DCIT Vs Tulip Star Hotels Ltd. (ITAT Delhi)
The issue under consideration is whether CIT(A) is correct in deleting the penalty levied u/s 221(1) by the AO on the ground that assessee has paid the self assessment after the date of filling of return of income?
In the present case, the assessee could not pay the self assessment tax liability at the time of return of income, however the same has been paid subsequently on installment over a period of time. Assessee had given very elaborate reasons before the authorities below that due to huge financial crunch and hardships, assessee did not had any liquidity to pay the self assessment tax liability.
ITAT states that there are umpteen number of judgments, wherein it has been held that financial stringency is considered to be good and sufficient cause for sufficiency of reason for not levying penalty u/s 221(1). The AO has also not given any reasoning to controvert the assessee’s reasons regarding paucity of funds and if Assessee Company had sufficient reasons for not paying the self assessment tax at time, then assessee could not be considered as willful defaulter on which no penalty should be levied. Further, CIT(A) on stay of collection of demand has given the direction for payment of installments though in some other matter. Now the entire self assessment tax has been paid and the entire liability has been discharged. Thus, order of the Ld. CIT(A) deleting the penalty is upheld. Consequently, the grounds raised by the revenue is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeal has been filed by the revenue against impugned order dated 22.6.2011 passed by Ld. CIT(Appeals) XIX, New Delhi in relation to the penalty levied u/s 221(1) for the assessment year 2007-08. In the various grounds of appeal the revenue has challenged the deletion of penalty of Rs. 40,34,524/- levied u/s 221 by the AO on the ground that assesSee has not paid the self assessment tax till the date of filling of return of income.
2. The facts in brief are that the assessee is a Public Limited Company engaged in the business of hotel consultancy and operations. The return of income for the assessment year 2007-08 was filed on 15.11.2007 declaring total income of Rs. 36,86,75,655/-. However, the self assessment tax of Rs. 8,06,90,485/- on the return of income could not be paid on the due date due to stringent financial difficulties. In response to the show cause notice as to why the penalty u/s 221(1)could not be levied in the fault of paying the self assessment tax, assessee submitted that, due to stringent financial difficulties the same could not be paid, as the major investment of the assessee in Centaur Hotel has been a failure and has not reaped the benefit which is expected . The hotel has not been operating since April, 2005 and huge capital outlay of the assessee was blocked. All the assessee’s funds were struck up in the said hotel and therefore, due to this deep financial crunch, the self assessment tax could not be paid on time. It was further submitted that due to recession in hospitality business, assessee was forced to retrench its employees and huge amount was to be paid to these workers. However, Ld. AO has levied the penalty of 5% of the total demand which worked out to Rs. 1434524/-.
3. Before the Ld. CIT(A) it was submitted that though self assessment tax liability could not be paid before the due date of filing of return of income, but the said tax liability has been paid in installment over the period of time as per the details given below :
