VINAY VIKRAM OBEROI,NAVI MUMBAI vs. ITO 22(3)4, NAVI MUMBAI

Per Jason P. Boaz, A.M.

This appeal by the assessee is directed against the order of the CIT(A)- 33, Mumbai dated 01.09.2014 upholding the levy of penalty of `2,44,943/- under section 221(1) of the Income Tax Act, 1961 (in short 'the Act') by the Assessing Officer’s order dated 28.01.2013. 2. This appeal was fixed for hearing on a number occasions, but neither anyone was present for the assessee nor was any adjournment sought on his behalf. Even the notice for hearing issued by RPAD could not elicit compliance thereto or a response in this regard. On the day the Bench did not function, the case was adjourned and notice of next date of hearing was informed through Notice Board and by issue of notice to the parties. On 15.09.2015, when the case was called for hearing, none was present for the assessee, but the learned D.R. for Revenue was present and ready to argue the case for Revenue. In these circumstances, as mentioned above, we are of the considered opinion that the assessee is not interested in pursuing this appeal seriously and therefore proceed to dispose the

2 ITA No. 7157/Mum/2014 Shri Vinay Vikram Oberoi same with the assistance of the learned D.R. for Revenue and the material on record. 3.1 The grounds raised by the assessee in this appeal are as under: - “1. The Learned Officer Shri K. V. Sreenivas has erred in passing order U/s. 221(1) of the Income Tax Act, 1961 dated 28.01.2013 despite the fact that the remarks of "None Attended" cannot withstand the facts of the case; 2. It is important to note the sequence of events, which are described hereunder: a. The scrutiny for Asst. Year 2010-2011 was carried out between September’ 2012 to December' 2012 before the same learned officer, Shri K. V. Sreenivas; b. The assessment was made U/s. 143(3) of the Income Tax Act, 1961 and the order dated 31.12.2012 was delivered to us accordingly by hand through our same Authorised Chartered Accountant, who had been there since past several years; c. The learned officer was orally requested that some few days be granted to make the payment of Rs. 11,530/- so demanded for the AY 2010-2011 as the undersigned assessee was passing through a bad financial crunch; d. The assessment order for AY 2010-2011 disclosed a demand of Rs. 11,530/-, which was paid on 17th January 2013. The said challan was also produced before the same learned officer on 18th January 2013 so that he can update his records at his end; e. A request to provide some time was also discussed during our various meetings pertaining to outstanding tax payment of Rs. 244,943 relevant to Asst. Year 2012- 2013; f. We had requested the Officer on the basis of the fact that although the Bank had set up a Cash Credit limit for us, however the Drawing powers were curtailed to less than the original limit leading to a financial crunch; g. The same learned officer in his order dated 28.01.2013 for the Asst. Year 2012-2013 levied a penalty of Rs. 244,943/- U/s. 221(1) of the Income Tax Act, 1961 on the ground that we never attended before him; h. The CIT — Appeals XXXIII has, in their order dated 01.09.2014 disagreed with us and claimed that Scrutiny proceedings are different from the penalty proceeding U/s. 221(1); i. When the Assessee, Assessing Officer, Authorised Chartered Accountant all were same for both the years in question, it would be unreasonable to believe that both the cases would not be discussed at the same meeting especially when the dates

