SHREYAS LAND PVT.LTD,,PUNE vs. INCOME-TAX OFFICER,, PANVEL

This appeal by the assessee against the order dated 23-02-2017 passed by the Commissioner of Income Tax (Appeals)-2, Thane [„CIT(A)‟] for assessment year 2013-14.

We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent and set ex-parte. Therefore we proceed to dispose of the case by hearing the ld. DR and perusing the material available on record.

The assessee raised ground Nos. 1 to 4 amongst which the only issue emanates challenging the action of CIT(A) in confirming the penalty imposed u/s. 221 of the Act to an extent of Rs.16,53,355/- in the facts and circumstances of the case.

The ld. DR, Shri Alok Malviya submits that the assessee filed return of income declaring a total income of Rs.1,83,55,238/- within due date but no self assessment tax amounting to Rs.66,13,420/- paid. The assessee was requested to pay tax dues but no response from the assessee. The AO issued a letter requesting the assessee to show cause as to why penalty u/s. 221 r.w.s. 140A(3) of the Act should not be levied. The said notice was not served due to change of address of assessee. Again the AO issued another notice which was served on the assessee, in spite of receipt of such notice no response from the assessee. The AR of the assessee communicated orally to the AO that the assessee is not willing to pay self assessment tax. Having no response from the assessee in payment of self assessment tax the AO treated the same as continuing default and imposed penalty of Rs.25,00,000/- u/s. 221 r.w.s. 140A(3) of the Act.

The ld. DR further submits that one of the Directors of the assessee appeared before the CIT(A) and submitted that the AO imposed penalty on lump sum basis without considering the financial position of assessee. Further, the ld. DR submits that the assessee shown the evidence in respect of payment to an extent of Rs.46,21,000/- on various dates and undertaken to pay the remaining amount in due course. The CIT(A) considering the submissions of assessee held the penalty imposed by the AO is high and restricted to Rs.16,53,355/-. The ld. DR strongly argued that the assessee did not comply with the show cause notice in the penalty proceedings and payment of tax to some extent after the imposition of penalty shall not cease the assessee to be liable for penalty. The assessee is liable to pay self assessment tax as prescribed by the Act on such dates contemplated in Section 211 of the Act or before the due date of filing of return of income.

Heard ld. DR and perused the material available on record. Section 207 explains that tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 of the Act. The payment of advance tax refers to total income chargeable to tax for assessment year on immediately following that financial year is being referred as current income. This provision shall not apply to an individual resident in India who does not have any income chargeable under the head profits and gains of business or profession and is of the age of 60 years or more at any time during the previous year. The record shows that the assessee is Private Limited Company and therefore is very much under the ambit of section 207 of the Act and is liable to pay advance tax.

Section 208 speaks that advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year is ten thousand rupees or more. In the present case, the assessee filed return of income declaring a total income of Rs.1,83,55,238/- and also admitted that it requires to pay Rs.66,13,420/- as tax. Admittedly, that the assessee did not pay the advance tax payable or before the due date of filing of return of income. It is needless to say that the admitted tax shall have to be paid on or before a prescribed date of filing of return on 30-09-2013. We note that the AO issued a show cause notice on 11-02-2015 to the assessee why penalty u/s. 221 r.w.s. 140A(3) of the Act should not be levied but however no response from the assessee in the penalty proceedings.

Section 211 of the Act describes the installments of advance tax and due dates. We note that record shows that the assessee received an amount of Rs.1,22,80,500/- as on 31-03-2012 and is liable to pay advance tax but no such advance tax paid.

Section 221 of the Act defines when an assessee is in default or is deemed to be in default in making a payment of tax is liable to pay penalty in addition of the arrears and interest as AO may direct from time to time, further, the penalty shall not exceed the amount of tax in arrears. In the present case, the AO imposed penalty of Rs.25,00,000/- but the CIT(A) restricted the same to an extent of Rs.16,53,355/- being 1/4th of tax due.

The CIT(A) examined the case in detail. We note that the assessee stated that the financial crunch is the main reason for non-payment of tax liability. The CIT(A) in its order at page No. 6 examined the financial position of assessee as on the due dates of installments of payments of advance tax and also on due date for filing of return of income, wherein we note that the assessee had sufficient balance amount in its accounts to discharge the tax liability as on the due dates of installments in terms of section 211 of the Act. Therefore, we completely agree with the reasons recorded by the CIT(A) in its order that the assessee had sufficient funds to discharge its liability.

The assessee raised a ground that due to financial liquidity crisis the assessee could not pay taxes. As discussed above, the assessee was in sound financial position during the dates of installments of advance tax payments. Let us examine the provision u/s. 273B of the Act is applicable to the assessee or not. Under the provisions of section 273B no penalty be imposed in certain cases listed therein, if the assessee proves that there was reasonable cause for the said failure. On careful reading of section 273B we note that no penalty shall be imposable on the person or the assessee for any failure referred to in the listed provisions therein but however the provisions u/s. 221 of the Act is conspicuously absent. Therefore, the reasonable cause as defined u/s. 273B in our opinion is not applicable to the penalty imposable u/s. 221 of the Act. The term advance tax refers to paying a part of taxes before the end of the financial year. It should be paid in the year in which the income is received. In the present case the relevant Financial Year is 2012-13 and end of Financial Year is 31-03-2013 the assessee is required to pay advance tax on 15-06-2012, 15-09-2012, 15-12-2012 and 15-03-2013 i.e. before the end of Financial Year 31-03-2013. We note that the assessee paid Rs.11,21,000/- on two dates 13-03-2015 and 16-03-2015 i.e. after passing of penalty order on 03-03-2015 and an amount of Rs.35,00,000/- on 16-01-2017 i.e. just before passing impugned order on 23-02-2017. We agree with the submission of Shri Alok Malviya that the assessee shall not cease to be liable to any penalty under sub-section (1) of section 221 merely by reason of the fact that the assessee paid tax, but however taking into consideration the facts of circumstances, it is fair and just to restrict the penalty to Rs.66,134/- being 1% of Rs.66,13,420/- and we confirm the penalty to an amount of Rs.66,134/- and the order of CIT(A) is modified accordingly. Thus, grounds raised by the assessee are partly allowed.

In the result, the appeal of assessee is partly allowed.