AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 1110
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s 221(1) of the Act, on the facts of the case and in view of the gist of the legal citation placed on record ? 2. That the worthy CIT(A) was wrong and unjustified to have summarily ignored the facts and arguments as to the financial constraint and assessee's inability to make payment as per submissions on record including even request and no objection by the assessee and asessee's associate entity for adjustment of the payments against determined refund due after the appeal effect, of the said associate entity. 3. That the worthy CIT(A) have also ignored the facts that the notice of recovery of the tax u/s 221(1) dated 12.07.2106 refer to the sum of Rs. 22,14,320/- whereas the said notice itself was not referring to correct amount as the assessee had paid the sum of Rs. 10.00 Lacs on 23.06.2016 and the whole amount stood paid by 21.07.2016, even prior to the said date of hearing of the notice u/s 221(1) and default, if any, was already made good. 4. That the worthy CIT (A) and Assessing Officer both have been wrong and unjustified in sustaining/imposing penalty u/s 221(1) of the Act, and the said imposition of the penalty u/s 221(1) cannot be an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal, the appellant contended that as the said return of income for A.Y.2014-15 was treated an invalid u/s 139(9) of the Act by the CPC vide communication dated 30.3.2016, it was a non-est return. Consequently, there was no order u/s 143(1) of the Act and also no valid demand notice u/s 156 of the Act for the relevant assessment year. It was argued that in the absence of a notice of demand u/s 156 of the Act, the penalty imposition u/s 221(1) was not sustainable. I have considered the above contention and find that it is not tenable. The impugned order u/s 221(1) is for levy of penalty u/s 221(1) of the Act and not for processing u/s 143(1) of the Act. Levy of penalty under section 221(1) is independent of processing under section 143(1) of the Act. The penalty has been rightly levied u/s 221(1) for default u/s 140A(3) of the Act. Further plea of the assessee is that the penalty has been wrongly levied on the sum of Rs. 22,14,320/- without giving credit for Rs. 22,14,320/- paid after the filing of the return of income but before the passing of the impugned penalty order u/s 221(1) of the Act on 28.07.2016. The Act on 28.07.2016. The plea is also not tenable and cannot be ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he regular assessment of a valid return as per provisions of section 140(2) of the Act for A.Y.14-15. Grounds of appeal 1 to 5 are dismissed." 4. Aggrieved again, the present appeal has been filed by the assessee in Income Tax Appellate Tribunal in the course of appellate proceedings in ITAT. The assessee amended the grounds of appeal which are as under: "1. That the Ld. CIT(Appeals) has erred both on facts and in law to have uphold the penalty as levied u/s 221(1) of the Act in view that the impugned Return of Income as filed u/s 139(1) of the Act itself was declared an invalid Return vide communication Ref. No. CPC-1/4/5/95/150962219 dated 30.03.2016 and there was no valid demand raised or outstanding pursuant to provisions u/s 156 of the Act, being non est return, which is mandatory condition and there was, as such, no valid demand outstanding for which the penalty u/s 221(1) has been imposed and upheld. 2. That the worthy CIT(A) have erred in law and on facts and unjustified for upholding, the penalty imposition u/s 221(1) read with section 140(A)(3) of the Act in view of the amended provisions of section 140(A)(3) w.e.f. 1.4.1989 as after the said....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat consequent of the said Amendment, the default in payment of self Assessment Tax would be covered by the scope of section 221(1),after the said Amendment. As such by the said amendment in the provision of section 140(A)(3) w.e.f 1.4.1989, the assessee is to be treated as assessee in default, subject to the other provision of the Act, if the said demand would have been validly raised for the limited purpose to enable the A.O to make recovery of the amount of tax and the interest due thereon and not for Levy of penalty ,an aspect which has been done away in the new provisions. 