Top Class Capital Market Ltd ( Formelry ... vs Assessee

BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) सव ी बी.आर.बा करन, लेखा सद य एवं अ मत शु ला, या यक सद य के सम

आयकर अपील सं./I.T.A. No.505/Mum/2013 ( नधारण वष / Assessment Year :2010-11)

M/s Top Class Capital Market बनाम/ Jt.Commissioner of Income Tax -

Ltd, Vs. (OSD), Range 1(3), (Formerly known as Top Class Aayakar Bhavan, Education Facilities and Services M.K.Road, Pvt Ltd.) 2nd floor, Mumbai-400020 Bombay Mutual Building, D N Road, Fort, Mumbai-400001 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AACCT5800G

अपीलाथ ओर से / Appellant by Shri Jitendra Jain and Shri Mahesh O Rajora यथ क ओर से/Rspondent by Smt. N V Nadkarni

सुनवाई क तार ख / Date of Hearing : 21.4.2015 घोषणा क तार ख /Date of Pronouncement : 3.6.2015

आदे श / O R D E R

PER B.R. BASKARAN (AM)

The assessee has filed this appeal challenging the order dated 7.12.2012 passed by Ld CIT(A)-2, Mumbai for the assessment year 2010- 11, wherein he has partially confirmed the penalty levied under section 221(1) of the Income Tax Act.

2. We heard the parties and perused the record. The facts relating to the issue are stated in brief. The assessee is engaged in the business of trading and investment in shares and securities and also doing financing 2 I T A N o . 5 0 5 / Mu m / 2 0 1 3

business. It filed its return of income for the year under consideration declaring a total income of Rs.43.32 crores. As per return of income the self assessment tax due was Rs.9.08 crores, but the assessee did not pay the same at the time of filing of the return of income. Hence, the AO held that the assessee company as "assessee in default" for non-payment of self assessment tax before filing the return of income in terms of provisions of section 140A(3) of the Act. Hence, the AO levied penalty under section 221(1) of the Act at 10% of the self assessment tax due from the assessee, which worked out to Rs.90.85 lakhs.

3. In the appellate proceedings, the ld.CIT(A) reduced the penalty to 5% of the self assessment tax. Still aggrieved the assessee has filed this appeal before us.

4. We notice that the assessee has paid self assessment tax subsequent to the filing of the return of income as per details given below:

Date of payment Amount 15.02.2011 1,00,00,000 18.02.2011 3,00,00,000 12.03.2011 50,00,000 25.03.2011 50,00,000 26.03.2011 50,00,000 29.03.2011 2,00,00,000 30.03.2011 1,58,54,474 Total 9,08,54,474

The assessee's explanation was that though it earned good profit during the year under consideration, but the same was reinvested in other quoted shares with the expectation of earning more profit. However, due to fall in 3 I T A N o . 5 0 5 / Mu m / 2 0 1 3

the stock market the assessee company could not sell the shares, since it may result in huge loss. Hence at the time of filing return of income, the assessee could not generate enough cash to make payment of self assessment tax. It was further explained that the assessee had made major investments in the shares of ADF Foods Limited, Aegis Logistics Ltd and Prime Focus Ltd and these shares were pledged by the assessee company and hence they could not be transferred during the relevant period. Accordingly, it was submitted that the self assessment tax could not be paid due to non-availability of liquid funds only. It was further submitted that the self assessment tax was paid within short period of 5 months from the date of filing of the return of income and accordingly, it was prayed that the penalty levied under section 221(1) of the Act should be deleted.

5. The assessee had also placed reliance on certain case laws before the tax authorities to support its stand.

6. However, the ld.CIT(A) noticed that the assessee had made investment of Rs.50.20 crores and it had advanced loans and advances to the tune of Rs.37.67 crores as on 15.3.2011. The ld. CIT(A) further noticed that the assessee had started paying self assessment tax only after receipt of notice dated 15.2.2011 from the AO. Accordingly, the ld.CIT(A) took the view that financial position of the company is sound and the self assessment tax was not paid only on account of indifferent attitude of the assessee. Accordingly, the ld.CIT(A) expressed his view that he could not find good and sufficient reason for not paying self assessment tax in time. However, since he found that the penalty levied at 10% was on higher side, the ld.CIT(A) reduced it to 5% of the self assessment tax.

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7. Before us, the Ld A.R placed strong reliance on the submissions made before the tax authorities and also on the decision rendered by the co- ordinate bench in the case of DCIT Vs. Kamala Mills Ltd (ITA No. 7775 to 7777/Mum/2004 dated 31.10.2007). He submitted that the co-ordinate bench in the above said case has deleted the penalty levied u/s 221(1) of the Act with the observation that the payment of taxes made within the reasonable time does not make the assessee "assessee in default". He further submitted that the decision rendered by the co-ordinate bench in the case of Kamala Mills Ltd has been upheld by the Hon'ble Bombay High Court. He further submitted that the assessee has offered reasonable explanation for not paying the self assessment tax before filing return of income and it has paid the same within the reasonable period of time. Accordingly he submitted that the ld CIT(A) should have deleted the penalty in entirety, instead of confirming the same partially.

8. On the contrary, the ld D.R submitted that the explanation of the assessee with regard to the financial crunch has been found to be not correct by the Ld CIT(A).

9. The provisions of sec. 140A(3) provides that the assessee shall be deemed to be in default, if the tax and interest is not paid in accordance with the provisions of sec. 140A(1) of the Act. The provisions of sec. 221 (1) provides that 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 sec. 220(2), be liable to pay by way of penalty such sum as the AO may direct. The second proviso states that the AO shall not levy penalty, if the assessee proves that there was good and sufficient reason for non-payment of tax.

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10. In the instant case, the only reason furnished by the assessee for non-payment of tax was that it was not having liquid funds and all its funds were locked in shares and securities. However, the Ld CIT(A) has expressed the view in paragraph 4.10 of his order that the financial position of the assessee is sound, since it had made huge investment in shares and also by way of providing loans. In any case, the assessee did not furnish any document either before us or before the tax authorities to support of its stand that it was not having liquid funds. Hence, we are of the view that the assessee has failed to furnish any good and sufficient reason for non-payment of self assessment tax.

11. Though the co-ordinate bench has held in the case of Kamala Mills Ltd (supra) that the payment of tax made within the reasonable time does not make the assessee as assessee in default, yet we notice that the said view is contrary to the express provisions of sec. 140A(3) of the Act. Further, we notice that the Hon'ble High Court has declined to admit the appeal preferred by the revenue for want of substantial question of law. Hence, we are of the view that the assessee could not take support of the decision rendered in the case of Kamala Mills Ltd.

12. However, we have noticed that the assessee has paid the self assessment tax before March, 2011, i.e., within five months from the date of filing of return of income. Under these set of facts, the penalty @ 5% of self assessment tax confirmed by the Ld CIT(A) also appears to be on the higher side. Hence, in order to put this matter to rest, we are of the view that the penalty to be levied u/s 221(1) of the Act should be restricted to 2.5% of the self assessment tax. We order accordingly.

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13. In the result, the appeal filed by the assessee is partly allowed.

घोषणा खल ु े यायालय म दनांकः3rd June, 2015 को क गई ।

Sd sd

(अ मत शु ला / AMIT SHUKLA) (बी.आर.बा करन / B.R. BASKARAN) या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER

मुंबई Mumbai: 3rd June,2015.

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, True copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai