KUNDAN JEWELLERS P. LTD, MUMBAI V. ITO 8(2)(2), MUMBAI

ITA 6649/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9292 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 6649/MUM/2010 (ASSESSMENT YEAR: 2007-08) KUNDAN JEWELLERS PVT. LTD. 223, S.V. ROAD, ANDHERI (WEST), MUMBAI - 400 053 [PAN: AABCK 5770 H] VS. ITO 8(2)(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. GOPAL RESPONDENT BY : SHRI A.K. NAYAK DATE OF HEARING: 20.11.2012 DATE OF PRONOUNCEMENT: 12.12.2012 O R D E R PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE APP ELLATE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-17, MUMBAI (C IT(A) FOR SHORT) DATED 24.06.2010 FOR THE ASSESSMENT YEAR (AY) 2007-08, DI SMISSING THE ASSESSEES APPEAL CONTESTING THE LEVY OF PENALTY U/S. 221(1) OF THE I NCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) BY THE ASSESSING OFFICER (AO) VIDE ORD ER DATED 10.02.2009. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME FOR THE YEAR ON 14.11.2007, ADMITTING AN INCOME OF RS.177.6 1 LACS AND, FURTHER, DISCLOSING A LIABILITY TOWARD SELF-ASSESSMENT TAX AT RS.45 LACS. AS THE SAID TAX HAD NOT BEEN PAID IN TERMS OF SECTION 140A(1), THE ASSESSEE WAS SHOW CAU SED VIDE LETTER DATED 20.01.2009, AS TO WHY PENALTY U/S. 221(1) R/W SECTION 140A(3) O F THE ACT BE NOT LEVIED FOR FAILURE ITA NO. 6649/MUM/2010 (AY 2007-08) KUNDAN JEWELLERS PVT. LTD. V. ITO, MUMBAI 2 TO PAY THE TAX. THE ASSESSEE PLEADED POOR FINANCIAL CONDITION AS A REASON FOR THE SAID FAILURE, WHICH, HOWEVER, WAS FOUND BY THE AO AS NOT BORNE OUT BY THE FACTS ON RECORD; THE FINANCIAL STATEMENTS ON THE CONTRARY REVEALING SUBSTANTIAL INCOME. EVEN THE ASSESSEES CONDUCT WAS FOUND BY HIM AS NOT BONA FIDE INASMUCH AS IT HAD NOT BROUGHT ITS STATED POOR FINANCIAL CONDITION TO THE NOTICE O F THE DEPARTMENT ON THE FILING OF THE RETURN NOR ENTERED INTO ANY ARRANGEMENT THEREWITH F OR LIQUIDATING ITS ADMITTED LIABILITY. HE, ACCORDINGLY, IMPOSED A PENALTY @ 5% OF THE TAX DUE, I.E., AT RS.2,25,000, FOR NON- PAYMENT OF THE ADMITTED TAX. THE ASSESSEE, IN APPEA L, SOUGHT TO SUBSTANTIATE ITS CASE WITH REFERENCE TO ITS FINANCIALS, CLAIMING THAT ITS PROFITS HAD BEEN ABSORBED IN THE STOCK OF GOLD AND DIAMOND JEWELLERY (THE ASSESSEES STOCK -IN-TRADE), WHICH ON ACCOUNT OF A QUANTUM INCREASE IN THE PRICES DURING THE RELEVANT YEAR HAD RESULTED IN AN INCREASE IN THE LEVEL OF ITS STOCK HOLDING BY RS. 101.52 LACS F OR THE YEAR. IN FACT, ITS LOAN LIABILITY PORTFOLIO HAD ALSO WITNESSED AN INCREASE BY RS.138. 