ITAT ‘K’ Bench, Mumbai
Before G. E Veerabhadrappa (VP) &
Ms. Sushma Chowla (JM)
ITA No. 7775-77/Mum./2004
A.Ys. : 2000-01, 2001-02 and 2002-03.
Decided on : 31-10-2007
Counsel for revenue/assessee : Mohit Jain/
Jitendra Jain
S. 140A(3) of the Income-tax Act, 1961 — Failure to pay
self-assessment tax — Assessee deemed to be in default — assessee offers full
explanation for non-payment — Taxes fully paid together with interest — Whether
imposition of penalty justified — Held, No.
Per G. E Veerabhadrappa :
Facts :
The assessee had filed its return of income for A.Y. 2000-01
to 2002-03 in time, but did not make the payment of S.A. Tax. The AO asked the
assessee to explain as to why penalty should not be imposed u/s.221, read with
S. 140A(3) of the Income-tax Act. The assessee explained that it could not make
payment due to financial crunch on account of paucity of funds. The AO was not
satisfied with the explanation and imposed penalty of Rs.20 lacs for A.Y.
2000-01, Rs.50 lacs for A.Y. 2001-02 and Rs.20 lacs for A.Y. 2002-03.
Being
aggrieved, the assessee appealed before the CIT(A) who considered the
explanation offered by the assessee and deleted the penalty mainly on the
following grounds :
(1) Paucity
of funds at the material time when S.A. Tax was to be paid does constitute a
reasonable cause for the default of non-payment of S.A. Tax.
(2) The
assessee has paid the entire tax, together with applicable interest u/s.234B,
u/s.234C and u/s.220(2), before show-cause notice u/s.221 was served on the
assessee. This shows that the assessee had no mala fide intention to
withhold the payment of S.A. Tax.
(3)
Initiation of penalty proceedings after a long period is contrary to the
spirit of the provisions relating to bar of limitation for imposing penalties
and hence imposition of penalty was illegal.
The Department appealed to the ITAT.
Held :
The Tribunal examined the provisions of S. 220(4) and S. 221,
together with provisions of S. 140A(3) and came to a conclusion that in the
present case, the assessee has paid all the taxes, together with interest and it
cannot be held that the assessee is in default or deemed to be in default, and
as such, there is no merit in the levy of penalty u/s.221 of the Act, specially
when there is no clear provisions for imposition of penalty u/s.140A(3), after
the amendment in S. 140A(3) in the year 1987. The Tribunal therefore confirmed
the order of CIT(A) and dismissed the Revenue’s appeal.
Errata :
Attention of the readers is drawn to the Tribunal decision
reported at Sr. No. 26 in March 2008 issue of the Journal. The last line of the
said decision on page no. 638 should be read as “Accordingly, the assessee could
not be treated as an assessee in default.” The error is regretted.
