Calyx Chemicals & Pharmaceuticals Ltd, ... vs Assessee

This is an appeal filed by the assessee against the order of CIT(A)

dated 29-6-2011 for the assessment year 2009-2010 in the matter of

imposition of penalty u/s.221(1) r.w.s.140A(3) of the I.T.Act.

2. Rival contentions have been heard and record perused. The

assessee company had filed its return of income declaring total income at

Rs.2,71,70,079/- for the A.Y.2009-2010 on 29-9-2009. The assessee had

computed its tax liability on account of self assessment tax at

Rs.1,45,35,730/-. However, same was not paid before filing of return of

income u/s.139(1) of the Act. In view of the same, a letter dated 3-2-2010 2 ITA No.6073/2011

was issued and the assessee was requested to furnish the copy of the

challans evidencing the payment of self assessment tax. In response, the

assessee filed letter on 19-3-2010 furnishing photocopies of the challans

evidencing e-payment of the self assessment tax for the assessment year

2009-2010 as under :-

Date Amount 16.02.2010 15,00,000/- 23.02.2010 3,00,000/- 26.02.2010 15,00,000/- 06.03.2010 5,00,000/- 09.03.2010 15,00,000/- 12.03.2010 80,00,000/- 13.03.2010 7,00,000/- 17.03.2010 35,730/- TOTAL 1,40,35,730/-

From the above, the AO noted that assessee has defaulted in making

payment of self assessment tax u/s.140A(1) of the Act. Assessee was

asked to show cause as to why the penalty should not be imposed

u/s.221(1) of the Act. In reply of the same, it was submitted that the return

of income was filed by the auditors office and final acknowledgement with

computation was not sent as well as did not received the

acknowledgement from IT Department's Bangalore office. It was further

submitted that as soon as assessee came to know the self assessment

tax liability, it had paid the same. The AO rejected assessee's contention

and held that assessee has failed to deposit tax within the time limit,

accordingly, penalty was imposed u/s.221(1) of the Act, amounting to

Rs.36,33,932/-,which was 25% of the unpaid amount of self assessment

tax.

3 ITA No.6073/2011

3. By the impugned order the CIT(A) confirmed the action of AO,

against which assessee is in further appeal before us.

4. It was contended by the ld. AR that assessee was having very bad

financial position, therefore, could not pay the tax in time. Whatever the

interest levied for the delay, had been deposited and the delay was due to

reasonable cause. Reliance was placed on the decision of Lucknow

bench of the Tribunal in the case of Shree Shakti Credit Ltd., 66 SOT

175, wherein penalty imposed for delay in deposit of self assessment tax

was deleted by observing that assessee has filed the revised return and

also paid tax as per the revised return of income. Reliance was also

placed on the decision of Hon'ble Supreme Court in the case of

Hindustan Steel Ltd. Vs. State of Orissa, (1972) 83 ITR 26 (SC),

wherein it was observed that no penalty should be imposed for failure to

perform a statutory obligation, which is a matter of discretion of the

authority to be exercised judicially and on a consideration of all the

relevant circumstances.

5. On the other hand, learned DR relied on the order of lower

authorities.

6. We have considered rival contentions, carefully gone through the

orders of the authorities below and found from the record that there was

delay in deposit of self assessment tax, therefore, the AO imposed

penalty u/s.221(1) of the Act. Provisions of Section 221(1) of the Act,

provides that where the assessee proves that the default was for good

and sufficient reasons, no penalty shall be levied under this Section. It is

also clarified that this penalty is in addition to the amount of tax and 4 ITA No.6073/2011

interest thereon. Meaning thereby if there is any delay in payment of tax,

assessee is not only liable to pay tax and interest for the delay, but also

penalty u/s.221(1) of the Act, will be imposed. However, the AO got the

discretion not to levy penalty, if there is sufficient reasons for delay in

deposit of tax. In the instant case, it was explained by the ld. AR that

delay was due to financial crisis. He also relied on the decision of Hon'ble

Supreme Court in the case of Hindustan Steel Ltd.(supra), wherein it

was held that an order imposing penalty for failure to carry out a statutory

obligation is the result of a quasi-criminal proceeding, and 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. It was also observed by the

Hon'ble Supreme Court that penalty may not 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 imposed 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 bona fide belief that the offender is

not liable to act in the manner prescribed by the statute.

7. In the case of Brijlal Banik, 79 STC 217, the Hon'ble Gauhati High

Court held that while imposing penalty u/s.221(1) the authority concerned

has to consider the relevant factors such as period of delay, conduct of

assessee and such other considerations, and levy of penalty without 5 ITA No.6073/2011

stating any reason may not be sustainable. In the instant case, we found

that amount of self assessment tax due came to the assessee's

knowledge when the AO informed the assessee about the same. Reason

for not deposit tax was also the financial crisis at the relevant point of

time. The maximum amount of penalty imposable u/s.221(1) of the Act is

equal to the amount of tax in arrears. The Act does not prescribe any

minimum amount which ought to be imposed, on the contrary Act

prescribes that for sufficient reason, no penalty is to be imposed. Keeping

in view the period of delay in deposit of self assessment tax, reasonable

cause advanced for delay and totality of facts and circumstances of the

case, we deem it appropriate to restrict the penalty to 5% to the unpaid

self assessment tax in place of 25% imposed by the AO. Accordingly,

orders of lower authorities are modified and the AO is directed to reduce

the amount of penalty. We direct accordingly.

8. In the result, appeal of the assessee is allowed in part.

Order pronounced in the open court on this 12/01/2015.

12/01/2015

Sd/- Sd/- ( ) ( ) (H.L.KARWA) (R.C.SHARMA) / PRESIDENT / ACCOUNTANT MEMBER

Mumbai; Dated 12/01/2015 /pkm, PS Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. / The CIT(A), Mumbai. 4. / CIT 5. / DR, ITAT, Mumbai 6 ITA No.6073/2011

6. Guard file.

//True Copy// / BY ORDER,

(Asstt. Registrar) / ITAT, Mumbai