TaxTMI 
TaxTMI 
2017 (5) TMI 1155
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 11/05/2015, a copy of which was provided to the Departmental Representative by the bench. In view of no objection from the Departmental Representative the revised grounds of appeal have been admitted, which are as under: 1. The Ld. CIT(A) has erred on facts and in law in holding that imposition of penalty under Section 140A(3) of the Income Tax Act, 1961 is an inadvertent mistake and has further erred in holding that this mistaken can be ignored in view of Section 292B of the Income Tax Act, 1961. 2. The learned CIT(A) has erred in confirming the penalty order under Section 140A(3) of the Income Tax Act, 1961 when the law does not permit imposition of any such penalty under Section 140A(3) of the Income Tax Act, 1961. 3. The learned CIT(A) has erred on facts and in law in confirming the penalty under Section 140A(3) of the Income Tax Act imposed by the Ld. Assessing Officer after the processing/assessments under section 143(1)/143(3) were completed by the AO. 4. The learned CIT(A) has erred on facts and in law in holding that the appellant did not have liquidity problems which made it difficult for the appellant to make payments of tax under Section 140A of the Incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee also referred the relevant section of penalty as under section 140A(3) of the Act. 3.2 The Assessing Officer considered the submission of the assessee, however, in absence of any supporting documentary evidence of liquidity crunch, he was not satisfied with the reasons cited by the assessee for non-payment of admitted tax. The Assessing Officer held the assessee in default for not making payment of admitted tax liability of Rs. 1,09,71,691/-and levied a penalty of an amount equal to admitted tax liability quoting section 140A(3) of the Act. 3.3 Before the Ld. Commissioner of Income-tax (Appeals), the assessee raised the ground that the order passed by the Assessing Officer was illegal and liable to be quashed as the penalty has been levied under section 140A(3) of the Act, whereas it should have been levied under section 221 of the Act. The Ld. CIT(A), however, held that the provisions of section 292B of the Act would cover such inadvertent mistake in quoting the correct section as the appellant had participated in the proceedings without rendering any objection. 3.4 Regarding the good and sufficient reason for non-payment of admitted tax liability, no submission....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her submitted that assessee also duly complied and submitted the reasons as why the admitted tax liability could not be paid, to satisfy the Assessing Officer that the default was for good and sufficient reasons. 4.3 The Ld. Senior DR further relied on the decision of the Hon'ble High Court of Gujarat in the case of Principal Commissioner of Income Tax-2, Vadodara Vs. Sugar Developers, reported in (2016) 72 taxmann.com 321(Guj), wherein it is held that whenever administrative action is found to be suffering from breach of principal of natural Justice, the decision-making process should be placed at a stage where defect is detected rather than to permanently annul action of the authority. He further relied on the judgment of the Hon'ble Supreme Court of India in Civil Appeal No. 2099, arising out of SLP (Civil) No. 2308 of 2009 in the case of P.K. Palanisamy Vs. N Arumugham and another, wherein the Hon'ble Supreme Court observed that it is a well settled principle of law that mentioning of wrong provision or non-mentioning of provision does not invalidate an order if the court and/or statutory authority had the requisites jurisdiction therefore. 4.4 Ld. DR submitted that in vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case of a continuing default, such further amount or amounts as the Assessing Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears : Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard : Provided further that where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied under this section." 4.6 On perusal of the above provisions of the Act, we find that wherever the assessee fails to pay the admitted tax liability, the assessee is deemed to be in default in terms of section 140A(3) of the Act in respect of the tax remaining unpaid and when the assessee is found to be in default or deemed to be in default, a penalty may be levied on such assessee up to the tax liability in arrear in terms of section 221 of the Act. 4.7 The contention of the Ld. Sr. DR are that in show cause notice, the Assessing Officer has properly informed the charges to the assessee, however, committed mistake of quoting wrong section and which could be ignored in view o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o imposing penalty and also the assessee was denied opportunity of hearing to discharge its onus to show "good and sufficient cause" for non-payment of tax at the time of filing of the return. 4.10 Now, we may like to examine, whether the facts on the basis of which, the Tribunal has deleted penalty in the case of sale Rakesh Kumar Garg, existed in the instant case are not. For this purpose, it is relevant to examine the show cause notice issued by the assessee, though the relevant section quoted was 140A(3), but whether it meets the requirement of section 221 of the Act. We find that, the Assessing Officer has issued show cause notice as to why the proceedings u/s 140A(3) for imposing penalty should be considered. The relevant paragraph of the show cause notice are reproduced as under: "In the above subject reference your attention is drawn towards return of income submitted in this office on 30th September, 2011. From the documents and details filed, it has been perused that as per computation chart annexed with the return of income filed for the AY 2010-11, tax payable has been shown at Rs. 1,09,71,691/-. As per provisions of Section 140A/1) of the Income Tax Act, 1961, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Officer, is reproduced as under: "The assessee was not able to deposit the tax of Rs. 1,09,71,691/- u/s 140A due to the following reasons: a) The assessee is suffering the liquidity crunch and find it difficult to pay the self assessment tax. b) The cash generation source of the business has been closed. c) All the bank account has been seized by the Income tax department due to which the assessee was left with no means to pay the tax. d) That the demand has emanated due to the surrender made at the time of the search, in addition to the discrepancies if any, those were found at the time of the search and after the search to cover up those discrepancies, but the assessee was made to pay for the surrendered amount unlinked with the incriminatory? documents found but also for the commitment made for the surrender and as such the assessee was made to pay taxes for the discrepancies as well as for the discrepancies which were not in the books but which were made to pay as per the surrender thereby making it difficult to comply with the both as such the amount remained unpaid but because the assessee has committed to pay, the amount committed to pay and will honor all the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the time of filing of return, as required under proviso to section 221 of the Act. 4.14 In our opinion, in substance, the assessee was duly provided opportunity of hearing and to discharge its onus to show "good and sufficient reasons", which being requirements for levy of penalty under section 221 of the Act. 4.15 In the circumstances, we are of opinion that the ratio in the case of Sh. Rakesh Kumar Garg (supra) is not applied over the facts of the instant case. 4.16 In the judgment of PK Palanisamy (supra), the Hon'ble Supreme Court observed as under: "It is a well settled principle of law that mentioning of a wrong provision or nonmentioning of a provision does not invalidate an order if the court and/or statutory authority had the requisite jurisdiction therefor. In Ram Sunder Ram v. Union of India & Ors. [2007 (9) SCALE 197], it was held: ".....It appears that the competent authority has wrongly quoted Section 20 in the order of discharge whereas, in fact, the order of discharge has to be read having been passed under Section 22 of the Army Act. It is well settled that if an authority has a power under the law merely because while exercising that power the so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. senior DR submitted that penalty was levied on 31/05/2012 whereas the assessment was completed on 11/03/2013 and thus, the penalty was levied well before the completion of the assessment and thus the ground raised was factually incorrect. 5.1. We have heard the rival submission on the issue in dispute. In our considered opinion limitation for levy of penalty falling under the chapter XXI "penalties imposable" under the Income Tax Act has been specified in section 275 of the Act. As far as penalty under section 221 of the Act is concerned, the limitation has not been provided, however it should be levied within a reasonable period of time. We find that the penalty has been levied even before the completion of the assessment and thus in our opinion it has been levied well within a reasonable period. Accordingly, ground No. 3 of appeal is dismissed. 6. In ground No. 4 the assessee has challenged the finding of the Ld. CIT-A that the assessee was not having any liquidity problem for making payment of tax under section 140A of the Act. 6.1 In support of the ground, the Ld. counsel submitted that the assessee already submitted reasons for liquidity crunch before the Assessing....