FIRST GLOBAL STOCKBROKING PVT LTD,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX 4 (1) (1), MUMBAI

Before us, the Ld. counsel for the assessee firstly firstly, submitted 5. Before us, the Ld. counsel for the assessee that there is a sufficient cause for not depositing the tax before that there is a sufficient cause for not depositing the tax before that there is a sufficient cause for not depositing the tax before filing of return of income. However, subsequently, the assessee has filing of return of income. However, subsequently, the assessee has filing of return of income. However, subsequently, the assessee has paid the self-assessment tax and notice for levy of the p assessment tax and notice for levy of the p assessment tax and notice for levy of the penalty was issued after a period issued after a period of five years from the period of self five years from the period of self-assessment tax whereas the assessee has already discharged its liability and tax whereas the assessee has already discharged its liability and tax whereas the assessee has already discharged its liability and therefore, penalty should have been dropped by the Assessing therefore, penalty should have been dropped by the Assessing therefore, penalty should have been dropped by the Assessing Officer. Secondly, the Ld. counsel for the asse , the Ld. counsel for the assessee referred to the ssee referred to the provisions of section 140A(3) of the Act provisions of section 140A(3) of the Act post amendment by way of post amendment by way of Direct Tax Amendment Act, 1987. He relied on the decision of the Direct Tax Amendment Act, 1987. He relied on the decision of the Direct Tax Amendment Act, 1987. He relied on the decision of the ordinate Bench of the Tribunal in the case of Heddle Co-ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of Knowledge Pvt. Ltd. in for assessment Knowledge Pvt. Ltd. in for a Knowledge Pvt. Ltd. in ITA No. 7509/M/2011 for a year 2009-10 and submitted that in view of amended provision of and submitted that in view of amended provision of and submitted that in view of amended provision of section 140A(3) of the Act section 140A(3) of the Act, no penalty was envisaged for delay in no penalty was envisaged for delay in deposit of the self-assessment tax. The Ld. counsel also relied on assessment tax. The Ld. counsel also relied on assessment tax. The Ld. counsel also relied on First Global Stockbroking Pvt. Ltd First Global Stockbroking Pvt. Ltd 4 1951 & 1950/MUM/2024 ITA Nos. 1786, 1951 & 1950/MUM/2024 the decision of the Tribunal in the case of M/s Sanghi Industries anghi Industries the decision of the Tribunal in the case of Ltd. in & 834/Hyd/2016 and CO No. 31/Hyd/2016 Ltd. in ITA No. 122 & 834/Hyd/2016 and CO No. 31/Hyd/2016 Ltd. in ITA No. 122 & 834/Hyd/2016 and CO No. 31/Hyd/2016 (ITA No. 122/Hyd/2016) (ITA No. 122/Hyd/2016) for assessment year 2010 for assessment year 2010-11 and ITA No. 6897 & 6898/Mum/2019 for assessment years 2011-12 and 2012- 6897 & 6898/Mum/2019 for assessment years 2011 6897 & 6898/Mum/2019 for assessment years 2011 13, wherein the Co-ordinate Bench has followed the decision ordinate Bench has followed the decision in the ordinate Bench has followed the decision case of Heddle Knowledge Pvt. Ltd. (supra) case of Heddle Knowledge Pvt. Ltd. (supra). The relevant finding of he relevant finding of the Co-ordinate Bench of the Tribunal in the case of Heddle ordinate Bench of the Tribunal in the case of Heddle ordinate Bench of the Tribunal in the case of Heddle Knowledge Pvt. Ltd. (supra) Knowledge Pvt. Ltd. (supra) is reproduced as under:

“4. Sec. 140A(3) of the Act, as it stands for the year under conside 4. Sec. 140A(3) of the Act, as it stands for the year under conside 4. Sec. 140A(3) of the Act, as it stands for the year under consideration, reads as under : reads as under :— "140A(3) If any assessee fails to pay the whole or any part of such "140A(3) If any assessee fails to pay the whole or any part of such "140A(3) If any assessee fails to pay the whole or any part of such tax [or interest or both] in accordance with the provisions of sub tax [or interest or both] in accordance with the provisions of sub tax [or interest or both] in accordance with the provisions of sub- section (1), he shall, without prejudice to any other consequences section (1), he shall, without prejudice to any other consequences section (1), he shall, without prejudice to any other consequences which he may incur, be which he may incur, be deemed to be an assessee in default in deemed to be an assessee in default in respect of the tax [or interest or both] remaining unpaid, and all the respect of the tax [or interest or both] remaining unpaid, and all the respect of the tax [or interest or both] remaining unpaid, and all the provisions of this Act shall apply accordingly." provisions of this Act shall apply accordingly."

