MAKSON INDUSTRIES P.LTD, M.P. V. DCIT 8(2), MUMBAI

ITA 698/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8360 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 26-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 28-01-2013
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: KAPIL K JAIN
• Keywords: Opportunity of being heard
• Section: 153A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO. 698/MUM/2013 (ASSESSMENT YEAR: 2010-11) MAKSON INDUSTRIES PVT LTD 6A, SECTOR D, AKVN INDUSTRIAL AREA MADHYA PRADESH 462046 VS DY.CIT 8(2), MUMBAI PAN : AADCM3354P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI KAPIL K JAIN RESPONDENT BY SHRI SUMAN KUMAR DATE OF HEARING : 12-01-2017 DATE OF ORDER : 13 -02-2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-17 [HEREINAFTE R CALLED CIT(A)], MUMBAI DATED 06-11-2012 PASSED AGAINST THE PENALTY ORDER OF THE AO U/S 221(1) R.W.S. 140A(3) OF THE ACT DATED 18-08-2011 F OR A.Y. 2010-11 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OF INCOME TAX (A) WAS NOT JUSTIFIED IN NOT HOLDING THAT THE AO DID NOT HAVE JURISDICTION TO INITIATE P ENALTY PROCEEDINGS AS ALL PROCEEDINGS WERE ABETTED AS PROV IDED U/S 153A 2 I.T.A. NO.698/MUM/2013 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OF INCOME TAX (A) WAS NOT JUSTIFIED IN NOT HOLDING THAT THE AO DID NOT HAVE JURISDICTION TO INITIATE P ENALTY PROCEEDINGS AS THE CASE OF THE ASSESSEE WAS CENTRAL IZED WITH DCIT CENTRAL CIRCLE 1(3), AHEMADABAD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED COMMISSIONER OF INCOME TAX (A) WAS NOT JUST IFIED IN NOT HOLDING THAT THE AO WAS NOT JUSTIFIED IN IMPOSI NG PENALTY OF RS. 225334/-. 2. THE BRIEF BACKGROUND OF THE CASE ARE THAT THERE WAS DELAY IN DEPOSIT OF SELF ASSESSMENT TAX BY THE ASSESSEE WHICH WAS CO NFIRMED BY LD. CIT(A). DURING THE COURSE OF HEARING IT WAS STATED BY LD. C OUNSEL OF THE ASSESSEE THAT DETAILED SUBMISSIONS WERE MADE BEFORE THE LOWE R AUTHORITIES WHEREIN REASONS WERE EXPLAINED IN DETAIL CAUSING DE LAY IN PAYMENT OF SELF ASSESSMENT TAX BY THE ASSESSEE. BUT WITHOUT DISCUS SING OR DEALING WITH THE REASONS NARRATED BY THE ASSESSEE PENALTY WAS LE VIED BY THE AO AND CONFIRMED BY LD. CIT(A). IT WAS ALSO SUBMITTED THA T ASSESSEE DEPOSITED THE ENTIRE AMOUNT OF TAX ALONG WITH THE INTEREST AS PER LAW VOLUNTARILY. THERE WAS NO MALAFIDE INTENTION ON THE PART OF THE ASSESS EE FOR MAKING LATE DEPOSIT OF TAX. UNDER THESE CIRCUMSTANCES, THE AO OUGHT NOT TO HAVE LEVIED THE PENALTY. PER CONTRA, THE LD. DR RELIED U PON THE ORDERS OF THE LOWER AUTHORITIES. 2. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES. IT IS ADMITTED FACT ON RECORD THAT THE ENTIRE TAX H AS BEEN DEPOSITED BY THE ASSESSEE VOLUNTARILY ALONG WITH THE STATUTORY INTER EST. THE ASSESSEE EXPLAINED THE REASONS CAUSING DELAY IN DEPOSIT OF T AX BEFORE THE AO AS WELL AS BEFORE THE LD. CIT(A) AS UNDER:- THE APPELLANT COMPANY HAS SUBMITTED A LETTER DATED 28/03/2011 GIVING THE DETAILED REASONS FOR THE DELA Y IN 3 I.T.A. NO.698/MUM/2013 PAYMENT DUE TO HEAVY RAINS, PART STRIKE TRUCKERS ST RIKE IN LAST QUARTER OF 2010, DUE TO WHICH HEAVY PORT CONGESTION OCCURS WHICH RESULTED IN DELAY OF SHIPMENTS AND CAUSING DE LAY IN RECOVERY OF REVENUE. DUE TO THIS THERE WERE LIQUIDITY CRISES RESULTING IN NON PAYMENT OF TAXES. THE APPELLANT ALSO APPROACHED TO DEVELOPMENT CREDIT BANK TO PROVIDE US ADVANCE CREDI T FACILITY OF RS. 100 LACS TO FACE THE LIQUIDITY CRISIS AND IT IS ONLY AFTER THE BANK FACILITY, THE APPELLANT COULD PAY THE SELF ASSESSME NT TAXES. WE ARE ALSO ENCLOSING SANCTION LETTER OF THAT SAID BAN K. WE THEREFORE, PLEADED BEFORE YOUR HONOUR THAT THE APPELLANT HAS PREVENTED DUE TO REASONS BEYOND ITS C ONTROL FROM TIMELY PAYMENT OF TAXES AND THEREFORE, THE LEV Y OF PENALTY IS VERY HARSH AND UNJUSTIFIED ON THE MERITS OF THE CASE. FURTHER, EVEN ON THE LEGAL ASPECTS OF THE ISSUE, OF PENALTY IS TOTALLY BAD IN LAW, NULL AND VOID AND LIABLE TO BE QUASHED. 