2) In this connection and subject matter, the reliance is placed on the recent judgement of the ITAT MUMBAI BENCH -A of 19th JANUARY 2018 in the case of HEDLEE KNOWLEDGE PVT LTD VS INCOME TAX OFFICER, REPORTED AT (2018) 169 DTR 396 (COPY ENCLOSED ) wherein it has been held as under: On the face of it, the argument of the revenue appears to be justified ,so however ,the same does not merit acceptance if one examine the issue in slight detail. Notably, the penalty envisaged u/s.140A(3) In the unamended provision was on the statue along with the penalty envisaged u/s .221. Once sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....18) and since no demand was raised under section 156 of the Act, which is mandatory condition of provisions, there was no valid demand outstanding for which the penalty has been wrongly imposed disregarding the said provision and also amended provisions under section 140 (A)(3).w.e.f 01.04.1989" Letter dated 10.07.2019. "1. Pursuing the Ground No 1 of the amended Grounds of Appeal, it is submitted and prayed that since the Return of Income as filed by the assessee firm on 31st March, 2015 for the relevant Asstt. Year 2014-15 vide acknowledgement No. 554990283300315 was itself declared invalid non est Return by the communication reference no. CPC/1415/95/1509631219 dated 30.03.2016 (copy at page 10 of the paper book submissions of 16th May, 2018; no order or intimation u/s 143(1) of the Act was either passed or served being a non est invalid return nor any demand was raised or notice u/s 156 was ever issued/served for any tax demand in respect thereof, which is a mandatory condition precedent for any tax becoming due payable and as such there was no valid demand for which the penalty has been wrongly imposed u/s 221(1) of the Act read with section 140(A)(3), disregarding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ispensing justice when it is found that valuable property of a person was sought to be sold away for recovery of such arrears as did not exist at all. 2. Pursuing the amended Ground No. 2 the assessee respectfully submits and pray that: i) Scope and Application of section 140(A)(3) of the Act, post Amendment of 1989, the Intention of the Legislature, at the time of Insertion of the Amendment under section 140 (A) (3) makes it clear that the old provision of 140(A) (3) prescribing for levy of penalty for Non-payment of Self Assessment Tax was no longer found necessary because the said default would after the said Amendment, invite Mandatory charging of Interest. Therefore, ostensibly The Legislature did not envisage that consequent of the said Amendment, the default in payment of self Assessment Tax would be covered by the scope of section 221(1), after the said Amendment. As such by the said amendment in the provision of section 140(A)(3) w.e.f 1.4.1989, the assessee is to be treated as assessee in default, subject to the other provision of the Act, if the said demand would have been validly raised for the limited purpose to enable the A.O to make recover....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erest. Ostensibly, the legislature did not envisage that consequent to the amendment, the default in payment of self assessment tax would hitherto be covered by the scope of Sec. 221(1) of the Act. The emphasis of the Revenue is to point out that the non-payment of self-assessment tax renders the assessee "ir default" in the amended provision which further presribes that "all the provisions c this Act shall apply accordingly" and, therefore, the default is hitherto (from ( 04.1989) covered by Sec. 221(1) of the Act. In our view, the consequence of the aforesaid two expressions contained in Sec. 140A(3) are also not of the type sought to be understood by the Revenue, and rather the assessee is to be treated as an "assessee in default" for the limited purpose of enabling the Assessing Officer to make recovery of the amount of tax and interest due and not for levy of penalty, an aspect which has been specifically done away in the new provision. Therefore, considered in the aforesaid light, in our vi w, the fact that the amended Sec. 140A(3) w.e.f. 01.04.1989 does not envisage any penalty for non-payment of self-assessment tax, the Assessing Officer was not justified ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve seen earlier, there is no amendment of Sec. 221 of the Act and it continues to remain the same. What we are trying to emphasise is if the piea of the Revenue is to be accepted, based on the amendment to Sec. 140A(3) of the Act, it would mean that prior to 01.04.1989 the same default invited penai provisions under two sections, namely, Sec. 140A(3) as well as Sec. 221(1) of the Act, which would appear to be peculiar and unintended. Furthermore, the intention of the legislature at the time of insertion of the amended Sec. 140A(3) makes it dear that the old provisions of Sec. 140A(3) prescribing for levy of penalty for non-payment of self-assessment tax was no longer found necessary because the said default would henceforth invite mandatory charging of interest. Ostensibly, the legislature did not envisage that consequent to the amendment, the default in payment of self assessment tax would hitherto be covered by the scope of Sec. 221(1) of the Act. The emphasis of the Revenue is to point out that the non-payment of self-assessment tax renders the assessee "ir default" in the amended provision which further presribes that "all the provisions c this Act shall apply accordingly" and,....