SEAGREEN MARKETING P. LTD, MUMBAI V. ITO 8(3)-1, MUMBAI

ITA 850/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6254 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 03-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: M P MEHWALA
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SMT. ASHA V IJAYARAGHAVAN (JM) ITA NO. 850/MUM/2010 ASSESSMENT YEAR- 2007-08 M/S. SEAGREEN MARKETING PVT. LTD., LOK BHAVAN, LOK BHARATI COMPLEX, MAROL MAROSHI ROAD, ANDHERI(E), MUMBAI-400 059 PAN-AAACS 8365B THE ITO 8(3)(1), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) VS. (RESPONDENT) ITA NO. 563/MUM/2010 ASSESSMENT YEAR- 2007-08 THE ITO 8(3)(1), AAYAKAR BHAVAN, MUMBAI-400 020 M/S. SEAGREEN MARKETING PVT. LTD., LOK BHAVAN, LOK BHARATI COMPLEX, MAROL MAROSHI ROAD, ANDHERI(E), MUMBAI-400 059 PAN-AAACS 8365B (APPELLANT) VS. (RESPONDENT) ASSESSEE BY: SHRI M.P. MEHWALA RESPONDENT BY: SHRI S.K. SINGH O R D E R PER ASHA VIJAYARAGHAVAN (JM) THE APPEAL IS FILED BY THE ASSESSEE AND THE CROSS A PPEAL IS FILED BY THE REVENUE ARE DIRECTED AGAINST THE ORDER DATED 18 .11.2009 PASSED BY THE LD. CIT(A)-18 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AN INVESTMENT COMPANY AND DOING BUSINESS OF FINANCE AND INVESTMENT. IT FILED THE RETURN OF INC OME FOR THE A.Y. 2007- 08 ACCORDING TO WHICH SELF ASSESSMENT TAX PAYABLE W AS RS. 1,64,04,574/- WHICH WAS PAYABLE BY THE ASSESSEE ON OR BEFORE 8.10.2008 SEA GREEN MARKETING 2 ALONGWITH RETURN OF INCOME FILED. HOWEVER, THE SAM E WAS NOT PAID ALONG WITH THE RETURN FILED. 3. AFTER THE ISSUE OF SHOW CAUSE NOTICE, PENALTY @5 % AMOUNTING TO RS. 8,20,229/- WAS LEVIED ON 2.01.2009. THEREAFTER , NOTICE U/S. 221(1) DT./ 2.2.2009 WAS ISSUED AND PENALTY WAS LEVIED @20 % ON THE BALANCE AMOUNT DUE OF RS. 1,29,04,574/-. TUS THE PENALTY O F RS. 25,80,915/- WAS LEVIED VIDE ORDER DT. 16.3.2009 U/S. 221(1). 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) ASSES SEE SUBMITTED AS FOLLOWS: DUE TO SEVERE FINANCIAL CONSTRAINTS, SELF ASSESSME NT TAX/ADVANCE TAX COULD NOT BE PAID. IT WAS EXPLAINE D THAT SISTER CONCERNS OF THE APPELLANT IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND THE LOAN GIVEN TO SUCH SISTER CONCE RNS WAS NOT PAID BACK IN TIME, DUE TO MELT DOWN IN REAL ESTATE MARKET. 5. THE LD. CIT(A) HELD AS FOLLOWS: IT WAS EXPLAINED THAT THE APPELLANT IS FINANCE AND INVESTMENT COMPANY AND INVESTED HEAVILY IN SISTER C ONCERNS ENGAGED IN REAL ESTATE BUSINESS. DUE TO RECESSION IN REAL ESTATE, THE SISTER CONCERNS DID NOT PAY THE LOAN IN TIME, CAUSING SERIOUS FINANCIAL CONSTRAINTS TO THE APPELL ANT. FROM THE DETAILS OF PAYMENT IT IS EVIDENT THAT TILL DATE , EVEN 50% OF SELF ASSESSMENT TAX IS NOT PAID. ANY PRUDENT PERSO N WOULD HAVE DISCHARGED ITS TAX LIABILITY IF HE HAD RESOURC ES, MORE PARTICULARLY SELF ASSESSMENT TAX/ADVANCE TAX FOR TH E FEAR OF MANDATORY INTEREST. IN VIEW OF THE ABOVE DISCUSSIO N AND IN VIEW OF THE REASONS GIVEN BY THE APPELLANT, I CONSI DER IT IS APPROPRIATE TO REDUCE THE PENALTY TO 10% OF THE OUT STANDING DUES OF RS. 1,29,04,574/- I.E. RS. 12,90,457/- AGAI NST PENALTY LEVIED OF RS. 25,80,975/-. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE AS SESSEE AND REVENUE HAS RAISED THE FOLLOWING GROUNDS: ASSESSEES GROUNDS OF APPEAL SEA GREEN MARKETING 3 1. THE LD. CIT(A) ERRED I FACT AND IN LAW IN CONFI RMING 50% OF THE IMPUGNED PENALTY LEVIED BY THE LD. AO. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAVING APPRECIATED THE SERIOUS FINAN CIAL CONSTRAINTS OF THE APPELLANT OUGHT TO HAVE HELD THA T THE APPELLANT HAD REASONABLE CAUSE AND THEREFORE NO PENALTY U/S. 221(1) WAS EXIGIBLE AT ALL. REVENUES GROUNDS OF APPEAL 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN REDUCING THE PERCENTAGE OF PENALTY U/S. 221(1) FROM 20% TO 10% WITHOUT APPRECIATING THE FAC TS OF THE CASE. 7. ON FURTHER APPEAL BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SHRI M.P. MEHWALA SUBMITTED THAT A COMPOSITE APPLICATIO N DT. 23.9.2008 REQUESTING FOR PAYMENT BY INSTALMENTS IN RESPECT OF SELF ASSESSMENT TAX OF M/S. LOK HOUSING & CONSTRUCTIONS LTD. AND 5 GRO UP COMPANIES HAD BEEN SUBMITTED BY THE ASSESSEE. THE GIST OF WHICH I S THAT HAS BROUGHT OUT AS UNDER: TO CONCLUDE THE GROUP DUE TO ITS ACCOUNTING POLICI ES HAD TO RECOGNIZE A SUBSTANTIAL AMOUNT OF PROFIT WHICH RESU LTED INTO A BIG TAX OBLIGATION OF ABOUT RS. 100 CRORE BUT THIS DID NOT RESULT INTO ANY ACTUAL CASH GENERATION AS THE PAYMENTS IN RESPECT OF SALE OF PROPERTIES HAD NOT CRYSTALLIZED. ON THE OT HER HAND PROCEEDS FROM SALE OF INVESTMENTS WERE UTILIZED TO PAY BANKS AND FINANCIAL INSTITUTIONS. IN VIEW OF THE ABOVE C IRCUMSTANCES LOK GROUP WAS UNDER SEVERE CASH CRUNCH AND THEREFOR E WAS UNABLE TO MEET ITS TAX OBLIGATIONS. 8. THE LD. COUNSEL FOR THE ASSESSEE PLEADED THAT DU E TO PAUCITY OF FUNDS THE ASSESSEE WAS NOT IN A POSITION TO PAY THE SELF ASSESSMENT TAX. 9. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND POINTED OUT THAT THE ASSESSEE HAD IN HIS STATEMENT OF FACTS STATED AS FOLLOWS: SEA GREEN MARKETING 4 THE PROCEEDS OF THE SALE OF INVESTMENT WERE APPROP RIATED BY GIVING TEMPORARY ADVANCES TO THE OTHER SISTER CONCE RNS WHO ARE IN REAL ESTATE MARKET AND WHO WERE IN NEED OF F INANCE TO GET OVER THEIR FINANCIAL CRUNCHES DUE TO SLUMP IN T HE REAL ESTATE MARKET. 10. THE LD. DR SUBMITTED THAT THE ASSESSEE COULD HA VE TAKEN SOME INITIATIVE TO PAY THE SELF ASSESSMENT TAX FROM THE FUNDS AVAILABLE WITH THE ASSESSEE ON THE SALE OF INVESTMENT. IN THE COUNTER SUBMITTED THAT THE MONIES WERE USED TO PAY BANKS AND FINANCIAL INSTITU TIONS WHO WERE PRESSURIZING THE ASSESSEE AND HENCE THE ASSESSEE CO ULD NOT MEET ITS TAX PAYMENT TOWARDS SELF ASSESSMENT TAX. 11. WE HEARD BOTH THE PARTIES. WE FIND THAT THE AS SESSEE HAS BEEN UNDER IMMENSE PRESSURE AND FINANCIAL CONSTRAINT. T HE LD. CIT(A) HAVING OBSERVED THAT ANY PRUDENT PERSON WOULD HAVE DISCHA RGED ITS TAX LIABILITY IF HE HAD RESOURCES, MORE PARTICULARLY SELF ASSESS MENT TAX/ADVANCE FOR THE FEAR OF MANDATORY INTEREST, NEVERTHELESS REDUCE D THE PENALTY TO 10% FROM 20% CONSIDERING THE INABILITY OF THE ASSESSEE TO RAISE FUNDS TO PAY THE TAX. APPRECIATING THE FACT THAT THE ASSESSEE H AS BEEN UNDERGOING SEVERE FINANCIAL CONSTRAINT AND PAUCITY OF FUNDS HA S DRIVEN THE ASSESSEE TO DEFAULT IN PAYMENT OF SELF ASSESSMENT TAX, WE DE LETE THE PENALTY OF 10% LEVIED BY THE LD. CIT(A). 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE CROSS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF NOVEMBER, 2010 SD/- SD/- (J. SUDHAKAR REDDY) (ASHA VIJA YARAGHAVAN) ACCOUNTANT MEMBER JUDICIA L MEMBER MUMBAI, DATED 30 TH NOVEMBER, 2010 RJ SEA GREEN MARKETING 5 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI SEA GREEN MARKETING 6 DATE INITIALS 1 DRAFT DICTATED ON: 25.11.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 26.11.2010 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______