4. THUS, FROM THE ABOVE, IT IS CLEAR THAT THERE WERE R EASONS OF HEAVY RAINS AND STRIKE BY THE TRUCKERS WHICH LED TO DELAY IN SHIPMENTS AND CAUSING DELAY IN RECOVERY OF REVENUE BY THE ASSESSE E. ALL THESE FACTORS LED TO LIQUIDITY CRISIS RESULTING INTO DELAY IN PAYMENT OF TAXES. IT IS ALSO STATED BY THE ASSESSEE THAT ASSESSEE HAD TO ULTIMATELY APP ROACH DEVELOPMENT CREDIT BANK TO OBTAIN CREDIT FACILITIES AND AFTER O BTAINING THE CREDIT FACILITIES ONLY ASSESSEE COULD MAKE THE PAYMENT OF TAX. IT IS NOTED THAT ASSESSEE HAS BROUGHT ON RECORD VARIOUS EVIDENCES IN SUPPORT OF THESE FACTS. COPY OF APPLICATION FILED TO BANK FOR OBTAI NING TEMPORARY OVERDRAFT WAS FILED BEFORE US. OUR ATTENTION WAS ALSO DRAWN UPON THE COPY OF EMAIL RECEIVED BY THE ASSESSEE FROM LOGISTICS SERVICE PRO VIDER REGARDING STRIKE OF TRANSPORTERS AND GM (OPERATIONS) ABOUT TELANGANA AG ITATION RESULTING IN BANDH AND DISTURBANCES. NOTHING WAS BROUGHT ON RECORD B Y THE LOWER AUTHORITIES CONTRADICTING ANY OF THESE EVIDENCES. IT IS NOTED THAT VERIFICATION OF ALL THESE FACTS BY BOTH THE AUTHORI TIES WAS VERY MUCH FEASIBLE BUT NONE OF THE AUTHORITIES CHOSE TO MAKE VERIFICATION OF THESE 4 I.T.A. NO.698/MUM/2013 FACTS. IN FACT, LD. CIT(A) CONFIRMED THE PENALTY W ITHOUT MAKING ANY DISCUSSION AT ALL AND BY SIMPLY STATING THAT IN HIS VIEW AO WAS JUSTIFIED IN LEVYING THE PENALTY. THUS, THE REASONS EXPLAINED B Y THE ASSESSEE REMAIN UNCONTROVERTED. 5. IN OUR CONSIDERED VIEW, APPROACH FOLLOWED BY THE AO IN LEVYING PENALTY AND BY LD. CIT(A) IN CONFIRMING THE SAME WA S HIGHLY UNFAIR AND UNJUSTIFIED. IT IS NOTED THAT FIRST PROVISO TO SEC TION 221 PROVIDES THAT BEFORE LEVYING PENALTY U/S 221, THE ASSESSEE SHALL BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. FURTHER, SECOND PROVISO PROVIDES THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE AO T HAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS, NO PENALTY SHALL BE LE VIED UNDER THIS SECTION. THUS, AO WAS DUTY BOUND TO CONSIDER THE MATERIAL BR OUGHT ON RECORD BY THE ASSESSEE ON OBJECTIVE BASIS. BEFORE LEVYING THE PENALTY, IT WAS ALSO OBLIGATORY ON THE PART OF LOWER AUTHORITIES TO ARRI VE AT THE CONCLUSION THAT THERE WERE NO GOOD AND SUFFICIENT REASONS FOR THE D EFAULT. UNFORTUNATELY, NO SUCH EXERCISE HAS BEEN DONE BY EITHER OF THE LOW ER AUTHORITIES, WHICH MAKES LEVY OF PENALTY ILLEGAL PER SE. 6. FURTHER, IN OUR VIEW, THE OBJECT OF BRINGING PENAL PROVISIONS ON THE STATUTE WAS TO BRING A DETERRENT EFFECT. THE INTEN TION OF THE LEGISLATURE IS NOT TO MOP UP ADDITIONAL RESOURCES THROUGH PENAL PR OVISIONS. THEREFORE, LEVY OF PENALTY BY INVOKING PENAL PROVISIONS EVEN I N THOSE CASES, WHERE THE DEFAULT OCCURRED DUE TO REASONS BEYOND THE CONT ROL OF THE ASSESSEE WOULD CAUSE AVOIDABLE HARDSHIPS TO THE TAXPAYERS WI THOUT ACHIEVING THE OBJECTIVE OF THE LEGISLATURE. WE FIND THAT BOTH TH E AUTHORITIES WERE HIGHLY UNREASONABLE AND MISDIRECTED IN THEIR APPROACH. SU CH KIND OF APPROACH SHOULD BE AVOIDED AS IT SHAKES THE CONFIDENCE OF TH E TAXPAYER UPON THE 5 I.T.A. NO.698/MUM/2013 SYSTEM AND WORKING MECHANISM OF THE INCOME-TAX DEPA RTMENT WHICH MAY, IN TURN, REDUCE VOLUNTARY COMPLIANCE BY THE TA XPAYERS. THEREFORE, THE REVENUE OFFICIALS SHOULD BE MORE CAREFUL AND RE ASONABLE WHILE LEVYING PENALTY IN SUCH CASES. WITH THESE OBSERVATIONS, WE DELETE THE PENALTY OF RS.2,25,334/- LEVIED BY THE AO. 6. AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF HEARING. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 13 TH FEBRUARY, 2017 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES