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[2013] 39 taxmann.com 124 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'A'
Agio Pharmaceuticals Ltd.
v.
Assistant Commissioner of Income-tax -8(1)*
I.P. BANSAL, JUDICIAL MEMBER
AND SANJAY ARORA, ACCOUNTANT MEMBER
AND SANJAY ARORA, ACCOUNTANT MEMBER
IT APPEAL NO. 6911 (MUM.) OF 2011
[ASSESSMENT YEAR 2009-10]
[ASSESSMENT YEAR 2009-10]
SEPTEMBER 4, 2013
Section 221, read with section 140A, of the Income-tax Act, 1961 - Collection and recovery of tax - Penalty payable where tax in default [Effect of payment of self-assessment tax] - Assessment year 2009-10 -Assessee filed return of income on 28-9-2009 and paid self-assessment tax under section 140A on 19-1-2010 - Accordingly Assessing Officer levied penalty under section 221(1) upon assessee - Whether since assessee had paid self-assessment tax immediately when fact regarding non-payment came to its notice, it could not be said that assessee's act was deliberate in defiance of law - Held, yes - Whether, therefore, assessee was not liable for penalty to be levied under section 221(1) - Held, yes [Para 6.1] [In favour of assessee]
FACTS
| ■ | For the assessment year 2009-10, the assessee filed the return of income on 28-9-2009. However, it paid the self-assessment tax under section 140A on 19-1-2001. Accordingly the Assessing Officer levied the penalty under section 221(1) upon the assessee. | |
| ■ | On appeal, the Commissioner (Appeals) upheld the penalty order. | |
| ■ | On second appeal: |
HELD
| ■ | According to section 221(1) when an assessee is in default or is deemed to be in default in making payment of tax, he shall, in addition to the amount of arrears and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the Assessing Officer may direct, provided that the total amount of penalty in case of continuing default does not exceed amount of tax in arrears. In the instant case, it is not a continuing default and penalty has been levied by Assessing Officer at the rate of 10 per cent of the tax in arrears. The first proviso to section 221(1) provides that a reasonable opportunity of hearing should be given to the assessee before levying such penalty. Second proviso to section 221(1) describe that penalty shall not be levied in a case where the assessee is able to prove to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons. Explanation to second proviso, for the purpose of removal of doubt, declares that the assessee shall not be ceased to be liable for penalty under section 221(1) merely by reason of the fact that before levy of such penalty the assessee has paid the taxes. Therefore, the assessee can escape from levy of penalty only in the circumstances if he is able to prove to the satisfaction of Assessing Officer that the default was for good and sufficient reasons. [Para 6] | |
| ■ | Provisions of section 221(1) are not absolute as the word used in the provisions is not 'shall' but 'may'. This give a discretion to the authority vested with the power of levy of penalty not to levy penalty also. The assessee was saddled with a tax liability of more than Rs. 55 lakhs in respect of earlier years in view of retrospective amendment into the statute. The assessee has been paying said liability in instalments and in the process it is possible that it may have forgotten to make the payment of self-assessment tax which was paid immediately when the fact regarding non-payment came to its notice. Therefore, it cannot be said that the assessee's act was deliberate in defiance of law or the assessee is guilty of a conduct which is contumacious or dishonest. Therefore, the assessee was not liable for penalty to be levied under section 221(1). [Para 6.1] |
CASE REVIEW
Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC) (para 6) followed.
M. Subramanium for the Appellant. S.S. Rana for the Respondent.
ORDER
I.P. Bansal, Judicial Member - This is an appeal filed by the assessee. It is directed against the order passed by Ld. CIT(A)-16, Mumbai dated 05/07/2011 for assessment year 2009-10. Ground of appeal reads as under:
"On the Facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals) XVI erred in wrongly upholding the penalty of Rs. 51,338/ - (Fifty one thousand three hundred and thirty eight only) u/s. 22 1(1) of the Income tax Act 1961, imposed by the Ld. Assessing Officer which Your Honour is requested to order to delete and oblige".
2. It may be mentioned here that there is a delay of one day in filing the appeal. The assessee filed an application for condonation of delay. After hearing both the parties we condone the delay and proceed to decide the appeal filed by the assessee on merits.
3. According to computation of income filed along with return the assessee was required to pay an amount of Rs.5,13,380/- on account of self assessment tax payable under section 140A of the Income Tax Act, 1961(the Act). The return was filed on 28/9/2009. However, self assessment tax was not paid. It was paid on 19/01/2010. Accordingly, AO initiated penalty proceedings under section 221(1) of the Income Tax Act, 1961 vide notice dated 12/1/2010, asking the assessee to show cause as to why such penalty should not be levied. In response to such notice the representative of the assessee filed a copy of challan evidencing payment of Rs.5,13,381/- paid on 19/1/2010 and it was requested that penalty proceedings should be dropped. It was further submitted that assessee was going through a rough phase due to the action of the Government regarding withdrawal of deduction under section 80HHC on DEPB from retrospective effect. However, AO did not accept such submission of the assessee on the ground that financial position of the assessee is sound and he proceed to levy the penalty, which is computed @10% of the amount payable under section 140A. Ld. CIT(A) has sustained such penalty. Assessee is aggrieved, hence, in appeal.