77 LACS DURING THE RELEVANT YEAR. THE LD. CIT(A) DID NOT FIND MUCH MERIT IN THE ASSES SEES CASE; ITS FINANCIALS DISCLOSING A BURGEONING ECONOMIC ACTIVITY INSTEAD, I.E., AS AG AINST ITS CONTRACTION OR CONSTRICTION. HE, THEREFORE, CONFIRMED THE PENALTY AS LEVIED, REL YING ON THE DECISION IN THE CASE OF CIT V . HYDROFLEX EQUIPMENT LTD. , 200 CTR (BOM) 551 AND CIT V. MUNNILAL & CO ., 204 CTR 529 (RAJ). AGGRIEVED, THE ASSESSEE IS IN F URTHER APPEAL. 3. BEFORE US, WHILE THE ASSESSEE REITERATED ITS STA ND, I.E., AS BEFORE THE AUTHORITIES BELOW, THE LD. DR WOULD SUBMIT THAT THE ASSESSEE HA D ABYSMALLY FAILED TO SHOW ANY CAUSE, MUCH LESS SUFFICIENT CAUSE, FOR THE DEFAULT IN NOT DISCHARGING ITS ADMITTED LIABILITY TO SELF-ASSESSMENT TAX. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 THAT THE ASSESSEE-COMPANY WAS LIABLE TO SE LF-ASSESSMENT TAX U/S. 140A(1), IS AN UNDISPUTED, ADMITTED FACT, WHICH REMAINED UNPAID EV EN AS THE ASSESSEE FILED ITS RETURN. IT WAS ACCORDINGLY RIGHTLY DEEMED TO BE IN DEFAULT BY THE AO, IN VIEW OF SECTION 140(3) OF THE ACT, WHICH PROVIDES THUS, BOTH IN RES PECT OF UNPAID TAX AS WELL AS THE ITA NO. 6649/MUM/2010 (AY 2007-08) KUNDAN JEWELLERS PVT. LTD. V. ITO, MUMBAI 3 INTEREST PAYABLE UNDER THE ACT. THE ONLY QUESTION, THEREFORE, THAT NEEDS TO BE EXAMINED IS WHETHER, THE PENALTY U/S. 221(1) BEING NOT AUTOM ATIC, THE ASSESSEE HAS BEEN ABLE TO EXHIBIT GOOD AND SUFFICIENT REASON/S FOR THE EXERCI SE BY THE AO OF HIS DISCRETION IN NOT LEVYING THE SAID PENALTY, WHICH HAS BEEN LEVIED AT 5% OF THE TAX DUE OR THE SUM FOR WHICH THE ASSESSEE WAS IN DEFAULT (RS.45 LACS). WE FIND NO SUCH REASON/S FURNISHED BY THE ASSESSEE. IT MAY BE FACING A LIQUIDITY PROBLEM, BUT IT IS FOR THE ASSESSEE TO ARRANGE IT AFFAIRS IN A MANNER WHEREBY IT IS ABLE TO DISCHA RGE ITS STATUTORY OBLIGATIONS - OF WHICH WAS ONLY ACUTELY AWARE, IN TIME. IT IS NOT A CASE WHERE ITS MONIES HAD BEEN STUCK UP IN ANY ILLIQUID ASSETS, BUT RATHER WERE CO NSUMED IN INVENTORIES, WITH GOLD BEING RATHER A VERY SALEABLE AND LIQUID COMMODITY, SO THAT AS IT APPEARS EVEN THE LIQUIDITY PROBLEM THAT THE ASSESSEE WAS APPARENTLY FACING WAS ONLY OF ITS OWN MAKING. NEED FOR WORKING CAPITAL FUNDS IN BUSINESS IS ALWAY S THERE, MORE SO WHERE THE SAME IS IN AN EXPANSIONARY MODE, BEING RATHER HIGHER THEREA T, PRESENTING LIQUIDITY ISSUES, WHICH WOULD BE REQUIRED TO BE PROPERLY MANAGED, VIZ . BY RAISING CAPITAL BORROWED OR OTHERWISE, FOR THE PURPOSE