3 ITA No. 7157/Mum/2014 Shri Vinay Vikram Oberoi coincided with each other so frequently so often; ] j. Probably the Hon'ble CIT-Appeals 33 wanted us to have 2 different meetings on the same day for both different assessment years to prove the veracity of our case; k. It is hereby honestly disclosed that we had met the same learned officer several times and it would be very unreasonable to think that since the scrutiny case (Asst. Year 2010-2011) was being discussed and disposed, no talks were ever carried out for the Asst. year 2012-2013 although all the dates coincided with the dates mentioned by the learned officer when the Order U/s. 221(1) was passed by him. 3. One of the other reasons for the non-payment of taxes was that we were expecting a refund, which however could not be realized since the claim was disputed by the Department and the same is pending before the CIT Appeals-10 at Earnest House, Nariman Point. The status of refunci.dues for the relevant years have been disclosed as under: 4. As can be seen from the above, that the total refund expected to be released from the Department of Income Tax was approximately to the tune of Rs. 390,000/-. Since the total liability for the Fin Year 2011-2012 stood at Rs. 244,943/- we were expecting the refund to get credited. The refund was badly awaited to curtail our financial crunch, however unfortunately it dint go the way we planned; 5. Since the refunds were already expected; and since this was the FIRST YEAR of payment of Self-Assessment Tax (previous years being the cases for refund), the delay in payment of taxes should be condoned; 6. Moreover, the department had rightly exempted Transporters from deduction of TDS and hence accumulation of funds to make the payment of taxes (this being the first year of Payment of self- assessment tax) became unexpectedly difficult; 7. We seek the relief on the ground that in one the cases appealed before the Tribunal, the latter had rightly stated that "Penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute."

4 ITA No. 7157/Mum/2014 Shri Vinay Vikram Oberoi 8. The order of the CIT Appeal was delivered to us on 30.09.2014, hence this appeal is filed within the time limits set forth. We request your Excellency to allow our Appeal on the grounds stated hereinabove. All earlier cases were refund cases, and hence this being the FIRST YEAR for payment of Self Assessment Tax, your Hon'ble Excellency is requested to take a lenient view and allow our appeal, for which the undersigned shall remain obliged and always pray.” 3.2 Though the assessee has raised eight grounds in this appeal, however the sole issue on which the appeal is preferred is in respect of the levy of penalty under section 221(1) of the Act for A.Y. 2012-13. 4. The learned D.R. was heard and he places strong reliance on the orders of the authorities below in levying and confirming the levy of penalty under section 221(1) of the Act. According to the learned D.R., the learned CIT(A), after considering the submissions put forth by the assessee vide letter dated 23.02.2013 (recorded at para 2.3 of the impugned order) and the order of the Assessing Officer (AO) levying the said penalty of `2,44,943/- under section 221(1) of the Act, observed that the uncontroverted fact in the case on hand was that the assessee did not pay due taxes before filing the return of income of A.Y. 2012-13, wherein admittedly the tax liability was determined at `2,44,943/-. It is submitted that the learned CIT(A) was of the view that in the assessee’s submissions, the assessee has failed to demonstrate or explain that the circumstances that led to this default was beyond his control or due to poor financial position, etc. or as to why the assessee had paid the self assessment tax due under section 140A(3) of the Act only after passing of the penalty order levying penalty under section 221(1) of the Act. It was further submitted that the learned CIT(A) had also observed that the AO had levied the said penalty for good and sufficient reasons and after affording the assessee opportunity of being heard which could not be controverted by the assessee and in this view of the matter, upheld the levy of penalty under section 221(1) of the Act. It is contended by the learned D.R. that since the grounds raised by the assessee (supra) are all arguments put forth before the authorities below in the course of penalty proceedings and which has been considered by them while passing of the orders, and nothing has

5 ITA No. 7157/Mum/2014 Shri Vinay Vikram Oberoi been brought on record by the assessee to controvert the findings in the impugned order, the assessee’s appeal is liable to be dismissed. 5.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. Though several grounds have been raised by the assessee in this appeal (supra) the only issue on which this appeal has been preferred is for consideration and adjudication in respect of the penalty of `2,44,943/- levied under section 221(1) of the Act for A.Y. 2012-13. The submissions of the assessee on this issue and the finding of the learned CIT(A) at para 2 to 2.8 of the impugned order, after consideration thereof, is as under: - “2. The appellant has taken as much as five grounds of appeal, however the crux of the issue revolves around levy of penalty u/s. 221(1) of the Act. 2.1 In this case the return of income was filed on 29.09.2012 for the year under consideration. The A.O on perusal from the ITD system noticed that the appellant did not pay the self assessment tax amounting to Rs.2,44,943/- as claimed in the return of income filed. The A.O subsequently requested the appellant to furnish the proof of payment of self assessment tax and also issued a show cause notice as to why penalty u/s. 221(1) of the I.T. Act, 1961 should not be imposed on the appellant for the default in not making the payment of self assessment tax. Since there was no response to the said show cause notice, the A.O further issued a show cause notice dated 07.01.2013 asking the appellant to furnish the explanation. However, the same remained unattended. Consequently the A.O having been satisfied that the appellant had committed default u/s.221(1) of the I.T. Act, 1961, levied the penalty of Rs.2,44,943/-. 2.2 Aggrieved by the said action of the A.O., the appellant is in appeal, before me. 2.3 In appeal proceedings, the appellant vide his letter dated 23.2.2013, has submitted as under: “At the outset, let me state that the undersigned runs a transport agency in the proprietary capacity under the name and style of M/s SPEED CARGO CARRIERS. The self assessment tax for the Ast. Year 2012-13 to the tune of Rs.244,943/ - (Rupees Two Lacs Forty Four Thousand Nine Hundred & Forty Three Only) was payable by us, however due to circumstances beyond our control and due to financial vulnerability, we orally sought time for payment of taxes before the end of financial year. It is to be noted that Scrutiny requirements for Asst. Year 2010-2011 were regularly fulfilled before the Learned Officer for his satisfaction in order to

6 ITA No. 7157/Mum/2014 Shri Vinay Vikram Oberoi ensure appropriate passing of order u/s 143(3) of the Income-tax Act, 1961. It is to be further noted that the said order was passed on 31.12.2012 after several hearings in the month of December, 2012. Further, the payment of Rs. 11,530/- was made on 17.01.2013, which was determined to be payable by us vide the said asst. order dated 31.12.2012 passed by the same learned Officer. The date mentioned by the Learned Officer u/s 221(1) of the Income-tax Act, 1961 corresponds with the period of hearing carried out for disposal of scrutiny assessment for the Asst. year 2010-2011 and hence his remark that "None Attended" is misconceived and far from reality. Further, the notices mentioned by him were never received by us till we obtained the order u/s 221(1) dated 28.01.2013. Due to the aforesaid reason, we would request your excellency to grant us stay on the said demand raised by the learned officer u/s 156 of the Income-tax Act, 1961. The aforesaid reasons justify that we were not aware that such notices as mentioned in the Learned Officers Order u/s 221(1) were ever issued to us Further, we had attended several dates during the said period as mentioned in his order u/s 221(1) for disposal of scrutiny case for Asst. Year 2010-2011, and hence it is not true that we committed default u/ s 221(1) of the Income- tax Act, 1961. The undersigned requests your goodself to grant stay to avoid undue hardship. Kindly condone any delay (if any) which may have been cause at our end. The undersigned or his representative shall attend each dates as provided by the Hon'ble Authority to ensure quick disposal of the case filed before your Excellency.” 2.4 Penalty order of the A.O and submission made by the appellant have been considered. Undisputed fact of the case is that the assessee did not pay due taxes before filing of return wherein admitted tax liability was determined at Rs.2,44,943/-. The appellant contended that due to circumstances beyond his control and due to financial crunch he could not pay self assessment tax while filing return of income. However, on perusal of submission made before me, I am of the opinion that instead of demonstrating or explaining the situations or poor financial position which prevented him to pay taxes, he went on alleging that though his ld. A.R. was attending various hearings with the same A.O. for scrutiny proceedings in appellant's own case for A.Y. 2010-11, the A.O. has wrongly noted in his order that no one attended in penalty proceedings. In my view, the appellant has failed to appreciate the fact that scrutiny proceedings and penalty proceedings are two separate and independent proceedings and, thus, the attendance in scrutiny proceedings cannot be construed as attendance in response to notices issued in penalty proceedings and that too for different assessment years. The appellant further contended that time for payment of taxes was orally sought. From the statement of the appellant, it appears that the fact of non-payment of self assessment tax was apprised of to the appellant by the A.O. It is also apt to note that, on completion of scrutiny assessment for A.Y.2010-11 on 31.12.2012, demand raised was entirely paid on 17.1.2013 whereas S.A. tax for year under consideration was paid only after passing of penalty order and prior to filing appeal before me.

7 ITA No. 7157/Mum/2014 Shri Vinay Vikram Oberoi 2.5 Provisions of Sec.140A(3)r.w.s.221(1)of the Act are very clear. Section 140A(3) stipulates that 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-section (1), he shall, be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid, and all the provisions of this Act shall apply accordingly. Section 221(1) comes in to play once it is found that default has been committed by any assessee in payment of tax. 2.6. The Assessing Officer has levied the penalty after issuing show- cause notice to the assessee and thereby followed the mandate of the Act. The appellant alleged that the said notices were never issued by him. On perusal of the record with the A.O. it is observed that the notices were sent on the address of assessee which was available in PAN database. Even when the opportunities were granted and availed of in appellate proceedings, the appellant failed to buttress his claim with documentary evidence like bank pass book or cash book to show that he was suffering with financial crunch. 2.7 As per the provisions of the section 221(1), penalty is not to be levied if assessee proves, to the satisfaction of the AO, that the default was for good and sufficient reasons. Second condition for levying penalty is that before levying any such penalty the assessee has to be given a reasonable opportunity of being heard. As far as first condition is concerned, onus is on the assessee to prove the existence of good and sufficient reason. The appellant has not brought even an iota of evidence on record to indicate why he could not pay taxes as per provisions of the Act. On the other hand, AO has to establish that he afforded a reasonable opportunity of hearing to the assessee. In the case before me, it is found that the AO had levied the penalty after issuing show cause notice to the assessee. Thus, as far as AO is concerned, he has followed the mandate of the Act. In my opinion, the appellant has not discharged his onus as he failed to produce any good or sufficient reason as to why he could not pay taxes as per provisions of the Act. Hence advancement of statement that due to financial crisis he could not pay taxes, that too without any documentary evidence in a mere statement which cannot be entertained. 2.8 Hence, I do not find any infirmity in the action of the A.O. in levying penalty u/s. 221(1) of the Act.” 5.2 On a perusal of the finding rendered in the order of the learned CIT(A) (supra), we find that the learned CIT(A) has judiciously considered the issue, the AO’s view and assessee’s submissions before upholding the levy of the said penalty of `2,44,943/- under section 221(1) of the Act. Admittedly, the undisputed fact, in the case on hand, is that the assessee did not pay due taxed before filing of the return of income for A.Y. 2012-13; wherein the tax liability to be paid under section 140A(3) of the Act was determined by the

8 ITA No. 7157/Mum/2014 Shri Vinay Vikram Oberoi assessee himself at `2,44,943/-. In the light of the submissions of the assessee put forth before the authorities below and the facts on record, we concur with the view of the learned CIT(A) that the assessee has failed to establish with any material evidence that it was due to circumstances beyond his control and due to financial crunch that he was prevented from paying the determined/admitted tax liability of `2,44,943/-. We also find that, as observed by the learned CIT(A), the AO had levied the said penalty only after issue of show cause notice, affording the assessee opportunity of being heard in the matter; which is in accordance with the procedure laid down in the Act. In our view, on an appreciation of the orders of the authorities below, we find that the assessee, except for putting forth claims, has failed to discharge the onus upon him to prove the existence of good and sufficient reasons that prevented him from paying the said taxes of `2,44,934/- as per the provisions of the Act. In the factual and legal matrix of the case, as discussed above, wherein the assessee has failed to bring on record material evidences to controvert the findings of the authorities below in respect of the levy of penalty of `2,44,943/- under section 221(1) of the Act, we uphold the orders of the authorities below in levying the said penalty. Consequently, the assessee’s grounds of appeal are dismissed. 5. In the result, the assessee’s appeal for A.Y. 2012-13 is dismissed. Order pronounced in the open court on 21st September, 2016. Sd/- Sd/- (Sandeep Gosain) (Jason P. Boaz) Judicial Member Accountant Member Mumbai, Dated: 21st September, 2016 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -33, Mumbai 4. The CIT - 22, Mumbai 5. The DR, “F” Bench, ITAT, Mumbai By Order //True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.