AGIO PHARMACEUTICALS LTD, MUMBAI V. ASST CIT 8(1), MUMBAI

ITA 6911/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70947 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 12-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: M SUBRAMANIUM
• Keywords: Bonafide belief; Retrospective amendment

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 6911/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2009-10 M/S. AGIO PHARMACEUTICALS LIMITED, 38, NANDIYOT INDUSTRIAL ESTATE, ANDHERI-KURLA ROAD, SAFED POOL, ANDHERI (EAST), MUMBAI 400072 % % % % / VS. THE ASSTT. COMMISSIONER OF INCOME TAX-8(1), MUMBAI. ' '# ./ ( ./ PAN/GIR NO. : AABCA 8426A ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , '/ APPELLANT BY SHRI M.SUBRAMANIUM *+') 7 , ' /RESPONDENT BY SHRI S.S.RANA % 7 8# / DATE OF HEARING : 04/09/2013 9 & 7 8# / DATE OF PRONOUNCEMENT : 04/09/2013 ': / O R D E R PER I.P.BANSAL,J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-16, MUMBAI DATED 05/07/2011 FOR ASSESSMENT YEAR 2009- 10. GROUND OF APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) XVI ERRED IN W RONGLY UPHOLDING THE PENALTY OF RS. 51,338/ - (FIFTY ONE THOUSAND THREE HUNDRED AND THIRTY EIGHT ONLY) U/S. 22 1(1) OF THE INCOME TAX ACT 1961, IMPOSED BY THE LD. ASSESSING OFFICER WHICH YOUR HONOUR IS REQUESTED TO ORDER TO DELETE AND OBLIGE. ./ I.T.A. NO. 6911/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2009-10 2 2. IT MAY BE MENTIONED HERE THAT THERE IS A DELAY O F ONE DAY IN FILING THE APPEAL. THE ASSESSEE FILED AN APPLICATION FOR CON DONATION OF DELAY. AFTER HEARING BOTH THE PARTIES WE CONDONE THE DELAY AND PROCEED T O DECIDE THE APPEAL FILED BY THE ASSESSEE ON MERITS. 3. ACCORDING TO COMPUTATION OF INCOME FILED ALONG W ITH RETURN THE ASSESSEE WAS REQUIRED TO PAY AN AMOUNT OF RS.5,13,380/- ON A CCOUNT OF SELF ASSESSMENT TAX PAYABLE UNDER SECTION 140A OF THE INCOME TAX AC T, 1961(THE ACT). THE RETURN WAS FILED ON 28/9/2009. HOWEVER, SELF ASSESSMENT T AX WAS NOT PAID. IT WAS PAID ON 19/01/2010. ACCORDINGLY, AO INITIATED PENALTY P ROCEEDINGS UNDER SECTION 221(1) OF THE INCOME TAX ACT, 1961 VIDE NOTICE DA TED 12/1/2010, ASKING THE ASSESSEE TO SHOW CAUSE AS TO WHY SUCH PENALTY SHOUL D NOT BE LEVIED. IN RESPONSE TO SUCH NOTICE THE REPRESENTATIVE OF THE ASSESSEE F ILED A COPY OF CHALLAN EVIDENCING PAYMENT OF RS.5,13,381/- PAID ON 19/1/20 10 AND IT WAS REQUESTED THAT PENALTY PROCEEDINGS SHOULD BE DROPPED. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS GOING THROUGH A ROUGH PHASE DUE TO THE ACTION OF THE GOVERNMENT REGARDING WITHDRAWAL OF DEDUCTION UNDER SECTION 80H HC ON DEPB FROM RETROSPECTIVE EFFECT. HOWEVER, AO DID NOT ACCEPT S UCH SUBMISSION OF THE ASSESSEE ON THE GROUND THAT FINANCIAL POSITION OF THE ASSES SEE IS SOUND AND HE PROCEED TO LEVY THE PENALTY, WHICH IS COMPUTED @10% OF THE AMO UNT PAYABLE UNDER SECTION 140A. LD. CIT(A) HAS SUSTAINED SUCH PENALTY. ASSE SSEE IS AGGRIEVED, HENCE, IN APPEAL. