TaxTMI 
TaxTMI 
2015 (8) TMI 603
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies alongwith other group companies sold certain extent of land and the profit arising therefrom was declared as long term and short term capital gain. In the returns of income filed on 30.09.2008, tax payable on the income so declared was also arrived at by the assessee which slightly increased by the Assessing Officer while processing the returns of income filed by the assessees companies under S.143(1) on 27.08.2009. The details of income returned by the assessees, tax shown as payable thereon and the tax determined by the A.O. as payable by the assessees are as under : Name of the Assessee Income returned Tax shown as payable by the assessee on returned income Tax payable as determined by the A.O. under sec.143(1). Rs. Rs. Rs. M/s. Konar Agro Farms P. Ltd. 4,51,73,100 1,20,99,795 1,20,99,795 M/s.Sindhu Greenlands P. Ltd. 7,65,64,570 2,27,74,270 2,50,30,160 M/s.Nagavalli Greenlands P. Ltd. 7,21,89,450 1,93,36,232 1,93,36,232 M/s.Medravathi Agro Farms P. Ltd. 4,47,64,910 1,19,21,651 1,19,21,651 M/s.Himagiri Bio-Tech P. Ltd. 7,76,58,350 2,08,01,099 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessing Officer for the following reasons given in the penalty orders. (i) "The assessee company submits that there is no willful default by it and penalty proceedings initiation is unsubstantiated without cause. This submission is examined carefully. As mentioned above, during the F.Y. 2007-08, the assessee company derived income. However, it failed to honour any of the instalments of advance tax. Even no amount was paid while filing the return of income on 30.09.2008 as self-assessment tax. The concept of advance tax payment is 'Pay as you earn'. The assessee is a company and carrying out its business activities for a long time. It is properly supported by many professionals. Despite the well established business setup and professional support, it chose not to pay any amount during the period it derived income, thus violated all the provisions of advance tax. Subsequently, it got its books of account audited and arrived at taxable income. Despite this, it chose not to pay any selfassessment tax even while filing the return of income on 30.09.2008. Even after receiving the intimation under sec.143(1) of the l.T. Act, it chose not to pay any amount against the demand raised. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... What were the efforts made by the assessee company prior to January, 2009 to clear the statutory tax payments? It failed to show the evidences of its efforts to mobilize the amount to meet the statutory payments. As mentioned above, the assessee company had liquidity and current assets also, to meet the statutory requirements but the same was not fulfilled by it. Simply stating that its properties are under attachment now, is not a sufficient reason to justify its continued default for years together. Hence, the assessee's submissions just highlighting the present status to justify even its earlier year's defaults is not acceptable. (iv) The submission that in the absence of the liquidity there was no willful default of tax payment hence it is not justified to impose any penalty is also examined carefully. As mentioned above, the assessee company is simply highlighting the present liquidity problem without giving any reasons for its continued default from the F.Y. 2007-08. The fact remains that the assessee company derived income and the present default of tax payments is, as a result of not honouring the provisions of advance tax while earning the income or not paying any sel....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../- and a liability was created as payable in the books of the developer' in favour of the appellant while finalizing their (the developer M/s. HCPL) financials. The demand thus arose only because of the book entries - crediting of the sale proceeds to P&L A/c on mercantile basis. There was no actual receipt. c. The appellant was not capable of realizing money from: HCPL due to the funds constraint experienced by the developer. The appellant could not also realize any money out of debit balances in its books even subsequent to the date of filing of tax returns. As per the *statutory obligation ROI was filed on 30.09.08. d. The AO listed out various deposits and bank balances but failed to mention that there was no balance "and funds were not available at the time of filing of return. e. The return was processed u/s 143(1) on 27.08.2009 and the problems for the flag ship company of the group M/s. Satyam Computer Services Ltd had started in December, 2008 culminating in the statement of Sri Ramalinga Raju in January, 2009. This situation had its effect on all the group companies. f. All these subsequent events and the lack of liquidity and funds post January, 2009 and espe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the levy of penalty. The gist of the submissions inferred from the said case laws and my remarks are given in the findings. 3.1. The learned CIT(A) did not find merit in the submissions made on behalf of the assessee companies as above and rejecting the same, he proceeded to confirm the penalties imposed by the Assessing Officer under section 221(1) read with section 140A(3) of the Act for the following reasons given in his impugned orders : "5.1. The appellant, as it is clear from the facts, had entered into a development agreement in December, 2005 itself and so was well aware of the tax liability that is likely to arise and the need for making arrangement for that. It is also a known fact that during this period, the prop ty being developed by M/s. HCPL had quite a good reputation as well as the hype and was quite in demand and there were a number of buyers who had deposited even advance monies to book a flat/villa as evidenced from subseque court proceedings by the owners association of those properties. Thus, during the period 2007-08, neither the appellant nor the developer HCPL were short of funds. et, it chose not to pay any advance tax. It also chose not to pay any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Orissa High Court) 6. CIT Special Range 9 V/s. Viral Laminates (P) Ltd (2006) 5 SOT 160 (Ahd- Trib) Paucity of funds due to financial stringency is a reasonable cause for inability to pay tax in time and therefore the penalty was not leviable The appellant's references to situation after January, 2009 are of no help. 7. Bramha Bazaz Inns(P) Ltd Vs Jt. CIT (2003) (79 TTJ (Pune) 342. 5.3.1. The Income Tax Act sets out a mechanism for payment of taxes by which, ideally, the entire tax lia ity is expected to be paid as the assessee earns during the previous year itself. Payment of self assessment tax itself is expected to be more of a final settlement of accounts with corrections if any and payment of residuary tax. Thus, Self assessment tax itself is a last resort. This is clear om the very opening sentence of Section 190 under the chapter XVII - "Collection and recovery of tax" which reads as under:- Section 190 (1) - Deduction at source and advance payment. Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deductio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decisions relied upon by ld. AR. At the outset, it needs to be mentioned that there is no dispute to the fact that assessees have failed to pay selfassessment tax u/s 140A of the Act while submitting its return of income for the impugned AY. Therefore, assessees are to be treated as assessees in default u/s 140A(3) of the Act thereby making them amenable to imposition of penalty u/s 221(1) of the Act. Section 221(1) makes it clear that AO can impose penalty in a case where assessee has defaulted in making payment of the tax liability as a result of which he is to be treated as an assessee deemed to be in default. However, it is also necessary to note that quantum of penalty has not been fixed in the said provision and it has been left to the discretion of AO. However, the first proviso to section 221(1) provides that before imposition of penalty, assessee shall be given a reasonable opportunity of being heard. Whereas, second proviso provides that where assessee proves to the satisfaction of AO that the default was for good and sufficient reasons, no penalty shall levied. From the plain reading of the aforesaid provision, it becomes clear that imposition of penalty u/s 221(1) is no....