Advocate Akhilesh Kumar Sah
An assessee is liable to penalty under section 221(1) of the Act in a case in which the though the assessee has not paid the self assessment tax under section 140A, while filing the return of income, but revises the income, by filing revised return of income, and pays the tax on the revised return of income at the time of filing the revised return of income?
Section 221 (1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) deals with the penalty where payment of tax is in default.
Recently, in Claris Life Sciences Limited vs. DCIT [ITA No. 498/Ahd/2011, decided on 26.09.2017], on a Division Bench’s recommendations dated 18.12.2014, doubting correctness of another Division Bench order holding that the provisions of Section 221 (1) of the Act cannot be invoked in respect of non-payment of self-assessment tax under section 140A at the time of filing an income tax return which has been revised subsequently, Hon’ble President had constituted this Special Bench to decide the following question:
“Whether an assessee is liable to penalty under section 221(1) of the Act in a case in which the though the assessee has not paid the self assessment tax under section 140A, while filing the return of income, but revises the income, by filing revised return of income, and pays the tax on the revised return of income at the time of filing the revised return of income?”
The assessee a public company filed its return of income on 30.09.2008 declaring a taxable income of Rs 44,69,33,790. The total tax due, as per return of income, was Rs 16,84,01,690 which included income tax of Rs 15,19,12,796 and interest thereon amounting to Rs 1,64,88,896. It was declared by the assessee that the tax deducted at source was Rs 26,91,930 and the remaining amount of tax liability, i.e. Rs 16,84,01,690 has been paid as self- assessment tax under section 140A of the Act. This claim was, however, found to be incorrect. Accordingly, the Assessing Officer(AO), informed the assessee, vide letter dated 28.04.2009, that “you have shown payment of self-assessment tax Rs 16,57,09,760 on 28.9.2008” but “the payment of Rs 16,57,09.760 (as claimed by you) is not being reflected in the income tax department software”. The assessee was “requested to kindly furnish proof of payment of Rs 16,57,09,760 immediately”. Vide letter dated 28.04.2009, which was received by the AO on 04.05.2009, the assessee accepted that the amount was not actually paid by the assessee and stated that “on account of the financial stringency and liquidity crunch, at the time of filing of the return of income, the company could not make payment of self-assessment tax”. In the same letter, the assessee further submitted that “subsequently, certain apparent mistakes and omissions were found and in respect of which we are in the process of revision of accounts a filing of the revised return of income”. On 21.05.2009, the assessee filed his revised return of income declaring total income of Rs 37,57,13,110 and paid the admitted self-assessment tax liability thereon which was Rs 14,76,22,910 in respect of income tax and Rs 19,58,090 in respect of fringe benefit tax. On these facts, the AO imposed a penalty of Rs 50,00,000 on account of nonpayment of self-assessment tax liability under section 140A. Thereafter, assessee carried the matter in appeal before the CIT(A) but not got success. The assessee, therefore, filed appeal before Ahmedabad ITAT. When the matter was being heard by a Division Bench of the Tribunal, the assessee relied upon a decision of another Division Bench, in the case of ACIT vs. Shri Shakti Credits Limited [(2014) 66 SOT 175 (Lko.)] which has, inter alia, held as follows:
………we find that though the assessee has not paid admitted tax at the time of filing of the original return, but this return was duly revised within the prescribed period under section 139(5) of the Act and at the time of filing the return under section 139(5) of the Act the admitted tax was paid. The revised return also substitutes the original return, as the assessment was framed on the basis of the revised return. Therefore, the assessee has filed the return under section 139 of the Act and at the time of filing of the return, the admitted tax liability was also paid. Provisions of sub-section (3) of section 140A of the Act can only be invoked where the assessee has not paid admitted tax liability while filing the return under section 139 of the Act. Since the admitted tax liability has been paid at the time of filing the return under section 139(5) of the Act, the provisions of sub-section (3) of section 140A of the Act cannot be invoked for imposing penalty under section 140A of the Act for non-payment of tax or interest on the income declared in the return. Therefore, we are of the considered view that in such circumstances, the penalty under section 140A(3) of the Act cannot be levied. ….
The Division Bench had reservations on correctness of this approach and was thus of the view that this aspect of the matter needs to be reconsidered by a larger Bench. Accepting this recommendation, Hon’ble President has constituted the Special Bench.
The learned Members of the Special Bench, after considering the facts & circumstances of the case, rival submissions, legal position, rulings held that in our considered view, the assessee was, in principle, covered by the scope of the penalty under section 221(1) of the Act and answered the question referred to the Special Bench in affirmative and against the assessee. However, whether the penalty under section 221(1) r.w.s. 140A(1) of the Act is actually leviable on the facts of a particular case or not will depend on the facts of that case and depending on, inter alia, the factual finding as to whether or not the default of the assessee was for good and sufficient reasons.