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT AS A RESULT OF RETROSPECTIVE AMENDMENT THE TAX LIABILITY OF THE AS SESSEE IN RESPECT OF ASSESSMENT YEAR 2000-01, 2001-02 AND 2003-04 WAS CUMULATIVELY AT A SUM OF RS.55,09,840/-. THE ASSESSEE STARTED PAYING THE SAI D LIABILITY IN INSTALLMENTS IN RESPECT OF ALL THESE YEARS. HE IN THIS REGARD REFE RRED TO THE FOLLOWING CHART: ./ I.T.A. NO. 6911/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2009-10 3 ASSESSMENT YEAR OTHER PAYMENTS PAYABLE I N INSTALLMENT INSTALLMENT NO. OF INSTALLMENTS AMOUNT TOTAL 2000-01 702,568.00 97,207.00 48 5,36 8,504.00 2001-02 2,907,272.00 - 0 2,907,27 2.00 2002-03 - 47,282.00 48 2,269 ,536.00 2003-04 1,900,000.00 41,010.00 48 2,868 ,480.00 2004-05 - 12,361.00 39 482,07 9.00 TOTAL 5,509,840.00 197,860.00 14,895,871.00 THE CHART IS PLACED AT PAGE 7 OF THE PAPER BOOK AND DETAILS OF PAYMENTS MADE IN RESPECT OF AFOREMENTIONED INSTALLMENTS ARE PLACED A T PAGE 8 TO 16 OF THE PAPER BOOK. IT IS THE CASE OF LD. AR THAT DEFAULT OF TH E ASSESSEE IN NON-PAYMENT OF SELF ASSESSMENT TAX WAS A VENIAL BREACH OF PROVISIONS OF LAW. IT WAS NOT DELIBERATE AND ACCORDING TO THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA, 83 ITR 26 (SC), NO PENALTY SHOULD HAVE BEEN LEVIED. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. ACCORDING TO SECTION 221(1) WHEN AN AS SESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING PAYMENT OF TAX, HE SHALL, IN ADDITION TO THE AMOUNT OF ARREARS AND THE AMOUNT OF INTEREST PAYABL E UNDER SUB-SECTION (2) OF SECTION 220 BE LIABLE, BY WAY OF PENALTY, TO PAY SU CH AMOUNT AS THE AO MAY DIRECT, PROVIDED THAT THE TOTAL AMOUNT OF PENALTY I N CASE OF CONTINUING DEFAULT DOES NOT EXCEED AMOUNT OF TAX IN ARREARS. IN THE P RESENT CASE, IT IS NOT A CONTINUING DEFAULT AND PENALTY HAS BEEN LEVIED BY AO @10% OF THE TAX IN ARREARS. THE FIRST PROVISO TO SECTION 221(1) PROVI DES THAT A REASONABLE OPPORTUNITY OF HEARING SHOULD BE GIVEN TO THE ASSE SSEE BEFORE LEVYING SUCH PENALTY. SECOND PROVISO TO SECTION 221(1) DESCRIBE THAT PENALTY SHALL NOT BE LEVIED IN A CASE WHERE THE ASSESSEE IS ABLE TO PROV E TO THE SATISFACTION OF AO THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS. E XPLANATION TO SECOND PROVISO, ./ I.T.A. NO. 6911/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2009-10 4 FOR THE PURPOSE OF REMOVAL OF DOUBT, DECLARES THAT ASSESSEE SHALL NOT BE CEASED TO BE LIABLE FOR PENALTY UNDER SECTION 221(1) MERELY B Y REASON OF THE FACT THAT BEFORE LEVY OF SUCH PENALTY THE ASSESSEE HAS PAID T HE TAXES. THEREFORE, THE ASSESSEE CAN ESCAPE FROM LEVY OF PENALTY ONLY IN TH E CIRCUMSTANCES IF HE IS ABLE TO PROVE TO THE SATISFACTION OF AO THAT THE DEFAULT WA