Income Tax Appellate Tribunal - Ahmedabad
Jt. Cit Special Range 9 vs Viral Laminates (P) Ltd. on 29 September, 2005
Equivalent citations: [2006]5SOT160(AHD)
ORDER
Sanjay Arora, A.M. This is an appeal by the revenue, directed against the order of Commissioner of Appeals, XIII, Ahmedabad (Commissioner (Appeals) hereinafter referred to as) dated 14-12-1998.
2. None appeared on behalf of the assessee and the appeal was heard ex parte.
3. The only issue in the appeal as projected per the first ground of appeal is the levy of penalty under section 221(1) of the Income Tax Act, 1961 (Act hereinafter) at Rs. 10,00,000 as under :-
"I. The learned Commissioner (Appeals) has erred in law and facts in deleting the penalty of Rs. 10,00,000 levied under section 221 (1) of the Act."
4. The facts in brief are that the return in the instant case was furnished under section 158BC of the Act on 11-3-1996 declaring an undisclosed income of Rs. 2,84,28,437 resultingin self-assessment tax of Rs. 1,96,15,621, which stood unpaid. Block assessment was completed on 30-11-1996 at an undisclosed income of Rs. 3,28,48,900. Notice under section 221 (1) of the Act was issued on 12-7-1996 requiring the assessee as to why penalty under the said section be not levied for the default in payment of self assessment tax in view of the provisions of section 140A(3) of the Act (which deems assessee to be in ' default on non-payment of self-assessment tax). The assessee replied by stating that the provisions of section 140A(3) did not apply to its case; the return in its case being furnished under the provisions of a separate Chapter i.e., Chapter-XIV of the Act, which prescribes a separate procedure for assessment of undisclosed income. However, on merits it was submitted that assessee had, as far back as on 29-3-1996, made an application before the CIT, Gujarat-I, Ahmedabad, for adjusting all the seized cash of Rs. 1.90 lakhs against its self-assessment tax liability and making a further request for grant of additional time for payment of the balance amount of Rs. 1,94,25,621 in view of the fact that it had, closed its business. The assessing officer, however, was of the view that the provisions of section 140A were squarely applicable in view of the residual provision of section 158BH of the Act, and that it was a fit case for levy of penalty in view of the clear cut provisions of section 140A which mandates the assessee to be in default on non-payment of self-assessment tax; the assessee having deprived the revenue of its legitimate dues (for a period of 9 months, the total payment, in terms of the revised return (filed subsequently on 21-11-1996), having been deposited only by 27-12-1996, and levied a penalty of Rs. 10 lakhs under section 221(1) of the Act. On appeal, similar contentions were raised before the Id. Commissioner (Appeals), who, though in agreement with the assessing officer with regard to the applicability of the provisions of section 140A to a return filed under section 158BC (in view of section 158BH of the Act), differed from him on the question of levy of penalty, as in his view:
(a) No new show-cause notice, i.e., after the initial one dated 12-7-1996, consequent to the filing of the revised return by the assessee on 21-11-1996, stood issued; the self-assessment tax liability (after adjustment of the seized cash of Rs. 1.90 lakhs) having reduced to Rs. 1,77,24,464 (from Rs. 1,94,25,621);
(b) The conduct of the assessee revealed its bona fide intention inasmuch as it paid the tax in terms of its agreement with the assessing officer, liquidating the entire liability (as revised) by 27-12-1996;
(c) The assessee was facing a constrained financial position, which definitely is an impediment for clearing the liability in one go, thus constituting reasonable cause, and which is pertinent and relevant for the purpose of levy of penalty.
Aggrieved, the revenue is in appeal before us.
5. Before us, it was contended by the learned Departmental Representative that in view of the notice having already been issued to which the assessee had replied, there was no necessity or requirement for issue of fresh notice, i.e., on the filing of the revised return, and it having availed of the opportunity on earlier occasion; its case being essentially the same. Further it had, in making the payment of tax as per the schedule only complied with one furnished by it on its own; the department admittedly having not initiated any coercive measure for the purpose and that the inference of the learned Commissioner (Appeals) of their being an agreement with the assessing officer for the payment of tax was in consistent with the facts, as well as the law, which vide Explanation 2 to the section 221(1), clearly provides that the assessee would not cease to be liable to penalty under the section merely by the reason of the fact that there has been a payment of tax before the levy of penalty. He, therefore, prayed for the dismissal of the order of the first appellate authority and restoration of the penalty order.
6. We have heard the party before us, and also perused the material on record. We find force in the arguments of the learned Departmental Representative inasmuch as no prejudice has been caused to the assessee by the non-issue of a fresh show cause notice; its admitted self-assessment tax liability having only scaled down a few notches, i.e., from Rs. 194.25 lakhs to Rs. 177.25 lakhs as a result of the revised return, so that its case of the attendant accentuating circumstances that prevented it from making the payment in one go, remain the same. Also, we find the second contention of the learned Departmental Representative to be correct on facts inasmuch as there was no such 'agreement' between the assessee and the assessing officer, and which, nevertheless would still render the assessee as in default. However, we, for the reasons stated hereunder are not inclined to interfere with the order of Id. Commissioner (Appeals). The assessee, as far back as in March, 1996, prayed for an allowance of time in settling its tax dues in view of the closure of its business and the resultant financial stringency. In the absence of any finding to the contrary by either of the lower authorities, we have no reason to disbelieve the same. Penal provisions are quasi-criminal in character, and notwithstanding the applicability (of the relevant provision on satisfaction of the definite parameter(s) as laid down for example, non-payment of self-assessment tax as in the instant case, can be invoked, only where there is an element of deliberateness on the part of the assessee in committing the breach of the relevant provision(s) of law, i.e., it is guilty of a conduct contumacious or a conscious disregard to its obligation under the law. In the present case the default arose on account of the admitted situation of the assessee being placed under acute financial constraint(s). There is no evidence of the assessee's request (for allowing time) being motivated by extraneous reasons; the same, as remarked earlier, having not been examined on merits, would have to be taken as warranted by its circumstances. Secondly, it places a schedule of payment of the admitted tax before the authorities, which it observes; which only suggests an honest attempt on its part to liquidate its tax liability, leading to an inference of a bona fide conduct. The assessing officer's ground of the Government being entitled to compensation in view of the delayed payment, is misplaced, as the statute has a separate provision for interest (on the assessee being in default) (section 220(2)), and which is applicable independent of the penalty proceedings, and meant only for the purpose of the said compensation. Rather, the same too has a waiver clause (Section 220(2A)), for application, on the assessee showing a case of genuine hardship and an attitude of co-operation. The law in the matter of penalty stands expounded by the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 and, for the reasons aforementioned, we find the present case as one which stands qualified for the saving from penalty in view of the said law; the default in the compliance of the relevant provision notwithstanding.
7. In result, the revenue's appeal is dismissed.