4. After narrating the facts it was submitted by Ld. AR that as a result of retrospective amendment the tax liability of the assessee in respect of assessment year 2000-01, 2001-02 and 2003-04 was cumulatively at a sum of Rs.55,09,840/-. The assessee started paying the said liability in installments in respect of all these years. He in this regard referred to the following chart:
| Assessment Year | Other Payments | Payable in installment | TOTAL | |
| Installment Amount | No. of installments | |||
| 2000-01 | 702,568.00 | 97,207.00 | 48 | 5,368,504.00 |
| 2001-02 | 2,907,272.00 | - | 0 | 2,907,272.00 |
| 2002-03 | - | 47,282.00 | 48 | 2,269,536.00 |
| 2003-04 | 1,900,000.00 | 41,010.00 | 48 | 2,868,480.00 |
| 2004-05 | - | 12,361.00 | 39 | 482,079.00 |
| Total | 5,509,840.00 | 197,860.00 | 14,895,871.00 | |
The chart is placed at page 7 of the paper book and details of payments made in respect of aforementioned installments are placed at page 8 to 16 of the paper book. It is the case of Ld. AR that default of the assessee in non-payment of self assessment tax was a venial breach of provisions of law. It was not deliberate and according to the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, no penalty should have been levied.
5. On the other hand, Ld. DR relied upon the order passed by AO and Ld. CIT(A).
6. We have heard both the parties and their contentions have carefully been considered. According to section 221(1) when an assessee is in default or is deemed to be in default in making payment of tax, he shall, in addition to the amount of arrears and the amount of interest payable under sub-section (2) of section 220 be liable, by way of penalty, to pay such amount as the AO may direct, provided that the total amount of penalty in case of continuing default does not exceed amount of tax in arrears. In the present case, it is not a continuing default and penalty has been levied by AO @10% of the tax in arrears. The first proviso to section 221(1) provides that a reasonable opportunity of hearing should be given to the assessee before levying such penalty. Second proviso to section 221(1) describe that penalty shall not be levied in a case where the assessee is able to prove to the satisfaction of AO that the default was for good and sufficient reasons. Explanation to second proviso, for the purpose of removal of doubt, declares that assessee shall not be ceased to be liable for penalty under section 221(1) merely by reason of the fact that before levy of such penalty the assessee has paid the taxes. Therefore, the assessee can escape from levy of penalty only in the circumstances if he is able to prove to the satisfaction of AO that the default was for good and sufficient reasons. There cannot be any doubt that provisions of section 221(1) are penalty proceedings, therefore, are in the nature of quasi criminal proceedings. Such penalty is leviable in respect of failure of the assessee to carry out a statutory obligation and according to aforementioned decision of Hon'ble Supreme Court such penalty should not be ordinarly imposed unless the party obliged, either acted, deliberately in defiance of law or was guilty of conduct of contumacious or dishonest, or acted in a conscious disregard of its obligation. It is also held that penalty will not also be imposed merely because it is lawful to do so. It is a matter of discretion of the authority to be exercised judiciously and on consideration of the relevant circumstances. It is also held that even if minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is technical or venial breach of the provisions of the Act or where breach flows from a bonafide belief the offender is not liable to act in the manner prescribed by the statute.
6.1 Looking into the facts of the present case in the light of aforementioned decision of Hon'ble Supreme Court, we are of the opinion that levy of penalty is not justified. Provisions of section 221(1) are not absolute as the words used in the provisions is not "shall" but "may". This give a discretion to the authority vested with the power of levy of penalty not to levy penalty also. The assessee was saddled with a tax liability of more than Rs.55.00 lacs in respect of earlier years in view of retrospective amendment into the statute. The assessee has been paying said liability in installments and in the process, it is possible that assessee may have forgotten to make the payment of self assessment tax which was paid immediately when the fact regarding non-payment came to the notice of the assessee. Therefore, according to the facts of the case it cannot be said that the assessee's act was deliberate in defiance of law or assessee is guilty of a conduct which is contumacious or dishonest. Therefore, we hold that assessee is not liable for penalty to be levied under section 221(1) of the Act. We delete the same and the appeal is allowed.
7. In the result, the appeal filed by the assessee is allowed.
S.K.J.__._,_.___
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