S FOR GOOD AND SUFFICIENT REASONS. THERE CANNOT BE ANY DOUBT THAT PROVISION S OF SECTION 221(1) ARE PENALTY PROCEEDINGS, THEREFORE, ARE IN THE NATURE O F QUASI CRIMINAL PROCEEDINGS. SUCH PENALTY IS LEVIABLE IN RESPECT OF FAILURE OF T HE ASSESSEE TO CARRY OUT A STATUTORY OBLIGATION AND ACCORDING TO AFOREMENTIONE D DECISION OF HONBLE SUPREME COURT SUCH PENALTY SHOULD NOT BE ORDINARLY IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED, DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT OF CONTUMACIOUS OR DISHONEST, OR ACTED IN A CONSCIOU S DISREGARD OF ITS OBLIGATION. IT IS ALSO HELD THAT PENALTY WILL NOT ALSO BE IMPOS ED MERELY BECAUSE IT IS LAWFUL TO DO SO. IT IS A MATTER OF DISCRETION OF THE AUTH ORITY TO BE EXERCISED JUDICIOUSLY AND ON CONSIDERATION OF THE RELEVANT CIRCUMSTANCES. IT IS ALSO HELD THAT EVEN IF MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, W HEN THERE IS TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE BREACH FLOWS FROM A BONAFIDE BELIEF THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRE SCRIBED BY THE STATUTE. 6.1 LOOKING INTO THE FACTS OF THE PRESENT CASE IN T HE LIGHT OF AFOREMENTIONED DECISION OF HONBLE SUPREME COURT, WE ARE OF THE O PINION THAT LEVY OF PENALTY IS NOT JUSTIFIED. PROVISIONS OF SECTION 221(1) ARE NO T ABSOLUTE AS THE WORDS USED IN THE PROVISIONS IS NOT SHALL BUT MAY. THIS GIVE A DISCRETION TO THE AUTHORITY VESTED WITH THE POWER OF LEVY OF PENALTY NOT TO LEV Y PENALTY ALSO. THE ASSESSEE WAS SADDLED WITH A TAX LIABILITY OF MORE THAN RS.55 .00 LACS IN RESPECT OF EARLIER YEARS IN VIEW OF RETROSPECTIVE AMENDMENT INTO THE STATUTE. THE ASSESSEE HAS BEEN PAYING SAID LIABILITY IN INSTALLMENTS AND IN T HE PROCESS, IT IS POSSIBLE THAT ASSESSEE MAY HAVE FORGOTTEN TO MAKE THE PAYMENT OF SELF ASSESSMENT TAX WHICH WAS PAID IMMEDIATELY WHEN THE FACT REGARDING NON-PAYMENT CAM E TO THE NOTICE OF THE ASSESSEE. THEREFORE, ACCORDING T O THE FACTS OF THE CASE IT CANNOT BE SAID THAT THE ASSESSEES ACT WAS DELIBERATE IN ./ I.T.A. NO. 6911/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR: 2009-10 5 DEFIANCE OF LAW OR ASSESSEE IS GUILTY OF A CONDUCT WHICH IS CONTUMACIOUS OR DISHONEST. THEREFORE, WE HOLD THAT ASSESSEE I S NOT LIABLE FOR PENALTY TO BE LEVIED UNDER SECTION 221(1) OF THE ACT. WE DELETE THE SAME AND THE APPEAL IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/09/2013 . ': 7 & #' ; <%= 04/09/2013 7 > SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; <% DATED 04/09/2013 ': ': ': ': 7 77 7 *8?@ *8?@ *8?@ *8?@ A'@&8 A'@&8 A'@&8 A'@&8 / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. B ( ) / THE CIT(A)- 4. B / CIT 5. @C> *8% , , / DR, ITAT, MUMBAI 6. >D E / GUARD FILE. ':% ':% ':% ':% / BY ORDER, +@8 *8 //TRUE COPY// F FF F / G G G G (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . .VM , SR. PS