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INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI

ITA No. 5305/Mum/2013 Assessment Year: 2011-12
Dy. Commissioner of Income Tax (Appellant) vs. M/s. Stock Guardians (India) Pvt. Ltd. (Respondent)
Date of Judgment : 06-01-2016

ORDER

PER JASON P. BOAZ, A.M.
This appeal by Revenue is directed against the order of the CIT(A)-6, Mumbai dated 13.05.2013 for A.Y. 2011-12. The assessee has also preferred cross objections (‘CO’) against the aforesaid order of the CIT(A)-6, Mumbai.

2. The facts of the case, briefly, are as under:-

2.1 The assessee filed its return of income for A.Y. 2011-12 on 29.09.2011. On examination thereof, the Assessing Officer (‘AO’) noticed that the assessee had not paid the self assessment tax of `12,69,268/- due as per the provisions of section 140A(3) of the Income Tax Act, 1961 (in short ‘the Act’), before filing the return of income for A.Y. 2011-12. In this regard, the AO initiated penalty proceedings under section 221 r.w.s. 140A(3) of the Act and called for the assessee’s explanation in the matter. The assessee’s submissions that it was facing financial hardship due to heavy losses incurred in the capital market did not find favour with the AO. The AO, observing that the entire self assessment tax was paid by the assessee only after the assessee’s bank account was attached on 31.01.2013, was of the opinion that the assessee did not make payment of self assessment tax before filing of the return of income, as required by the provisions of section 140A(3), without any reasonable cause or sufficient reasons. In this view of the matter, the AO proceeded to levy penalty under section 221 r.w.s. 140A(3) of the Act vide order dated 30.04.2012 at the maximum limit of `12,69,268/-, i.e. the amount of tax in arrears.

2.2 Aggrieved by the order of the AO levying penalty of `12,69,268/- under section 221 r.w.s. 140A(3) of the Act, in A.Y. 2011-12, vide order dated 30.04.2012, the assessee preferred an appeal before the CIT(A)-6, Mumbai. Before the learned CIT(A), the assessee reiterated that it faced liquidity crunch due to losses incurred in the past. It was, inter alia, submitted that the day the AO attached the assessee’s bank account the balance therein was only `48,487/- which evidenced the fact that the assessee was under financial hardship. The learned CIT(A), on examination of the assessee’s bank account for the said period, observed that the assessee did not have sufficient funds and that the assessee withdrew margin money deposited with various brokers over a period of time and made payment of taxes. In this factual matrix, the learned CIT(A) came to the view that it would be reasonable to conclude that the assessee was facing financial hardship during the relevant period, but still made the payment of taxes in six installments from 22.11.2011 to 09.03.2012 by withdrawing margin money placed with various brokers. The learned CIT(A) also observed that the AO’s levy of maximum penalty, to the extent of tax arrears at the very first instant, appeared to be excessive, especially when taking into account the fact that the assessee actually faced severe financial constraints. Observing thus, the learned CIT(A) confirmed the levy of penalty at `1,00,000/-, thereby allowing the assessee relief of `11,69,268/-.

3. Revenue, being aggrieved by the order of the CIT(A)-6, Mumbai dated 13.05.2013, has preferred this appeal raising the following grounds: -

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the penalty under section 221 r.w.s. 140A of the IT Act to Rs.1,00,000/- overlooking the facts that inspite of receiving notice under section 221 of the IT Act the assessee failed to pay the whole amount of Self Assessment tax on the profit already earned by it.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the penalty under section 221 r.w.s. 140A of the IT Act to Rs.1,00,000/- ignoring the fact that the assessee is in default by not paying the taxes in form of Advance Tax which is wholly attributable to the assessee and ventured to utilize the funds which would have gone to Govt. coffers. 3. For these and other ground that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored.”

3.1 We have heard both the learned D.R. for Revenue in support of the grounds raised (supra) and the learned A.R. for the assessee. As per the facts that emanate from the record, it is not disputed that the assessee had not paid self assessment tax of `12,69,268/- before filing the return of income for A.Y. 2011-12 as stipulated in the provisions of section 140A(3) of the Act. Penalty proceedings initiated under section 221 r.w.s. 140A(3) of the Act resulted in the levy of penalty of `12,69,268/- on the assessee at maximum level specified i.e. the amount of tax in arrears, after the AO had rejected the assessee’s submission that the default was due to severe financial hardship and liquidity it faced.

3.1.1 It is seen from a perusal of the impugned order of the learned CIT(A) that on appeal the assessee once again reiterated its submission that the default in payment of self assessment taxes was due to severe financial hardship and liquidity pressure due to heavy losses incurred in the capital market. We find that the examination by the learned CIT(A) of the assessee’s bank account, for the period under consideration, evidenced that the assessee did not have sufficient funds therein and that the payment of taxes in six installments from 22.11.2011 to 09.03.2012 were made by margin moneys deposited with various brokers being withdrawn by the assessee. Before us, except for reiterating the ground raised, Revenue had not been able to controvert the above factual findings of the learned CIT(A) that the assessee was in severe financial hardship in the said period, as evidenced by the fact that when the AO attached the assessee’s bank account, the balance therein was only `48,487/-. Financial hardship is further buttressed by the observation of the CIT(A) that for making the payment of taxes the assessee had withdrawn margin money placed by it with various brokers. Revenue has also not been able to justify before us, as to why, in these factual circumstances, the AO proceeded to levy the maximum penalty, i.e. to the extent of tax arrears. In these above factual circumstances, we concur with the view of the learned CIT(A) that the AO’s action in levying the penalty under section 221 r.w.s. 140A(3) of the Act on the maximum amount of tax payable appears to be excessive, especially considering the severe financial constraints faced by the assessee and the fact that the payment of tax in six installments from 22.11.2011 to 09.03.2012 was made by withdrawing margin money kept with various brokers. In this view of the matter, we uphold the order of the learned CIT(A) in confirming the penalty levied on the assessee under section 221 r.w.s. 140A(3) of the Act to the extent of `1,00,000/- only. Consequently the grounds at S.Nos. 1 to 3 raised by Revenue are dismissed.

4. In the result, Revenue’s appeal for A.Y. 2011-12 is dismissed.

Assessee’s CO No. 221/Mum/2014
5. In the course of hearing before the Bench, the learned A.R. for the assessee submitted that the cross objection filed by the assessee is withdrawn. Since the assessee has withdrawn the CO, the same is rendered infructuous and is accordingly dismissed.

6. In the result assessee’s cross objection for A.Y. 2011-12 is dismissed.

7. To sum up, both Revenue’s appeal and the assessee’s cross objection for A.Y. 2011-12 are dismissed.

Order pronounced in the open court on 6th January, 2016.

(JOGINDER SINGH)    (JASON P. BOAZ)
 JUDICIAL MEMBER   ACCOUNTANT MEMBER

Levy of Penalty u/s 221 rws 140A(3) for non-payment of self assessment tax before filing return of income due to financial hardship deleted by ITAT | 08-01-2016 |

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