First Global Stockbroking Pvt. Ltd First Global Stockbroking Pvt. Ltd 5 1951 & 1950/MUM/2024 1951 & 1950/MUM/2024 "Para 4.17 : The old provisions of subsection (3) of the section "Para 4.17 : The old provisions of subsection (3) of the section "Para 4.17 : The old provisions of subsection (3) of the section provided for levy of penalty for non provided for levy of penalty for non-payment of self payment of self-assessment tax, since the rate of mandatory interest for failure to pay the tax tax, since the rate of mandatory interest for failure to pay the tax tax, since the rate of mandatory interest for failure to pay the tax has now been increased, it is not necessary to retain has now been increased, it is not necessary to retain has now been increased, it is not necessary to retain this provision any more. The amending Act has accordingly omitted the said sub any more. The amending Act has accordingly omitted the said sub any more. The amending Act has accordingly omitted the said sub section (3). section (3). 4.18 : In order to vest the power of recovery of tax and interest due 4.18 : In order to vest the power of recovery of tax and interest due 4.18 : In order to vest the power of recovery of tax and interest due under this section on the basis of the return, amending Act 1987, under this section on the basis of the return, amending Act 1987, under this section on the basis of the return, amending Act 1987, has inserted a new sub secti has inserted a new sub section (3) in the section to provide that if on (3) in the section to provide that if any assessee has not paid self assessment tax and interest in full any assessee has not paid self assessment tax and interest in full any assessee has not paid self assessment tax and interest in full before filing the return, he shall be deemed to be an assessee in before filing the return, he shall be deemed to be an assessee in before filing the return, he shall be deemed to be an assessee in default in respect of such tax and interest." default in respect of such tax and interest." Quite clearly, if one is to read the Quite clearly, if one is to read the earlier Sec. 140A(3) of the Act and the earlier Sec. 140A(3) of the Act and the amended section w.e.f. 1.4.1989 alongwith the explanatory notes to the amended section w.e.f. 1.4.1989 alongwith the explanatory notes to the amended section w.e.f. 1.4.1989 alongwith the explanatory notes to the amendment conjointly, it is clear that the earlier provision prescribing for amendment conjointly, it is clear that the earlier provision prescribing for amendment conjointly, it is clear that the earlier provision prescribing for levy of penalty for default outlined in Sub levy of penalty for default outlined in Sub-section (1) of Sec. 140 section (1) of Sec. 140A(3) has yielded place to mandatory charging of interest for such default. The yielded place to mandatory charging of interest for such default. The yielded place to mandatory charging of interest for such default. The aforesaid legislative intent also gets strength by the fact that aforesaid legislative intent also gets strength by the fact that aforesaid legislative intent also gets strength by the fact that simultaneously the legislature prescribed for mandatory charging of simultaneously the legislature prescribed for mandatory charging of simultaneously the legislature prescribed for mandatory charging of interest u/s 234B of the Act for default in interest u/s 234B of the Act for default in payment of self-assessment tax assessment tax w.e.f. 01.04.1989 onwards. w.e.f. 01.04.1989 onwards.

