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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: Shri Saktijit Dey, JM & Shri Manoj Kumar Aggarwal, AM
O R D E R Per Saktijit Dey, Judicial Member:
These cross appeals arise out of a common order dated 09.12.2012 of learned CIT(A)-40, Mumbai, sustaining a part of the penalty imposed u/s. 220(1) r.w.s. 140A of the I.T. Act, 1961 for the assessment year 2008-09.
Briefly, the facts as found from record are assessee – a company is engaged in the business as a builder in developing residential and commercial property. A search and seizure operation u/s 132(1) of the Act was conducted in case of the assessee as well as its Directors’ on 09.07.2008. In course of search and seizure operation disclosure of additional income was made. Subsequently, the assessee filed its return of income for A.Ys. 2007- 08 and 2008-09 declaring income of `.0.72 crores and `.35.50 crores respectively. While verifying the return of income filed by the assessee for A.Y. 2008-09, it was noticed by the AO, though, as per the computation of income filed by the assessee the tax due on declared total income of `.35,50,44,715/- was `.13,39,36,817/-, however, at the time of filing of return assessee has paid tax including TDS of `.7,02,05,803/- and balance amount of `. 6,37,31,014/- shown as payable by self assessment tax was actually not paid by the assessee. Due to non-payment of self assessment tax, the AO treating the assessee as assessee in default initiated proceedings for imposition of penalty u/s. 221(1) r.w.s. 140A of the Act. In response to the show cause notice, though, the assessee submitted its explanation stating the reasons which prevented it from paying the self assessment tax, however, the AO rejecting the explanation of the assessee passed an order imposing penalty of `.1 crore u/s. 221(1) of the Act. The assessee challenged the imposition of penalty before the CIT(A).
The learned CIT(A) after considering elaborate submissions of the assessee and keeping in view the relevant case laws cited before him though, agreed with the AO that penalty u/s. 221(1) is imposable under the given facts and circumstances of the case, however, he did not agree with the quantum of penalty imposed by the AO. The learned CIT(A) held that in the facts of the case, penalty @2% of the self assessment tax payable would serve the interest of justice. Accordingly, he worked out the penalty payable u/s 221(1) r.w.s. 140A at `.12,74,620/-. Being aggrieved both the assessee and the department are before us.
When the appeals were called for hearing, no one was present for the assessee. Therefore, we proceed to dispose of the appeals exparte qua-the assessee, after hearing the learned DR and on the basis of material available on record.
The learned DR justifying the quantum of penalty imposed by the AO submitted that the facts discussed by the AO in the penalty order clearly demonstrates that the assessee had sufficient liquidity of funds to make various investments, however, it didn’t pay the self assessment tax payable by it. Therefore, the provisions of section 221(1) are clearly attracted as the assessee has not made out a reasonable cause for the default.
We have heard the learned DR and perused the materials on record.
Undisputedly, at the time of filing of return of income, the assessee has not discharged its income-tax liability fully as self assessment tax to the tune of `.6.37 crores was not paid by the assessee at the time of filing of return. No material has been brought on record to conclusively prove the fact that assessee didn’t have financial capability to discharge the liability on account of self assessment tax. Therefore, in terms of section 220(1) r.w.s. 140A, assessee has to be treated as assessee in default and penalty provisions are clearly attracted as the assessee has failed to show reasonable cause for the default in non-payment of self assessment tax. Having held so, it is necessary now to deal with the quantum of penalty which can be said to be reasonable in the given facts and circumstances of the case. As could be seen, for non-payment of self assessment tax of `.6.37 crores the AO has imposed penalty of `. 1 crore. The AO has not given any basis for arriving at the figure of `.1 crore. Though, the provisions of section 220(1) empowers the AO to direct the assessee to pay penalty as may be quantified by him, however, such power to levy penalty cannot be exercised by the AO in an arbitrary and whimsical manner. It is seen from the submissions made by the assessee before the learned CIT(A) that subsequently it has not only paid the self assessment tax liability of `.6.37 crores but has also paid interest u/s. 234B and 234C amounting to `.1.32 crores. Thus, when the assessee has discharged the unpaid self assessment tax liability along with statutory interest, imposition of penalty at such a high and excessive figure in our view is uncalled for. In our considered opinion, the decision of the CIT(A) in restricting the penalty u/s. 220(1) to @2% of the self assessment tax payable is fair and reasonable and would serve the interest of justice.
Accordingly, we uphold the order of the CIT(A) on the issue.
In the result, both the appeals are dismissed.
Order pronounced in the open court on 9th day of May, 2017.