AND, IN ANY CASE, CAN NOT FORM A GROUND FOR NON-DISCHARGE OF THE STATUTORY LIABILITIES IN TIME. WE ARE, THERE FORE, IN COMPLETE AGREEMENT WITH THE AUTHORITIES BELOW THAT THE ASSESSEE HAD ABYSMALLY F AILED TO SHOW ANY GOOD AND SUFFICIENT REASON FOR BEING IN DEFAULT. THE NON-EXE RCISING OF THE DISCRETION IN LEVY OF PENALTY U/S. 221(1) BY THE AO IS THUS JUSTIFIED AND , THEREFORE, UPHELD. 4.2 THE AR, ON SUCH A VIEW BEING EXPRESSED BY THE B ENCH DURING HEARING ITSELF, PLEADED FOR A REDUCTION IN QUANTUM OF PENALTY, WHIC H HAS WITHOUT DOUBT BEEN REASONABLY LEVIED AT 5% OF THE AMOUNT IN DEFAULT. T OWARD THIS, WE FIND THAT THE ASSESSEE HAD, MUCH PRIOR TO THE ISSUE OF SHOW CAUSE NOTICE ON 20.01.2009, DISCHARGED ITS LIABILITY IN FULL, I.E., BY 23.09.2008 (REFER S CHEDULE OF PAYMENT OF ADVANCE TAX AT PARA 3.1 OF THE IMPUGNED ORDER). IN FACT, THE PAYME NT OF THE OUTSTANDING TAX, WHICH WAS MOSTLY IN INSTALLMENTS OF RS.5 LACS, STARTED IM MEDIATELY AFTER THE FILING OF THE RETURN, WITH RS.35 LACS OF THE DEFAULT AMOUNT OF RS .45 LACS HAVING BEEN PAID BY 31.12.2007 I.E., WITHIN A MONTH AND HALF OF THE FILING OF THE RETURN, EXHIBITING A ITA NO. 6649/MUM/2010 (AY 2007-08) KUNDAN JEWELLERS PVT. LTD. V. ITO, MUMBAI 4 POSITIVE ATTEMPT AND REGARD BY THE ASSESSEE FOR ITS OBLIGATIONS. THE ASSESSEES BONA FIDES , OR RATHER CONDUCT, DOUBTED BY THE AO ON THE BASIS OF NON DISCLOSURE OF THE DEFAULT, AND THAT IT DID NOT SUO MOTU ENTER INTO AN ARRANGEMENT WITH THE REVENUE FOR LIQUIDATING ITS LIABILITY, THUS, CANNOT BE CALLED I NTO QUESTION. THE ASSESSEE HAS, IT MUST BE BORNE IN MIND, ALSO PAID INTEREST ON THE DELAYED PAYMENT OF TAX, AS CONFIRMED BY THE LD. AR. AS SUCH, THOUGH SUSTAINABLE FOR THE REA SON THAT THE ASSESSEE HAS NOT SHOWN ANY JUSTIFIABLE CAUSE FOR THE DEFAULT, WE CONSIDER THAT THERE IS SCOPE FOR REDUCTION IN THE QUANTUM OF PENALTY, INASMUCH AS THE SAME IS TO BE UNDER THE CIRCUMSTANCES ONLY SYMBOLIC. 5. WE, ACCORDINGLY, DIRECT FOR A REDUCTION IN THE P ENALTY TO 3% OF THE AMOUNT IN DEFAULT, AS AGAINST THE LEVIED RATIO OF 5% THEREOF, WHICH WOULD IN OUR VIEW SERVE THE ENDS OF JUSTICE. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF DECEMBER, 2012 SD/- (B.R. MITTAL) JUDICIAL MEMBER SD/- (SANJAY ARORA) ACCOUTANT MEMBER MUMBAI, DATE: 12/12/2012 COPY TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A)- 17, MUMBAI. 4. THE CIT CONCERNED 5. THE D.R. A BENCH, MUMBAI. 6. COPY TO GUARD FILE. BY ORDER ASSTT. REGISTRAR I.T.A.T., MUMBAI RASIKA