6. However, a contrary position is taken by the Revenue to the effect that 6. However, a contrary position is taken by the Revenue to the effect that 6. However, a contrary position is taken by the Revenue to the effect that for having defaulted in payment of self for having defaulted in payment of self-assessment tax within the assessment tax within the stipulated period, assessee qualifies to be "an assessee stipulated period, assessee qualifies to be "an assessee stipulated period, assessee qualifies to be "an assessee in default" as prescribed in the amended Sec. 140A(3) of the Act and, therefore, if one is prescribed in the amended Sec. 140A(3) of the Act and, therefore, if one is prescribed in the amended Sec. 140A(3) of the Act and, therefore, if one is to read the same with Sec. 221(1) of the Act, the action of the Assessing to read the same with Sec. 221(1) of the Act, the action of the Assessing to read the same with Sec. 221(1) of the Act, the action of the Assessing Officer in imposing penalty is quite justified. In sum and substance, it is Officer in imposing penalty is quite justified. In sum and substance, it is Officer in imposing penalty is quite justified. In sum and substance, it is sought to be em sought to be emphasised on the strength of Sec. 221(1) of the Act that the phasised on the strength of Sec. 221(1) of the Act that the penalty is leviable so long as the default is in the nature which renders the penalty is leviable so long as the default is in the nature which renders the penalty is leviable so long as the default is in the nature which renders the assessee as an "assessee in default" for payment of tax. Sec. 221(1) of the assessee as an "assessee in default" for payment of tax. Sec. 221(1) of the assessee as an "assessee in default" for payment of tax. Sec. 221(1) of the Act prescribes for penalty when assessee i Act prescribes for penalty when assessee is in default in making the s in default in making the payment of tax. On the face of it, the argument of the Revenue appears to payment of tax. On the face of it, the argument of the Revenue appears to payment of tax. On the face of it, the argument of the Revenue appears to be justified, so however, the same does not merit acceptance if one be justified, so however, the same does not merit acceptance if one be justified, so however, the same does not merit acceptance if one examines the issue in slight detail. Notably, the penalty envisaged Sec. examines the issue in slight detail. Notably, the penalty envisaged Sec. examines the issue in slight detail. Notably, the penalty envisaged Sec. 140A(3) in the 140A(3) in the unamended provision was on the statute alongwith the unamended provision was on the statute alongwith the penalty envisaged u/s 221 of the Act. Once Sec. 140A(3) of the Act has penalty envisaged u/s 221 of the Act. Once Sec. 140A(3) of the Act has penalty envisaged u/s 221 of the Act. Once Sec. 140A(3) of the Act has been amended w.e.f. 01.04.1989, as we have seen earlier, there is no been amended w.e.f. 01.04.1989, as we have seen earlier, there is no been amended w.e.f. 01.04.1989, as we have seen earlier, there is no amendment of Sec. 221 of the Act and it continues to remain th amendment of Sec. 221 of the Act and it continues to remain th amendment of Sec. 221 of the Act and it continues to remain the same. What we are trying to emphasise is if the plea of the Revenue is to be What we are trying to emphasise is if the plea of the Revenue is to be What we are trying to emphasise is if the plea of the Revenue is to be accepted, based on the amendment to Sec. 140A(3) of the Act, it would accepted, based on the amendment to Sec. 140A(3) of the Act, it would accepted, based on the amendment to Sec. 140A(3) of the Act, it would mean that prior to 01.04.1989 the same default invited penal provisions mean that prior to 01.04.1989 the same default invited penal provisions mean that prior to 01.04.1989 the same default invited penal provisions under two sections, namely, Sec. 14 under two sections, namely, Sec. 140A(3) as well as Sec. 221(1) of the Act, 0A(3) as well as Sec. 221(1) of the Act, which would appear to be peculiar and unintended. Furthermore, the which would appear to be peculiar and unintended. Furthermore, the which would appear to be peculiar and unintended. Furthermore, the intention of the legislature at the time of insertion of the amended Sec. intention of the legislature at the time of insertion of the amended Sec. intention of the legislature at the time of insertion of the amended Sec. 140A(3) makes it clear that the old provisions of Sec. 140A(3) prescribing 140A(3) makes it clear that the old provisions of Sec. 140A(3) prescribing 140A(3) makes it clear that the old provisions of Sec. 140A(3) prescribing for levy of penalty for non for levy of penalty for non-payment of self-assessment tax was no longer assessment tax was no longer found necessary because the said default would henceforth invite found necessary because the said default would henceforth invite found necessary because the said default would henceforth invite mandatory charging of interest. Ostensibly, the legislature did not mandatory charging of interest. Ostensibly, the legislature did not mandatory charging of interest. Ostensibly, the legislature did not envisage that consequent to the amendment, the de envisage that consequent to the amendment, the default in payment of fault in payment of self- assessment tax would hitherto be covered by the scope of Sec. 221(1) assessment tax would hitherto be covered by the scope of Sec. 221(1) assessment tax would hitherto be covered by the scope of Sec. 221(1)

First Global Stockbroking Pvt. Ltd First Global Stockbroking Pvt. Ltd 6 1951 & 1950/MUM/2024 1951 & 1950/MUM/2024 of the Act. The emphasis of the Revenue is to point out that the non of the Act. The emphasis of the Revenue is to point out that the non of the Act. The emphasis of the Revenue is to point out that the non- payment of self payment of self-assessment tax renders the assessee "in default" in the assessment tax renders the assessee "in default" in the amended provision wh amended provision which further prescribes that "all the provisions of this ich further prescribes that "all the provisions of this Act shall apply accordingly" and, therefore, the default is hitherto (from Act shall apply accordingly" and, therefore, the default is hitherto (from Act shall apply accordingly" and, therefore, the default is hitherto (from 01.04.1989) covered by Sec. 221(1) of the Act. In our view, the 01.04.1989) covered by Sec. 221(1) of the Act. In our view, the 01.04.1989) covered by Sec. 221(1) of the Act. In our view, the consequence of the aforesaid two expressions contained in Sec consequence of the aforesaid two expressions contained in Sec consequence of the aforesaid two expressions contained in Sec. 140A(3) are also not of the type sought to be understood by the Revenue, and are also not of the type sought to be understood by the Revenue, and are also not of the type sought to be understood by the Revenue, and rather the assessee is to be treated as an "assessee in default" for the rather the assessee is to be treated as an "assessee in default" for the rather the assessee is to be treated as an "assessee in default" for the limited purpose of enabling the Assessing Officer to make recovery of the limited purpose of enabling the Assessing Officer to make recovery of the limited purpose of enabling the Assessing Officer to make recovery of the amount of tax and interest due amount of tax and interest due and not for levy of penalty, an aspect and not for levy of penalty, an aspect which has been specifically done away in the new provision. Therefore, which has been specifically done away in the new provision. Therefore, which has been specifically done away in the new provision. Therefore, considered in the aforesaid light, in our view, the fact that the amended considered in the aforesaid light, in our view, the fact that the amended considered in the aforesaid light, in our view, the fact that the amended Sec. 140A(3) w.e.f. 01.04.1989 does not envisage any penalty for non Sec. 140A(3) w.e.f. 01.04.1989 does not envisage any penalty for non Sec. 140A(3) w.e.f. 01.04.1989 does not envisage any penalty for non- payment of self yment of self-assessment tax, the Assessing Officer was not justified in assessment tax, the Assessing Officer was not justified in levying the impugned penalty by making recourse to Sec. 221(1) of the Act. levying the impugned penalty by making recourse to Sec. 221(1) of the Act. levying the impugned penalty by making recourse to Sec. 221(1) of the Act. Before parting, we may again emphasise that Sec. 221 of the Act remains Before parting, we may again emphasise that Sec. 221 of the Act remains Before parting, we may again emphasise that Sec. 221 of the Act remains unchanged, both during the pre and p unchanged, both during the pre and post amended Sec. 140A(3) of the Act ost amended Sec. 140A(3) of the Act and even in the pre and even in the pre-amended situation, penalty u/s 221 of the Act was not amended situation, penalty u/s 221 of the Act was not attracted for default in payment of self attracted for default in payment of self-assessment tax, which was assessment tax, which was expressly covered in pre 01.04.1989 prevailing Sec. 140A(3). Thus, without expressly covered in pre 01.04.1989 prevailing Sec. 140A(3). Thus, without expressly covered in pre 01.04.1989 prevailing Sec. 140A(3). Thus, without there being any requisite corresponding amendment to Sec. 221 of the Act e being any requisite corresponding amendment to Sec. 221 of the Act e being any requisite corresponding amendment to Sec. 221 of the Act in consonance with the amendments carried out in Sec. 140A(3) of the Act in consonance with the amendments carried out in Sec. 140A(3) of the Act in consonance with the amendments carried out in Sec. 140A(3) of the Act w.e.f. 01.04.1989, the Assessing Officer erred in levying the impugned w.e.f. 01.04.1989, the Assessing Officer erred in levying the impugned w.e.f. 01.04.1989, the Assessing Officer erred in levying the impugned penalty. Thus, on this aspect, we hereby se penalty. Thus, on this aspect, we hereby set-aside the order of CIT(A) and aside the order of CIT(A) and direct the Assessing Officer to delete the penalty imposed u/s 140A(3) direct the Assessing Officer to delete the penalty imposed u/s 140A(3) direct the Assessing Officer to delete the penalty imposed u/s 140A(3) r.w.s. 221(1) of the Act. r.w.s. 221(1) of the Act.” 5.1 Thus the Co-ordinate Bench of the Tribunal referred to the ordinate Bench of the Tribunal referred to the ordinate Bench of the Tribunal referred to the Circular of the Central Board of Direct Taxes dated 31.10.1989 Circular of the Central Board of Direct Taxes dated 31.10.1989 Circular of the Central Board of Direct Taxes dated 31.10.1989 wherein it is pointed out that in view of the mandatory interest for wherein it is pointed out that in view of the mandatory interest for wherein it is pointed out that in view of the mandatory interest for failure to pay the self failure to pay the self-assessment tax has now been increased assessment tax has now been increased, therefore levy of the penalty therefore levy of the penalty for non-payment of the self payment of the self-assessment tax under old provisions of sub tax under old provisions of sub-section (3) of section section (3) of section 140 was not necessary. The Co-ordinate Bench has held that levy of penalty u/s ordinate Bench has held that levy of penalty u/s ordinate Bench has held that levy of penalty u/s 140A(3) of the Act has been retrained only to 140A(3) of the Act has been retrained only to vest power of recovery power of recovery of interest due under the section and not for levy of the penalty of interest due under the section and not for levy of the penalty of interest due under the section and not for levy of the penalty where payment has already been done. The C where payment has already been done. The Co-ordinate Bench of ordinate Bench of the Tribunal (supra) has held that therefore the Tribunal (supra) has held that therefore without without any requisite corresponding amend corresponding amendment to section 221 of the Act, t ment to section 221 of the Act, the Assessing

First Global Stockbroking Pvt. Ltd First Global Stockbroking Pvt. Ltd 7 1951 & 1950/MUM/2024 1951 & 1950/MUM/2024 Officer is not having any authority to levy penalty invoking section Officer is not having any authority to levy penalty invoking section Officer is not having any authority to levy penalty invoking section 140A(3) of the Act r.w.s. 221 of th 140A(3) of the Act r.w.s. 221 of the Act. In the instant case also the e Act. In the instant case also the penalty has been levied for delay in payment of the self-assessment penalty has been levied for delay in payment of the self penalty has been levied for delay in payment of the self tax and therefore, respectfully following the finding of the Co- tax and therefore, respectfully following the finding of the Co tax and therefore, respectfully following the finding of the Co ordinate Bench of the Tribunal in the case of Heddle Knowledge Pvt. ordinate Bench of the Tribunal in the case of Heddle Knowledge Pvt. ordinate Bench of the Tribunal in the case of Heddle Knowledge Pvt. Ltd. (supra), we set aside the order of the Ld. aside the order of the Ld. CIT(A) on the issue in CIT(A) on the issue in dispute and delete the penalty levied by the AO invoking section dispute and delete the penalty levied by the AO invoking section dispute and delete the penalty levied by the AO invoking section 221 of the Act.

5.2 Since, we have already deleted the penalty in view of lack of Since, we have already deleted the penalty in view of lack of Since, we have already deleted the penalty in view of lack of authority, the issue of sufficient cause is rendered mere the issue of sufficient cause is rendered mere the issue of sufficient cause is rendered merely academic and therefore, we are not adjudicating upon the same. The issue in and therefore, we are not adjudicating upon the same. The issue in and therefore, we are not adjudicating upon the same. The issue in dispute involved in the remaining two appeals is identical to the dispute involved in the remaining two appeals is identical to the dispute involved in the remaining two appeals is identical to the issue issue decided decided in in assessment assessment year year 2013-14 2013 14 in in ITA ITA No. No. 1786/Mum/2024 and therefore, following our finding the grounds 1786/Mum/2024 and therefore, following our finding the grou 1786/Mum/2024 and therefore, following our finding the grou raised in other two appeals are also allowed. two appeals are also allowed.