DCIT., CIRCLE-8(1), HYDERABAD vs. LATE SAMA RAMACHANDRA REDDY L/R BY HIS WIFE SAMA YASHODHA, HYDERABAD

Thereafter, the Revenue has filed the Revised Form No.36 whereby the legal representative of the deceased-assessee was brought on record. The Revised Form No.36 filed by the department for both the years are taken on record. In the appeal arising from the assessment order u/s.153A of the Act, the Learned Departmental Representative has submitted that the Assessing Officer has raised an objection against the maintainability of the appeal of the assessee as the assessee did not pay the self-assessment tax. This fact is duly recorded by the Ld. CIT(A) in para No.2.3 of the impugned order. The Ld. CIT(A) has not given any findings or even allowed the assessee further time for payment of the self-assessment tax but passed the impugned order which is not sustainable in view of the provisions of section 249(4) r.w. section 140A of the Act. Thus the Ld. DR has submitted that the assessee has not paid the self-assessment tax and the appeal of the assessee before the Ld. CIT(A) was not maintainable and liable to be dismissed on this ground alone instead of adjudication of the appeals on merit. He has further submitted that the Ld. CIT(A) has entertained the additional evidences filed by the assessee in violation of Rule 46A of the Income Tax Rules, 1962.

He further argued that the impugned order of the Ld. CIT(A) is not sustainable in law and liable to be set aside. He has relied upon the order of Assessing Officer as well as the decision of co-ordinate bench of this Tribunal dated 21.04.2017 in the case of ACIT Vs. P. to 1075/Hyd/2012.

“5. I have carefully considered the written submissions and oral argument of the appellant. I have also perused the penalty order, assessment order, CIT(A), Guntur order and also revised computation before Assessing Officer during the course of scrutiny. The Assessing Officer did not consider the revised computation. However, the CIT(A), Guntur, during the course of appellant proceedings has considered the revised computation filed by the assessee. Since the revised computation of income has been admitted by the CIT (Appeals), there is no tax payable u/140A. Therefore, it is implied that provisions of scrutiny 249(4) are not applicable to the appellant’s case. There is no default of any tax u/s. 140-A by the assessee. Hence, the penalty levied u/s. 221(1) amounting to Rs.95,97,051/- is deleted.”

7.1 Thus the only reason given by the Ld. CIT(A) for deleting the penalty is that during the course of appellate proceedings the revised computation was admitted by the CIT(A), whereby no tax payable was reported by the assessee. The fact remains that in the Return of Income the assessee has declared income and not paid the income tax on the same. Even subsequently if the assessee succeeds in getting the relief on wrong declaration of income, the requirement of payment of self-assessment tax would not obliterated as prescribed u/s. 149(4) of the Income Tax Act. The assessee if gets relief from the appellate authority, then that will result in refund of tax along with interest, if any. The assessee himself cannot choose not to pay the self-assessment tax. The Hon’ble Bombay High Court in the case of CIT Vs. Oryx Finance and Investment Ltd. (supra), as held in para 21 as under :

“ 21. In view of the aforesaid discussion and on reading the provisions of section 221 conjointly with the definition of “tax” as detailed under section 2(43), the irresistible conclusion that can be drawn is that the phraseology “tax in arrears” as envisaged in section 221 of the Act would not take within its realm the interest component. It would be abundantly clear that the Assessing Officer can impose penalty for default in making the payment of tax, but the same shall not exceed the amount of tax in arrears. Ta in arrears would not include the interest payable under section 220(2) of the Act. In the result, the substantial question of law are answered against the appellant. The appeal stands dismissed. However, no order as to costs.”

7.2 The Special Bench of ITAT, Ahmedabad in the case of Claris Life Sciences Limited Vs. DCIT (supra) as relied upon by the Ld. DR has also held in para 20 as under :

“ 20. In view of the above discussions, as also bearing in mind entirety of the case, in our considered view, the assessee is, in principle, covered by the scope of the penalty under section 221(1) of the Act in a case in which the though the assessee has not paid the admitted tax liability under section 140A, while filing the original return of income, the assessee subsequently pays the tax on the revised return of income, at the time of filing the revised return of income. We, therefore, answer the question referred to the special bench in affirmative and against the assessee. However, whether the penalty under section 221(1) r.w.s. 140A(1) is actually leviable on the facts of a particular case or not will depend on the facts of that case and depending on, inter alia, the factual finding as to whether or not the default of the assessee was for good and sufficient reasons- something with which we are not really concerned at this stage due to inherently limited scope of the question before the special bench.”

Accordingly, in view of the facts and circumstances of the case as well as by following the decision of Hon’ble Bombay High Court and the Special Bench of this Tribunal, the impugned order of the Ld. CIT(A) is set aside and the order of the Assessing Officer passed u/s.221(1) of the Act is restored. The appeal of the Revenue is allowed.