Case Law Details

Case Name : Shri Chandak Krishnagopal Motilal Vs ITO (ITAT Mumbai)
Appeal Number : ITA No.2466/PN/2012
Date of Judgement/Order : 17/06/2015
Related Assessment Year : 2006-07
Courts : All ITAT (4351) ITAT Mumbai (1445)

Brief about the case

The Assessee filed his return on 30.03.2008 declaring total income of Rs.62799405/-comprising of Short Term Capital Gains of Rs.4,73,30,889/- and Long Term Capital Gains of Rs. 1,53,11,448/- along with salary income. The tax payable on the returned income was Rs.5317680/-. However, the assesee only paid Rs.1100887/- and the balance of Rs.4216773/- remained unpaid. The AO after processing the return raised a demand of Rs.6207590/- along-with interest. The case was further selected for scrutiny and the assessment was completed u/s 143(3) on 4/12/2008 by treating the share transactions as assessable under the head ‘business’. As a result of this, demand of Rs.31930835/- was raised. However, A.O after noticing the contravention of sec. 140A, treated the assessee in default u/s 140A(3) and issued a show cause notice. Since the assessee did not reply to the show cause notice the Assessing Officer again issued similar notices asking the assessee to explain. In absence of any reply from the assessee despite opportunities given, the Assessing Officer levied penalty of Rs.4216773/- u/s 140A(3) r.w.s. 221 of the I.T. Act.

          Against the order, assessee filed the appeal before CIT(A) and craves for waiver of said penalty on the ground of good and sufficient reasons. Considering the fact he also requested that the delay for filing appeal may also be condoned by CIT(A).

          Based on the ground sighted by the assessee, Ld. CIT(A) cancelled the penalty so levied u/s 140A(3) of the Act.

Contention of Revenue

Despite repetitive opportunities given by A.O., the assessee did not bother to appear before the A.O. to substantiate the financial hardship, if any. Therefore, the assessee should not be given any premium for non-attendance before A.O.

Contention of Assessee

The Ld. Counsel for the assessee contended that although the assessee has not appeared before the Assessing Officer during penalty proceedings, however assessee has appeared before the Assessing Officer during scrutiny assessment proceedings for the A.Y. 2006-07 wherein all details were filed. Assessee submitted before the CIT(A) that his father was looking after the taxation matters, who was not feeling well from June to September 2006 in which he decided to file return. Suddenly the mother of the assessee also fell sick and after a brief illness she expired on 05-10-2006. Subsequently, his father was also admitted to hospital on 10-10-2006 and he expired on 25-10-2006. Thereafter, the assessee’s wife also suffered from low blood pressure who was admitted to hospital. It was further submitted by the assessee that since the assessee was facing problems one after another the landlord took advantage of the situation and tried to take possession of the godown of the assessee and he along with around 200 persons forcibly attacked the godown and destroyed the same. Unfortunately that event took a communal colour, i.e. Hindu-Muslim conflict and the matter is still subjudice before the court. The assessee further gave a chronology of events such as the fall in the stock market and attachment of bank account, demat account by A.O. etc in justification of his plea. In all these circumstances assessee couldn’t understand that what he has to do first. Due to some other family problems and financial crises assessee could not file appeal in time

The default of the assessee was not wilful and there were sufficient reasons to prove that due to financial hardship the assessee could not pay self-assessment tax. If the assessee proves good and sufficient cause then the burden shifts to the Revenue to establish that assessee has not deposited tax without good and sufficient reason. If the Revenue cannot prove that there was no sufficient reason in not paying self-assessment tax, then in that case penalty u/s 140A(3) cannot be levied. The Ld. Counsel for the assessee further submitted that after the assessment order was passed raising huge demand the assessee preferred an appeal before the CIT(A) which was dismissed by him u/s.249(4) for non-payment of self- assessment tax. Thereafter, the assessee could arrange the loan and made the payment after about 1½ years and filed the appeal before the Tribunal. Referring to the copy of the order of the Tribunal vide ITA No.1721/PN/2012 order dated 28-10-2013 he submitted that the Tribunal allowed the appeal filed by the assessee by directing the CIT(A) to admit the appeal and decide the issue on merit. He accordingly submitted that there was valid reason for non-payment of self- assessment tax. Therefore, the order of the CIT(A) should be upheld and the grounds raised by the Revenue should be dismissed.

Held by Tribunal

It was pronounced by the Hon’ble Trinunal that despite the opportunities given by the Assessing Officer, the assessee did not appear before him during the penalty proceedings initiated under the provisions of section 140A(3) r.w.s.221. However, before the CIT(A), the assessee made elaborate arguments narrating the mishaps in the family caused due to death of his parents and also financial hardship. The assessee also brought to the notice of the Ld.CIT(A) the action of the Assessing Officer by attaching the bank account, demat account etc., The action of the Assessing Officer in selling some shares held by the assessee at a very less price was also brought to the notice of Ld.CIT(A). It is also a fact that against the quantum addition made by the Assessing Officer the assessee filed an appeal before the CIT(A) which was dismissed by him as non maintainable in view of section 249(4)(a) of the I.T. Act on the ground that tax on the returned income was not paid by the assessee in full before filing of the appeal. Subsequently, the assessee paid self-assessment tax and filed an appeal before the Tribunal against such order of CIT(A). All these facts show that there was some bonafide reason on the part of the assessee for non-payment of self-assessment tax. However, as per the second proviso to provisions of section 221(1) if the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons no penalty should be levied under this section. The act of assessee by ignoring the Assessing Officer is highly deplorable. However, considering the mishaps in the family caused due to the death of his parents within a very short span and the subsequent illness of his wife as stated before the CIT(A) which was not controverted by the Revenue, a liberal view can be taken on the part of the assessee in not appearing before the Assessing Officer. However, it is also an admitted fact that the assessee before the CIT(A) has appeared and brought to his notice the chronology of events. From the various bank accounts produced by the assessee it was found that there were negligible or insufficient balances. Therefore, we find merit in the submission of the Ld. Counsel for the assessee that there was a bonafide reason on his part in not paying the self-assessment tax. In the instant case, the assessee has proved beyond doubt that the default by him in not paying the self-assessment tax is not wilful and it was beyond his control as there was no sufficient money available with him to pay the self-assessment tax especially when the income is mainly from short term and long term capital gain. Therefore, in view of the second proviso to section 221(1) this is not a fit case for levy of penalty u/s.140A(3) r.w.s. 221 of the I.T. Act. Accordingly, the order of the CIT(A) cancelling the penalty is upheld and the grounds raised by the Revenue are dismissed.

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