 221(1) OF TH E ACT WHICH STATED THAT EVEN IF TAXES HAD BEEN PAID BEFOR E LEVY OF PENALTY, THE ASSESSEE COULD NOT ESCAPE THE LEVY OF PENALTY UNDER SECTION 221(1) OF THE ACT. 8. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELO W AND GONE THROUGH THE DOCUMENTS FILED BEFORE US. THE IS SUE BEFORE US PERTAINS TO LEVY OF PENALTY UNDER SECTION 221(1) OF THE ACT WHICH STATES THAT WHERE THE ASSESSEE IS IN DEFAULT OR DEEMED TO BE IN DEFAULT IN MAKING THE PAYMENT OF TA X, HE SHALL BE LIABLE BY WAY OF PENALTY TO PAY AN AMOUNT WHICH IN ANY CASE WILL NOT EXCEED THE AMOUNT OF TAXES IN ARR EARS. THE FACTS IN THE PRESENT CASE UNDISPUTEDLY ARE THAT AT THE TIME OF FILING OF RETURN OF INCOME ON 21.10.2010 T HE ASSESSEE HAD NOT PAID TAXES TO THE TUNE OF RS.2,40, 860/-. FURTHER IT IS NOT DISPUTED THAT THE SAID AMOUNT HAD BEEN 7 PAID BY THE ASSESSEE ON 24.1.2011. CLEARLY, THE AS SESSEE WAS DEEMED TO BE AN ASSESSEE IN DEFAULT AS PER THE PROVISIONS OF SECTION 140A(3) R.W.S. 140A(1) OF THE ACT WHICH STATES THAT THE ASSESSEE IS LIABLE TO PAY ALL DUE T AXES BEFORE FILING OF RETURN OF INCOME AND ANY DEFAULT IN THE SAME WOULD RESULT IN TREATING THE ASSESSEE AS DEEMED TO BE AN ASSESSEE IN DEFAULT. BEING SO DEEMED TO BE AN ASSE SSEE IN DEFAULT, UNDENIABLY THE ASSESSEE WAS LIABLE TO LEVY OF PENALTY UNDER SECTION 221(1) OF THE ACT. BUT AT TH E SAME TIME, WE FIND THAT UNDER IDENTICAL SET OF FACTS AND CIRCUMSTANCES PENALTY @ 10% WAS LEVIED IN THE CASE OF M/S MUKEKSH UDYOG LIMITED AFTER APPRECIATING THE FACT T HAT THE ASSESSEE HAD SUO MOTO DEPOSITED THE UNPAID TAXES ALONGWITH INTEREST WITHIN A REASONABLE PERIOD OF FI LING OF RETURN OF INCOME. FURTHER FOR THE SAME REASON, TH E LEARNED CIT (APPEALS) HAD REDUCED THE PENALTY LEVIED FROM 1 00% TO 10% OF THE TAXES UNPAID IN THE CASE OF SHRI SANJEEV JINDAL, A PERSON BELONGING TO THE GROUP SEARCHED IN THE CAS E OF THE ASSESSEE, WHICH WE FIND HAS BEEN UPHELD BY THE I.T. A.T. ALSO VIDE ITS ORDER IN ITA NO.29/CHD/2015. SINCE T HE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THAT IN THE AB OVE TWO CASES, WITH THE ASSESSEE HAVING DEPOSITED THE UNPAI D TAXES WITHIN THREE MONTHS OF THE FILING OF RETURN OF INC OME AND BEFORE ANY PROCEEDING FOR RECOVERY OF THE SAME WERE INITIATED AGAINST THE ASSESSEE OR BEFORE ANY PROCEE DING FOR LEVY OF PENALTY WERE INITIATED AGAINST THE ASSESSEE , WE SEE NO REASON WHY LEVY OF PENALTY @ 100% OF THE TAXES I N ARREARS SHOULD BE LEVIED IN THE PRESENT CASE WHEN I N TWO 8 OTHER CASES THE DEPARTMENT HAS ITSELF LEVIED PENALT Y @ 10% ONLY ACCEPTING THE BONAFIDES OF THE ASSESSEE TO PAY TAXES WHICH HAS BEEN PROVED BY THE FACT THAT IT SUO MOTO PAID THE TAXES WITHIN A REASONABLE TIME AFTER FILING OF RETURN OF INCOME. IN VIEW OF THE SAME, WE DIRECT THAT THE PE NALTY IN THE PRESENT CASE BE REDUCED TO 10% OF THE TAXES REM AINING UNPAID AT THE TIME OF FILING OF RETURN OF INCOME. IN VIEW OF THE SAME, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25 TH MAY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH