M/s Health Biotech Ltd., Chandigarh V. DCIT, Chandigarh

ITA 834/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95647 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 115JB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 834/CHD/2014 ASSESSMENT YEAR: 2011-12 M/S HEALTH BIOTECH LTD., VS. THE DCIT, CIRCLE 4(1) , CHANDIGARH CHANDIGARH PAN NO. AABCH1876K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TEJ MOHAN SINGH RESPONDENT BY : SH. VIVEK NANGIA DATE OF HEARING : 30.09.2015 DATE OF PRONOUNCEMENT : 26.10.2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A) CHANDIGARH DATED 28.8.2014 IN CONFIRMING THE PENAL TY OF RS. 25,49,059/- IMPOSED U/S 221(1) READ WITH SECTION 140A(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT AS PER THE RETURN FILED BY ASSESSEE ON 29.9.2011, THE TAX PAYABLE U/S 115JB OF THE ACT WAS CALCULATED AT RS. 2,56,58,599/-, WHICH WAS REQUIRED TO BE PAID BY THE ASSESSEE AS SELF- 2 ASSESSMENT TAX. THE ASSESSEE PAID THE TAX OF RS. 2, 54,90,597/- AND RS. 1,93,212/- AS TDS AS PER THE RETURN OF INCOME. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 221(1) READ WITH SECTION 14 0A(3). AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THE ASS ESSING OFFICER LEVIED PENALTY @ 10% OF THE OUTSTANDING TAX DEMAND WHICH CAME TO R S. 25,49,059/-. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE PENALTY AND, HENCE, THE ASSESSEE IN APPEAL BEFORE THE TRIBUNAL. 4. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THIS BENC H OF THE TRIBUNAL DATED 30.6.2015, PASSED IN ASSESSEES OWN CASE IN ITA NO. 849/CHD/2014 RELATING TO ASSESSMENT YEAR 2012-13. WHILE DECIDING A SIMILAR ISSUE THE TRIBUNAL HELD AS UNDER:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MA TERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS SUBMITTED THAT DUE TO PAUCITY OF FUNDS, TAX COU LD NOT BE PAID BECAUSE ASSESSEE WAS IN EXPANSION MODE. THE SECURE D LOAN OF THE ASSESSEE COMPANY FROM THE BANK HAD INCREASED AN D DESPITE THE PROFITS, ITS LIABILITY KEPT ON INCREASING BECAU SE OF WHICH TAXES COULD NOT BE PAID. COPY OF THE BALANCE SHEET IS FILED IN SUPPORT OF THE SUBMISSION TO SHOW THAT SHORT TERM B ORROWINGS HAD INCREASED AS COMPARED TO EARLIER YEARS. LONG T ERM BORROWINGS HAVE ALSO INCREASED AS PER THE EARLIER Y EARS ALONGWITH OTHER CURRENT LIABILITIES. IN ALTERNATE CONTENTION, HE HAS SUBMITTED THAT PENALTY IS EXCESSIVE IN NATURE. 3 6. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE ASS ESSEE CLAIMED PAYMENT OF TAXES IN THE RETURN OF INCOME BU T RECORD REVEALED THAT ASSESSEE HAD NOT PAID ANY TAX LIABILI TY PLUS INTEREST TILL THE FILING OF THE RETURN AND PROCESSI NG OF THE RETURN UNDER SECTION 143(1) OF THE INCOME TAX ACT. THEREF ORE, PENALTY WAS CORRECTLY LEVIED UNDER SECTION 221(1) OF THE IN COME TAX ACT. 7. FROM THE FACTS OF THE CASE IN THE LIGHT OF THE SUBM ISSIONS OF THE PARTIES, WE ARE OF THE VIEW THAT PENALTY WAS CORRECTLY LEVIED UNDER SECTION 221(1) OF THE ACT BECAUSE ASSE SSEE HAS NOT PAID SELF ASSESSMENT TAX AND WHILE PROCESSING THE R ETURN OF INCOME UNDER SECTION 143(1), THE DEMAND HAD BEEN CR EATED AGAINST THE ASSESSEE WHICH WAS NOT PAID BY THE ASSE SSEE. HOWEVER, WE FIND THAT THE LEVY OF PENALTY IS EXCESS IVE IN NATURE BECAUSE ASSESSEE HAS MADE OUT A CASE OF PAUCITY OF FUNDS DUE TO EXPANSION OF BUSINESS AND THAT ASSESSEE WAS IN EXPA NSION MODE. WE HAVE CONSIDERED THE IDENTICAL ISSUE IN THE CASE OF M/S LAKSHMI ENERGY & FOODS LTD. IN ITA NO. 348/CHD/2013 & CO 23/CHD/2014 IN WHICH WE HAVE RESTRICTED THE LEVY OF PENALTY UNDER THE SAME PROVISIONS TO 7.5% OF THE TOTAL DEMA ND AS AGAINST 20% LEVIED BY THE AUTHORITIES BELOW. THE F INDINGS IN THIS CASE ARE REPRODUCED AS UNDER : 13. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR LEVY OF THE PENALTY UNDER SECTION 221(1) OF THE ACT . THIS PROVISION PROVIDES FOR PENALTY PAYABLE WHEN TA X IN DEFAULT. WHEN AN ASSESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING PAYMENT OF TAX, H E SHALL, IN ADDITION TO THE AMOUNT OF ARREARS AND THE AMOUNT OF INTEREST PAYABLE UNDER SECTION 220(2), BE LIABLE BY WAY OF PENALTY, TO PAY SUCH AMOUNT AS THE ASSESSING OFFICER MAY DIRECT AND IN CASE OF DEFAULT , FURTHER AMOUNT OR AMOUNTS AS THE ASSESSING OFFICER MAY FROM TIME TO TIME DIRECT SO, HOWEVER THAT TOTAL AMOUNT OF PENALTY WOULD NOT EXCEED THE AMOUNT OF TA X 4 IN ARREARS. THE SECOND PROVISO TO THIS PROVISION PROVIDES THAT WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF THE ASSESSING OFFICER THAT THE DEFA ULT WAS FOR GOOD AND SUFFICIENT REASONS, NO PENALTY SHA LL BE LEVIED UNDER THIS SECTION. 14. FROM THE FACTS OF THE CASE IN THE LIGHT OF THE FINDINGS OF THE AUTHORITIES BELOW, IT IS CLEAR THAT SELF ASSESSMENT TAX AMOUNTING TO RS. 8.14 CR IN RESPECT OF THE RETURN FILED BY ASSESSEE FOR ASSESSMENT YEAR UN DER APPEAL WAS NOT PAID BY THE ASSESSEE. EVEN BEFORE U S, IT IS NOT IN DISPUTE THAT ASSESSEE WAS IN DEFAULT O R WAS DEEMED TO BE IN DEFAULT IN MAKING PAYMENT OF TAX. THE ONLY EXCEPTION PROVIDED UNDER SECTION 221(1) OF THE ACT IF ASSESSEE IS ABLE TO PROVE TO THE SATISFA CTION OF ASSESSING OFFICER THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT REASONS. THE SECTION 221(1) ALSO DID NO T PROVIDE ANY MINIMUM PENALTY IN THE MATTER AND IT IS THE DISCRETION OF THE ASSESSING OFFICER TO LEVY THE PARTICULAR AMOUNT AS PENALTY, HOWEVER THE PENALTY AMOUNT WOULD NOT EXCEED THE AMOUNT OF TAX IN ARREARS. IN THE CASE OF THE PRESENT ASSESSEE, THE ASSESSING OFFICER HAS LEVIED PENALTY OF 20% OF THE ARREARS OF TAXES I.E. 8.41 CR AND LEVIED THE PENALT Y OF RS. 1.62 CR. THEREFORE, IT IS TO BE CONSIDERED WHE THER ASSESSEE HAS ANY GOOD AND SUFFICIENT REASONS FOR DEFAULT IN PAYMENT OF TAXES OR WHETHER ASSESSING OFFICER HAS CORRECTLY LEVIED THE PENALTY OF 20% OF THE ARREARS OF TAXES. 15. THE ASSESSEE PLEADED BEFORE THE AUTHORITIES BELOW THAT ASSESSING OFFICER DID NOT ACCEPT THE REQUEST OF THE ASSESSEE FOR ADJUSTMENT OF REFUND FO R ASSESSMENT YEAR 2007-08 AGAINST THE DEMAND DUE FOR ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE ALSO PLEADED THAT RS. 1 CRORE WAS PAID IN TWO INSTALLMEN TS 5 AND BALANCE OF RS. 14.67 LACS WAS ALSO PAID. THEREFORE, ASSESSEE PLEADED THAT DUE TO THIS BONAFI DE BELIEF, THE TAXES WERE NOT PAID. HOWEVER, THE LD. CIT(APPEALS) HAS QUOTED FROM THE ORDER OF THE ASSESSING OFFICER THE REASONS WHY THE ADJUSTMENT OF TAXES FROM THE REFUND OF ASSESSMENT YEAR 2007-08 WERE NOT GIVEN IN THE CASE OF THE ASSESSEE. THE ASSESSEE FURTHER PLEADED THAT THERE WAS A FINANCIAL DIFFICULTY IN PAYING THE TAXES. THE LD. COUNSEL FO R THE ASSESSEE REITERATED THE SAME SUBMISSIONS AND SUBMITTED THAT FINANCIAL CONDITION OF THE ASSESSEE COMPANY WAS IN BAD SHAPE WHICH IS EVIDENT FROM THE PERUSAL OF THE BALANCE SHEET FOR FINANCIAL YEAR 201 0- 11 AS SUBMITTED AND THE FUNDS HAD BEEN BLOCKED IN T HE INVENTORY, BOOK DEBTS AND OTHERS AS PER COLUMN 3 OF THE BALANCE SHEET UNDER THE HEAD CURRENT ASSET WHICH LED TO PAUCITY OF FUNDS AVAILABLE FOR PAYMENT OF SELF ASSESSMENT TAX. EVEN THE ASSESSEE HAD TO BORR OW MORE AND MORE FUNDS FROM THE BANKS AND OTHERS TO COPE UP WITH THE SITUATION AS THE SECURED AND UNSECURED LOANS WHICH WERE TO THE TUNE OF RS. 751.6 6 CR AS ON 31.03.2010 HAD GONE UPTO RS. 996.22 CR AS ON 31.03.2011, THEREBY INCREASING THE LIABILITY BY APPROXIMATELY 33%. IT WOULD PROVE PAUCITY OF THE FUNDS IN THE CASE OF THE ASSESSEE. 15(I) THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMI TTED THAT THESE CIRCUMSTANCES ULTIMATELY LED TO DIP IN T HE CREDIT RATING AS IS EVIDENT FROM PB-8 AND 9 OF THE PAPER BOOK WHICH HAD ALSO WORSENED FINANCIAL CONDITION OF THE ASSESSEE. DUE TO PAUCITY OF THE FU NDS AND STEEP FALL IN THE PROFIT DURING THE FINANCIAL Y EAR 2010-11, DURING WHICH SELF ASSESSMENT TAX WAS TO BE PAID, DUE TO PAUCITY OF FUNDS THE TAXES COULD NOT B E PAID. THE PROFIT DURING FINANCIAL YEAR 2009-10 WAS 6 RS.118.94 CR WHICH REDUCED TO RS.77.48 CR DURING FINANCIAL YEAR 2010-11. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT DUE TO ABOVE REASONS, THE SELF ASSESSMENT TAXES COULD NOT BE PAI D ON RETURNED INCOME. 16. ON GOING THROUGH THESE SUBMISSIONS OF THE ASSESSEE AND COPY OF THE BALANCE SHEET FILED ON RECORD, IT MAY BE A CASE OF THAT THE LIABILITY OF T HE ASSESSEE HAS INCREASED AND THAT CREDIT RATING OF TH E ASSESSEE HAS REDUCED BUT THERE WAS A PROFIT IN ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN SUBSEQUENT ASSESSMENT YEAR 2011-12. MAY BE THE PROFIT HAS REDUCED BUT IT IS NOT A CASE THAT ASSESS EE HAS NOT EARNED ANY PROFIT. THEREFORE, CONSIDERING THE MATERIAL ON RECORD, WE DO NOT FIND IT TO BE CASE OF GOOD AND SUFFICIENT REASONS FOR NOT PAYING THE TAXE S AS PER LAW. THEREFORE, PENALTY SHALL HAVE TO BE LEV IED IN THE FACTS AND CIRCUMSTANCES. HOWEVER, CONSIDERI NG THE FINANCIAL POSITION OF THE ASSESSEE HAS WORSENED AND THAT THE CREDIT RATING OF THE ASSESSEE HAS ALSO REDUCED AND ULTIMATELY WHEN SELF ASSESSMENT TAX WAS TO BE PAID IN SUBSEQUENT ASSESSMENT YEAR 2011-12, THERE WAS A FALL IN THE PROFIT. THEREFORE, CONSIDE RING THE EXPLANATION GIVEN BY THE ASSESSEE, WE ARE OF TH E VIEW THE ASSESSING OFFICER WAS NOT JUSTIFIED IN LEV YING THE PENALTY OF 20% OF THE ARREARS OF TAXES. IT IS ON VERY HIGH SIDE AND THE ASSESSING OFFICER SHOULD HAV E CONSIDERED THE FINANCIAL POSITION OF THE ASSESSEE BEFORE LEVYING THE PENALTY IN THE MATTER. THE LD. CIT(APPEALS) REJECTED THIS CONTENTION OF THE ASSESS EE BECAUSE THOSE REASONS WERE NOT PLACED BEFORE ASSESSING OFFICER. HOWEVER, LD. CIT(APPEALS) FORGO T TO NOTE THAT HE HAS COTERMINOUS POWERS TO THAT OF T HE ASSESSING OFFICER AND THE APPELLATE PROCEEDINGS ARE 7 CONTINUATION OF THE ASSESSMENT PROCEEDINGS. THEREFORE, WHEN THOSE FACTS WERE PLEADED BEFORE LD. CIT(APPEALS), HE SHOULD HAVE CONSIDERED THE SAME IN PROPER PERSPECTIVE FOR DOING JUSTICE BETWEEN THE PARTIES. 17. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AS NOTED ABOVE, WE HOLD THAT 20% OF THE PENALTY OF OUTSTANDING DEMAND WAS EXCESSIVE, UNREASONABLE AND THEREFORE, WE MODIFY THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFI CER TO RESTRICT THE PENALTY UNDER SECTION 221(1) OF THE ACT BY RESTRICTING THE PENALTY AT 7.5% OF THE OUTSTANDI NG SELF ASSESSMENT TAX OF RS. 8.14 CR AND THE ASSESSIN G OFFICER SHALL RE-WORK THE PENALTY AMOUNT ACCORDINGL Y. THE ORDERS OF AUTHORITIES BELOW LEVYING THE PENALTY AT 20% IS THUS, SET ASIDE AND MODIFIED TO THE EXTENT O F 7.5%. 18. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. FROM THE FACTS OF THE CASE IN THE LIGHT OF THE O RDER OF EVEN DATE IN THE CASE OF M/S LAKSHMI ENERGY & FOODS LTD. (SUPRA) WE MODIFY THE ORDERS OF THE AUTHORITIES BELOW IN THIS CASE AND DIRECT THE ASSESSING OFFICER TO LEVY THE PENALTY AT 7.5% OF THE OUTSTANDING TAX DEMAND OF RS.1.19 CR AGAINST 10% LE VIED BY THE AUTHORITIES BELOW. THE ORDERS OF THE AUTHORITIES B ELOW TO THAT EXTENT ARE MODIFIED AND ASSESSING OFFICER SHALL RES TRICT PENALTY OF 7.5% AS AGAINST 10% LEVIED BY THE ASSESSING OFFI CER. 5. THE FACTS OF THE PRESENT YEAR ARE SIMILAR TO THA T OF ASSESSMENT YEAR 2012- 13. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUN AL PASSED IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2012-13 (SUPRA), W E MODIFY THE ORDER OF THE AUTHORITIES BELOW IN THIS CASE AND DIRECT THE ASSES SING OFFICER TO LEVY THE 8 PENALTY AT 7.5% OF THE OUTSTANDING DEMAND AS AGAINS T 10% LEVIED BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A). THE IMPU GNED ORDER IS MODIFIED TO THE ABOVE EXTENT. 6. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY. ORDER PRONOUNCED IN THE OPEN COURT ON 26.10.2015 SD/- SD/- (RANO JAIN) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 26 TH OCTOBER, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR