SANGITA HIREN TRIVEDI,NAVI MUMBAI vs. ITO WD 22(3)(4), NAVI MUMBAI

The facts of the case are that the assessee filed her return of income on 29.9.2012 on which a sum of Rs.2,10,966/- was payable as self assessment tax. The AO upon examination of the return of income found that the self assessment tax of the assessee Rs.2,10,966/- was outstanding and issued show cause notice to the assessee as to why the penalty should not be levied u/s 221(1) of the Act for committing the default in payment of self assessment tax as same was required to be paid on or before filing of return of income. The AO granted opportunity vide letter dated 7.12.2012 fixing the date on 29.12.2012 and further show cause notice dated 7.1.2013 fixing the date 15.1.2013 but neither the assessee nor the AR of the assessee appeared to present the case before the AO. Finally the AO concluded the proceedings by coming to the conclusion that the assessee committed default u/s 221(1) of the Act without any sufficient reason and the case of the assessee was a fit case for levy of penalty for non payment of self assessment tax and accordingly levied a penalty of Rs.2,30,760/- under the provisions of section 221(1) of the Act vide order dated 28.1.2013. Aggrieved by the order of AO, the assessee filed an appeal before the First Appellate Authority challenging the order of the AO. The ld. CIT(A) after considering the submissions of the assessee as filed vide letter dated 4.9.2014 which has been incorporated in para 2.1 and 2.2 of the appeal order. The ld. CIT(A) dismissed the appeal of the assessee by observing and holding as under :

3 7055/Mum/2014 “2.6 Appellant further argued that the A.O passed penalty order on 28.01.2013 in spite of the fact that subsequent date of hearing was fixed on 31.01.2013. On perusal of penalty order, I found that there is no mention of such date of hearing fixed. Moreover the letter of reply itself dated 15.01.2013 which was produced before the A.O by the assessee in penalty proceedings, the A.O conveyed to the assessee as under: "Assessee to file copy of return of income, tax audit report along with necessary annexures, balance sheet and P&L account for A. Y. 2012-13 within 2 days from receipt of this letter ie. by 21.1.2011. Penalty proceedings stand as it is till further submissions. Non compliance will lead to levy of penalty u/ s. 221.” 2.7 Thus, it is clear that the A.O had given time upto 21.01.2011 to the assessee for compliance and also conveyed the consequences of non compliance. In view of this, the contention of the appellant also does not hold water. 2.8 The case laws relied upon by appellant also not come to the rescue of the appellant as the decisions relied upon were rendered in facts of their own. In case M/s Nirman Construction vs. ACIT Cir.20(2) supra, the assessee had paid self assessment. tax as and when the funds were available and before any notice from the department whereas in the case before me, the appellant paid taxes only after issuance of notice from the A.O. In case of M/s Vishal Projects Ltd supra reasonable cause for not paying admitted tax liability at the time of filing of return of income was proved. However, in the instant case even when sufficient funds to discharge tax liability were available, the appellant chose to default in payment of self assessment tax. Therefore, I am of the considered opinion that the reliance on the decisions is totally misplaced. 2.9 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 /interest./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. 2.10. The Assessing Officer has levied the penalty after issuing show-cause notice to the assessee and thereby followed the mandate of the Act. In 4 7055/Mum/2014 appeal proceedings, before me, also the appellant has miserably failed to demonstrate why she could not pay self determined tax liability. 2.11 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, whereas AO has to establish that he afforded a reasonable opportunity of hearing to the assessee. In the case under consideration it is found that the AO has 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 her onus as she failed to prove the existence of any good and sufficient reason. 2.12 Hence, I do not find any infirmity in the action of the A.O in levying penalty ujs.221(1) of the Act. I uphold the action of the Assessing Officer.”

Before us, the ld. AR submitted that the return of income was filed u/s 139(1) on 29.9.2012 declaring a total income at Rs.12,44,130/- on which the total tax was worked out at Rs.2,30,966/- and after adjusting advance tax paid on 14.09.2011 of Rs.20,000/- the balance tax payable as self assessment tax u/s 140A was Rs.2,10,966/-. The said self assessment tax was paid on 15.1.2013 and thus there was a delay of three months and 15 days in the payment of self assessment tax which was primarily due to the financial crunch and liquidity at the time of filing of return on 29.9.2012. The ld. Counsel further drew out attention to the page 2 of the assessee’s paper book which 5 7055/Mum/2014 states that the assessee paid a sum of Rs.2,30,360/- whereas actual amount due was only Rs.2,10,966/-. Thus, thereby making excess payment of Rs.19,786/- . The ld. AR further submitted that immediately after the financial position of the assessee eased, the self assessment tax was deposited without any further delay with interest for three months and 15 days. Since there was a sufficient cause for nonpayment self assessment tax due to financial and liquidity crunch in the business which is a prima facie reasonable cause for the non payment of self assessment tax and penalty levied was wrong and against the spirit of law. Therefore there was sufficient and reason able cause for non- payment of self assessment tax. In defence of his arguments the ld.counsel relied upon the various case laws and ultimately prayed that the penalty be deleted as there was a reasonable cause for non payment of self assessment tax. The ld. AR relied upon the following case laws: 1) DCIT V/s Aanjaneya Life Care Ltd (2015) 40 ITR (T) 691 (Mumbai) (Trib); 2) ITO V/s Chandak Krishnagopal Motilal (2015) 44 CCH 0236 Pune(Trib); 3) Jehangir Lentin Estate (P )Ltd V/s ITO (2014) 63 SOT 67 (Mumbai)(Trib) 5. The ld. DR on the other hand, strongly objected to the arguments advanced by the ld. AR by stating that the assessee failed to prove the liquidity and financial crunch in the business of the assessee and therefore the penalty was rightly imposed by the AO and also rightly confirmed by the ld.CIT(A) and finally prayed for upholding the penalty order and strongly supported the orders of authorities below.

We have heard the rival contentions and perused the material placed before us including the orders of authorities below and orders relied upon by the assessee. We find that the case of the assessee is non-payment of self assessment tax of Rs.2,10,966/- on the date of filing of return of income and was outstanding on 29.3.2012 which was paid on 15.1.2013 late by three months and 15 days. The actual payment was Rs.2,30,760/- which we find that there was excess payment of tax due on 29.9.2012 along with the interest till 15.1.2013. The reasons and the arguments as placed before us during the course of hearing were that the assessee could not deposit the self assessment tax due to financial crunch and other hardships in the business of the assessee, which the assessee tried to explain by filing the comparative chart of sale- purchase, gross-profit and percentage of profit and also outstanding sundry debtors and sundry creditors for three years as stated in 14 of paper book. In our considered view, the penalty cannot be imposed in case of financial and liquidity crunch in the business of the assessee as has been held by the various High Courts and Tribunal. However, the assessee has not filed bank statement /balancesheet before us which prove the reasonable cause for non levy of penalty. The levy of penalty is very hard action which is not done is the normal course if there is a reasonable cause is proved by the assessee. So, we are of the view that the ends of justice would meet if the assessee is given one more 7 7055/Mum/2014 opportunity to prove the reasonable cause for nonpayment of self assessment tax. We, therefore, set aside the order of the ld.CIT(A) and restore the matter to the file of AO to decide the matter afresh after providing reasonable and fair opportunity of hearing to the assessee and delete the penalty in case of sufficient reason for non payment. The assessee is also directed to co-operate with the AO for speedy disposal of matter.

In the result, the appeal of the assesses is allowed for statistical purposes. Order pronounced in the open court on 22.6.2016. sd (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) न्यधनयक सदस्य / JUDICIAL MEMBER ऱेखध सदस्य / ACCOUNTANT MEMBER म ंबई MUMBAI; ददनधंक DATED : 22 .6.2016 Sr.PS:SRL: