National Plastic Industries Ltd, ... vs Assessee

सव ौी ड . मुमोहन, उपा य! एवं नरे ि कुमार %ब&लै(या, लेखा सदःय के सम!

BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं./I.T.A. No. 7046/Mum/2011 िनधा रण वष / Assessment Year : 2010-11 (िनधा M/s. National Plastic बनाम The DCIT-1(2), बनाम/ Industries Ltd., Mumbai Vs. A-59, MIDC, Road No.1, Marol, Andheri (E), Mumbai-400 093 ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACN 3948F (अपीलाथ0 /Appellant) .. (ू2यथ0 / Respondent) अपीलाथ0 ओर से/ Appellant by: Shri Nishit Gandhi ू2यथ0 क4 ओर से/Respondent by: Shri S.J. Singh

सुनवाई क4 तार ख / Date of Hearing :12.03.2015 घोषणा क4 तार ख /Date of Pronouncement :18.03.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This appeal by the assessee is preferred against the order of the Ld. CIT(A)-2, Mumbai dt. 7.9.2011 pertaining to assessment year 2010-11.

2. The assessee is aggrieved by the levy of penalty u/s. 221(1) of the Act amounting to Rs. 10,00,000/-.

2 ITA No. 7046/M/2011 3. Briefly stated the facts of the case are that in this case, the Assessing Officer observed that the assessee has made payments by way of advance tax. The AO further observed that the self assessment tax comes to Rs. 71,30,539/-. However, the assessee has paid only Rs. 65,50,000/-. The AO was of the strong belief that since the assessee has failed to pay self assessment tax of Rs. 5,80,539/- in time, the assessee is liable for penalty u/s. 221(1) of the Act. Accordingly, showcause notice was issued. The assessee filed a detailed reply dt. 7.2.2011 giving the details of payments made by it on various dates. The AO simply rubbished this submission of the assessee. The AO concluded by holding that the assessee has paid the self assessment tax not before due date of filing the return, hence, for the default committed, the AO levied penalty of Rs. 10 lakhs.

4. The assessee carried the matter before the Ld. CIT(A). It was strongly contended before the Ld. CIT(A) that the assessee is a loss making company required to pay tax under MAT. It was pointed out to the Ld. CIT(A) that the assessee had paid self assessment tax to the tune of Rs. 63.50 lakhs, therefore for the meager balance of Rs.5,80,539/-, the penalty levied by the AO is unjustifiable. The Ld. CIT(A) did not accept the contentions made by the assessee and confirmed the order of the AO.

5. Aggrieved by this, the assessee is before us.

6. The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the Ld. Counsel that before levying the penalty, the AO did not offer any reasonable opportunity to explain its case. The Ld. Counsel for the assessee drew our attention to the financial position of the assessee and stated that due to financial difficulties, the assessee could not pay the balance amount of Rs.

3 ITA No. 7046/M/2011 5,80,539/-. The Ld. Counsel for the assessee further pointed out that the penalty levied by the AO is not as per provisions of the law.

7. Per contra, the Ld. Departmental Representative strongly supported the orders of the authorities below.

8. We have carefully perused the orders of the authorities below. Sec. 221(1) reads as under:

"(1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub-

section (2) of Sec. 220) be liable, by way of penalty, to pay such amount as the [Assessing] Officer may direct, and in the case of a continuing default, such further amount or amounts as the [Assessing] Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears :

Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard :

[Provided further that where the assessee proves to the satisfaction of the [Assessing] Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section.]"

8.1. A perusal of the aforestated portion clearly shows that the AO has to give reasonable opportunity of being heard to the assessee before levying any such penalty. It is further provided that if the assessee can successfully satisfy the AO that the default was for good and sufficient reasons, no penalty shall be levied.

8.2. A perusal of the penalty order shows that the AO in his notice has show caused the assessee to explain why penalty of Rs. 10 lakhs should not be levied. This notice/action of the AO is in contravention to the provisions of Sec. 221(1) of the Act wherein it has been specifically 4 ITA No. 7046/M/2011

mentioned that the total amount of penalty should not exceed the amount of tax in arrears. It is an undisputed fact that the tax in arrears is Rs.

5,80,539/-, we failed to understand how the AO can propose to levy penalty of Rs. 10 lakhs. In our considered opinion, the penalty has been levied by the AO in a mechanical manner and the First Appellate authority has erred in confirming such penalty. In our considered view, the penalty so levied deserves to be deleted. We, therefore, set aside the findings of the Ld. CIT(A) and direct the AO to delete the penalty of Rs. 10 lakhs.

9. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 18th March, 2015

Sd/- Sd/-

(D.MANMOHAN ) (N.K. BILLAIYA) उपा य! / VICE PRESIDENT लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; 8दनांक Dated : 18 March, 2015 th

व.िन.स./ RJ , Sr. PS व.िन.स./ RJ , Sr. PS आदे श क4 ूितिल%प अमे%षत/Copy षत of the Order forwarded to : 1. अपीलाथ0 / The Appellant 2. ू2यथ0 / The Respondent. 3. आयकर आयु:(अपील) / The CIT(A)- 4. आयकर आयु: / CIT

5. %वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स2या%पत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai