TaxTMI 
TaxTMI 
2017 (2) TMI 1429
X X X X Extracts X X X X
X X X X Extracts X X X X
....law, the learned CIT(A) erred in confirming the penalty of Rs. 5,96,547/- imposed u/s. 221(1) read with section 140A(3) of the Act by the learned Assessing Officer. Your appellant, therefore, prays that the penalty imposed be cancelled. 2. Your appellant craves leave to alter, modify, amend or delete the above ground of appeal, or to add one or more new ground(s), as may be necessary." 2. Briefly stated, the facts of the case are that the assessee company which is engaged in the business of property dealing had filed its return of income on 14.11.2010 declaring total income of Rs. 4,26,65,994/-. That as against the total tax liability of Rs. 1,58,10,207/-(including interest u/s 234B and 234C of Rs. 13,08,037/-) on the returned income, though an amount of Rs. 38,78,264/- (i.e TDS : Rs. 13,64,864/- + Advance tax : Rs. 25,00,000/-) stood deposited on or before filing of the return of income, however the balance amount of Rs. 1,19,30,943/- remained payable, and was thereafter deposited by the assessee alongwith interest, as under:- Date of deposit Amount deposited 09.02.2011 Rs. 20,00,000/- 17.02.2011 Rs. 50,00,000/- 23.02.2011 Rs. 49,31,000/- 22.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sufficient liquid funds. I am afraid 1 am unable to agree with the appellant's contention. The AO has rightly pointed out that the appellant had pre-tax profits of Rs. 2.52 crores and cash and bank balance of Rs. 26.35 crores as on 31.3.2010. The appellant on the other hand has contended that the FDRs were hypothecated with the banks and during the period 1.4.2010 to 31.12.2010, it had a cash flow of only Rs. 35 lacs from regular business operations and Rs. 8.61 crores by way of borrowings. I fail to understand why the borrowings could not be utilized for paying the SA taxes. The appellant's explanation itself shows that it had sufficient liquid funds even if they were from borrowed sources. This coupled with the fact that the appellant has consistently being showing profits clearly means that it was having sufficient discretion to pay the SA taxes at the time of filing the return itself. 3.5 Lastly, the appellant had sought to argue that the CFO was not keeping well after filing the return of income and therefore the taxes could not be paid. It is that the illness of the CFO is a bottle neck only while paying the taxes and not conducting the regular affairs of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....well and remained hospitalized for a period of 1½ month. Thus in the backdrop of the aforesaid facts it was averred by the Ld. A.R that though all the said facts were duly brought to the notice of the lower authorities, however the latter bypassing the same had subjected it to penalty u/s 221(1). It was thus submitted by the Ld. A.R that the order of the CIT(A) sustaining the penalty of Rs. 5,96,547/- imposed by the A.O u/s 221(1), in totality of the facts leading to the delay in depositing of the self assessment tax was thus liable to be vacated. That on the other hand the Ld. D.R heavily relied on the orders of the lower authorities and therein submitted that in light of the failure of the assessee to deposit the self-assessment tax at the time of filing of the return of income, the A.O had rightly held the assessee as being in default and imposed penalty u/s 221(1), which thereafter had rightly been upheld by the CIT(A). 4. We have heard the Ld. Representatives of both the parties, perused the orders of the lower authorities and the material placed before us. That before adverting further, we reproduce herein below the relevant statutory provisions around which the ver....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n depositing the tax, then no penalty shall be levied by the A.O u/s 221(1) in the hands of the assessee. We though are not oblivious of the fact that the discretion for exonerating an assessee from levy of penalty u/s 221(1) despite the default in paying the taxes remains within the exclusive domain of the A.O, however such exercise of discretion has to pass the litmus test of having been exercised in a judicious manner, which we are of the considered view has not been exercised in the present case. We have given a thoughtful consideration to the facts of the case and are unable to persuade ourselves to subscribe to the findings of the lower authorities, which we would not hesitate to observe had arrived at self suiting observations on the basis of perverse facts. We find that the lower authorities had restricted themselves to the fact that the assessee during the period relevant to the year under consideration had done well in its business, and had absolutely given a go by to the duly fortified contention of the assessee that the failure to deposit the self-assessment taxes was prompted due to severe financial crunch being faced by it at the relevant point of time, i.e as on 14.1....