We find from the order of tribunal that the finding recorded by the tribunal to arrive at a conclusion is based on sound appreciation of material available before it. In fact, a clear finding has been recorded by the tribunal that question of financial stringency pleaded by assessee was not proved. Even otherwise, it has been held that financial stringency would not justify the non-remittance of TDS to the Government, in as much as, it would amount to utilization of money payable to the appropriate government. As such, by extending its benevolence.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
Assessee has preferred this appeal questioning the correctness and legality of the order dated 07.10.2016 passed by Income Tax Appellate Tribunal, Bangalore Bench ‘C’, Bangalore (for assessment year 2013-14) whereunder order passed by Commissioner of Income Tax (Appeals)-13, Bangalore dated 14.08.2015 setting aside the levy of penalty of Rs.77,95,155/- came to be modified by restricting the quantum of penalty to Rs. taxguru.in 20,55,573/-
2. On 25.07.2013, a survey came to be conducted under Section 133A of Income Tax Act, 1961 (for short, ‘the Act’) in the business premises of assessee and an order under Section 201(1) of the Act came to be passed on 30.07.2013 enclosing therewith a demand notice. On 02.08.2013, assessee paid the amount demanded under the notice together with interest as required under Section 201 (1) (A) of the Act.
3. Subsequently, proceedings under Section 221 of the Act came to be initiated by issuance of show cause notice to assessee. A reply came to be submitted by the appellant contending that lapse in remittance of amount collected by way of TDS and retained by assessee was out of acute liquidity crunch and not deliberate or intentional negligence. Said plea of the assessee did not find favour with the Assessing Officer and as such, by order dated 27.01.2014 (Annexure-B), plea of the assessee came to be rejected and levied a penalty of Rs.77,95,155/-.
4. Being aggrieved by said order, an appeal came to be preferred by assessee before Commissioner of Income Tax (Appeals) in No.63/CIT(A)-13/2014-15, which found favour of the first Appellate Authority. Before the first Appellate Authority, assessee reiterated the plea put forward before the Assessing Officer with regard to financial crunch and a finding of fact came to be recorded which is to the following effect:
“9. It is also seen xxx on time. Perusal of the appellant’s submissions along with its balance sheet and other financial statements show that it had faced genuine financial difficulties during the said period.”
5. At this stage, it would be appropriate to notice that Commissioner of Income Tax (Appeals) has not analyzed and discussed or recorded a finding as to how the financial difficulty that was pleaded by the assessee was proved by him, particularly, in the background of Assessing Officer having recorded a finding of fact with regard to not only financial capacity of assessee but also assessee possessing surplus fund to the tune of Rs.7,85,71,805/- for the year ending having been recorded. One another factor which swayed in the mind of Commissioner of Income Tax (Appeals) for setting aside the penalty levied is on the ground that assessee had subsequently remitted TDS along with interest under Section 221 (1)(A) of the Act @ 1.5% per month and as such, Commissioner of Income Tax (Appeals) set aside the levy of penalty.
6. Revenue being aggrieved by said order preferred an appeal before the Income Tax Appellate Tribunal and tribunal while reversing the finding of Commissioner of Income Tax (Appeals) has extended olive branch to the assessee by restricting the levy of penalty to Rs.20,55,573/- in lieu of Rs.77,95,155/- which had been levied by the Assessing Officer. Hence, this appeal.
7. We have heard Ms.Varsha Shetty, learned counsel appearing for appellant-assessee and Sri. K.V. Aravind, learned Panel Counsel appearing for respondent.
8. Learned counsel appearing for assessee would contend that when in the instant case assessee had remitted the amount within four days from the date of demand notice issued, assessee cannot be considered or held to be an assessee in default and as such, she would submit that substantial question of law which has been formulated in the appeal memorandum requires to be formulated, adjudicated and answered in favour of assessee.
9. Per contra, learned Panel Counsel appearing for respondent would submit that order passed by the tribunal reducing penalty itself is erroneous for which revenue would have preferred the appeal but for the quantum of revenue involved and since the extant circular restricts the right of revenue to challenge the same on the monetary restrictions placed for filing appeal same has not been filed by the revenue. He would also submit that plea now put forward by the assessee is purely question of fact and there is no question of law involved to formulate, adjudicate and that too for being answered in favour of the assessee. Hence, he prays for dismissal of the appeal.
10. Having heard learned counsel appearing for parties and on perusal of record, we are of the considered view that appeal deserves to be dismissed at the threshold for the reasons indicated herein below.
11. At the outset, it is requires to be noticed that on survey conducted on 25.07.2013 in the business premises of appellant, the factum of non-remittance of TDS, which assessee had collected or retained with it had surfaced. It is on account of such survey conducted, proceedings under Section 201 (1)(A) of the Act was initiated and assessee in question was declared as an assessee in default under Section 201 of the Act by order dated 30.07.2013. Said order has reached finality or in other words undisputedly assessee has not challenged the said order.
12. Pursuant to said order, demand was raised and immediately within four days i.e., on 02.08.2013, assessee remitted the amount along with interest. It is thereafter the penalty proceedings came to be initiated by issuing notice under Section 221 of the Act to the assessee. In the penalty proceedings, assessee admitted that it was an assessee in default. However, a plea came to be raised that within four days of the order passed under Section 201 of the Act, amount which was required to be remitted along with interest had been remitted/paid and contended that delay of 15 months in not remitting the amount of tax to the tune of 2.05 crores which was relatable to salary deductions, contract payments, professional fee, etc., paid or payable to parties during the year ending 31.01.2012 had not been remitted or assessee had failed to remit the said amount so deducted to the account of the Central Government was due to financial crisis. Hence, the only plea which was available to assessee in the penalty proceedings is to explain the cause for delay. It is in this background, Assessing Officer amongst several questions raised had called upon assessee to answer three pertinent questions which has been noticed by the Commissioner of Income Tax (Appeals) in Paragraph 3.1 of the order and a plain reading of the same would disclose that during the financial year ending in question, assessee was possessing surplus funds of Rs.7,85,71,805/-. That apart, assessee had made three payments for purchase of sites, three payment for purchase of cars and as such, it was noticed that cars which were purchased was in addition to the existing four cars purchased in the earlier year and the reason of business expediency raised or pleaded by assessee was not suspectable as it was not in the proximity of truth. This finding of fact which had been recorded by the Assessing Officer when being set aside by the 1st appellate authority the least that was expected from Commissioner of Income Tax (Appeals) was to record a finding which would disprove said fact or in other words reasons had to be assigned. This exercise having not been undertaken by Commissioner of Income Tax (Appeals) and by a cryptic order as noticed herein, finding of the Assessing Officer having been set aside, this has persuaded the tribunal to reverse the finding of Commissioner of Income Tax (Appeals) and restore the finding of the Assessing Officer in part viz., affirming levy of penalty but reducing the quantum of penalty. We find from the order of tribunal that the finding recorded by the tribunal to arrive at a conclusion is based on sound appreciation of material available before it. In fact, a clear finding has been recorded by the tribunal that question of financial stringency pleaded by assessee was not proved. Even otherwise, it has been held that financial stringency would not justify the non-remittance of TDS to the Government, in as much as, it would amount to utilization of money payable to the appropriate government. As such, by extending its benevolence, tribunal has directed the Assessing Officer to restrict the levy of penalty to a sum of Rs.20,55,573/- in substitution to Rs.77,95,155/- levied by Assessing officer. This finding would not call for interference by us particularly when assessee having been declared as an assessee in default under Section 201 taxguru.in (1) of the Act by order dated 30.07.2013 and said order having not been challenged by the assessee.
For the reasons aforestated, we do not find any other good ground to entertain this appeal. Accordingly, without framing substantial question of law as pleaded by the assessee, appeal stands dismissed.