MAKSON INDUSTRIES P.LTD,M.P. vs. DCIT 8(2), MUMBAI

Date of hearing : 12-01-2017 Date of order : 13 -02-2017

O R D E R

Per ASHWANI TANEJA, AM:

2. On the facts and in the circumstances of the case the Learned Commissioner of Income Tax (A) was not justified in not holding that the AO did not have jurisdiction to initiate penalty proceedings as the case of the assessee was centralized with DCIT Central Circle 1(3), Ahemadabad.

3. On the facts and in the circumstances of the case the Learned Commissioner of Income Tax (A) was not justified in not holding that the AO was not justified in imposing penalty of Rs. 225334/-.” 2. The brief background of the case are that there was delay in deposit of self assessment tax by the assessee which was confirmed by Ld. CIT(A). During the course of hearing it was stated by Ld. Counsel of the assessee that detailed submissions were made before the lower authorities wherein reasons were explained in detail causing delay in payment of self assessment tax by the assessee. But without discussing or dealing with the reasons narrated by the assessee penalty was levied by the AO and confirmed by Ld. CIT(A). It was also submitted that assessee deposited the entire amount of tax along with the interest as per law voluntarily. There was no malafide intention on the part of the assessee for making late deposit of tax. Under these circumstances, the AO ought not to have levied the penalty. Per contra, the Ld. DR relied upon the orders of the lower authorities.

2. We have gone through the orders passed by the lower authorities. It is admitted fact on record that the entire tax has been deposited by the assessee voluntarily along with the statutory interest. The assessee explained the reasons causing delay in deposit of tax before the AO as well as before the Ld. CIT(A) as under:-

“The Appellant company has submitted a letter dated 28/03/2011 giving the detailed reasons for the delay in 2010, due to which heavy port congestion occurs which resulted in delay of shipments and causing delay in recovery of revenue. Due to this there were liquidity crises resulting in non payment of taxes. The Appellant also approached to Development Credit Bank to provide us advance credit facility of Rs. 100 Lacs to face the liquidity crisis and it is only after the bank facility, the appellant could pay the Self Assessment taxes. We are also enclosing sanction letter of that said bank. We therefore, pleaded before your honour that the appellant has prevented due to reasons beyond its control from timely payment of taxes and therefore, the levy of Penalty is very harsh and unjustified on the merits of the case. Further, even on the legal aspects of the issue, of penalty is totally bad in Law, Null and void and liable to be quashed.”

facts. In fact, Ld. CIT(A) confirmed the penalty without making any discussion at all and by simply stating that in his view AO was justified in levying the penalty. Thus, the reasons explained by the assessee remain uncontroverted.

6. Further, in our view, the object of bringing penal provisions on the statute was to bring a deterrent effect. The intention of the legislature is not to mop up additional resources through penal provisions. Therefore, levy of penalty by invoking penal provisions even in those cases, where the default occurred due to reasons beyond the control of the assessee would cause avoidable hardships to the taxpayers without achieving the objective of the legislature. We find that both the authorities were highly unreasonable and misdirected in their approach. Such kind of approach should be avoided as it shakes the confidence of the taxpayer upon the system and working mechanism of the income-tax department which may, in turn, reduce voluntary compliance by the taxpayers. Therefore, the Revenue officials should be more careful and reasonable while levying penalty in such cases. With these observations, we delete the penalty of Rs.2,25,334/- levied by the AO.