Dy.CIT, Circle-3(3),, Hyderabad v. M/s Vishal Projects Limited,, Hyderabad

ITA 623/HYD/2013 | 2010-2011
Pronouncement Date: 02-04-2014 | Result: Dismissed

Appeal Details

RSA Number 62322514 RSA 2013
Assessee PAN AABCV6235A
Bench Hyderabad
Appeal Number ITA 623/HYD/2013
Duration Of Justice 11 month(s) 2 day(s)
Appellant Dy.CIT, Circle-3(3),, Hyderabad
Respondent M/s Vishal Projects Limited,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 02-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 02-04-2014
Assessment Year 2010-2011
Appeal Filed On 30-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER I.T.A. NO. 623/HYD/2013 A.Y. : 2010-11 THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-3(3) HYDERABAD. VS. M/S VISHAL PROJECTS LTD. SECUNDERBAD. PAN AABCV6235 A APPELLANT RESPONDENT REVENUE BY: SHRI SOLGY JOSE T. KOTTARAM RESPONDENT BY: SHRI K.A. SAI PRASAD DATE OF HEARING: 20.03.2014 DATE OF PRONOUNCEMENT: 02.04.2014 O R D E R PER SAKTIJIT DEY JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV HYDERABAD DATED 13/02/2013 FOR THE ASSES SMENT YEAR 2010-11. 2. THE ONLY ISSUE IN THIS APPEAL OF THE DEPARTMENT IS IN RESPECT OF DELETION OF PENALTY IMPOSED U/S 221(1) O F THE IT ACT. 3. BRIEFLY THE FACTS ARE THE ASSESSEE COMPANY IS E NGAGED IN THE BUSINESS OF CONSTRUCTION OF FLATS AND INDEPENDE NT HOUSES. FOR THE ASSESSMENT YEAR UNDER THE DISPUTE THE ASSE SSEE HAD FILED ITS RETURN OF INCOME ON 15/10/2010 DECLARING TOTAL INCOME OF RS. 75 76 522/- UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF RS. 5 73 42 471/- UNDER SECTION 115JB. THE TAX L IABILITY AS PER THE ASSESSEES OWN COMPUTATION IS RS. 1 05 24 9 81/-. AFTER ADJUSTING THE TDS OF RS. 96 513/- THE NET TAX PAYA BLE BY THE I.T.A. NO. 623/HYD/2013 M/S. VISHAL PROJECTS LTD. 2 ASSESSEE AS PER ITS COMPUTATION IS RS. 1 04 28 468/ -. HOWEVER THE ASSESSEE FILED ITS RETURN OF INCOME WITHOUT PAY ING THE AFORESAID ADMITTED TAX LIABILITY. THE ASSESSING OFF ICER THEREFORE ISSUED A NOTICE U/S 221(1) OF THE IT ACT CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPOSED FOR THE FAILURE TO PAY THE ADMITTED TAX LIA BILITY. AS IT APPEARS FROM THE PENALTY ORDER PASSED IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER THE A SSESSEE NEITHER APPEARED NOR SUBMITTED ANY REPLY. THE ASSES SING OFFICER THEREFORE PROCEEDED TO PASS THE ORDER ON 03/03/2011 IMPOSING PENALTY OF RS. 26 07 117/- U/S 221(1) OF T HE IT ACT. BEING AGGRIEVED OF THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT(A). 4. IN COURSE OF HEARING OF APPEAL BEFORE THE CIT( A) IT WAS CONTENDED BY THE ASSESSEE THAT SINCE THE ASSESSEE W AS ELIGIBLE FOR DEDUCTION U/S 80IB(1) IT WAS NOT LIABLE TO TAX UNDER THE NORMAL PROVISIONS BUT WAS LIABLE TO PAY TAX U/S 1 15JB OF THE IT ACT. IT WAS SUBMITTED THAT THE REAL ESTATE MARKET W AS SEVERELY AFFECTED DUE TO SUDDEN DEMISE OF THE THEN CHIEF M INISTER SHRI Y.S. RAJASEKHAR REDDY ON 03/09/2009 AND THE SUBSEQU ENT TELENGANA AGITATION WHICH HAD AN EFFECT ON THE BUS INESS OF THE ASSESSEE. AS A RESULT OF WHICH SALES DROPPED FROM 1 25 CRORES IN THE PRECEDING AY TO RS. 10.09 CRORES IN THE ASSESSM ENT YEAR UNDER CONSIDERATION AND THE NET PROFIT DROPPED FROM RS. 34 CRORES TO RS. 5.7 CRORES. ACCORDING TO THE ASSESSEE THIS SLUMP IN BUSINESS DIRECTLY AFFECTED CASH FLOWS AND MADE I T DIFFICULT FOR THE ASSESSEE TO MEET ITS INCOME TAX OBLIGATIONS PA RTICULARLY SINCE ITS FUNDS WERE BLOCKED IN ITS BUSINESS INVEST MENTS. IT WAS SUBMITTED THAT THOUGH THE ASSESSEE TRIED TO SELL AW AY LAND OWNED BY IT BUT WAS UNABLE TO DO SO DUE TO POOR M ARKET CONDITIONS. THUS IT WAS SUBMITTED THAT FAILURE TO PAY ADMITTED TAX WAS NOT WILFUL BUT WAS DUE TO GENUINE FINANCIAL HARDSHIPS. IT I.T.A. NO. 623/HYD/2013 M/S. VISHAL PROJECTS LTD. 3 WAS THEREFORE CONTENDED THAT PENALTY SHOULD NOT H AVE BEEN LEVIED. IN SUPPORT OF SUCH CONTENTION THE ASSESSEE RELIED UPON CERTAIN JUDICIAL PRECEDENTS. 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE PENALTY BY HOLDING AS UNDER: 5. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS IN T HE PENALTY ORDER AND OF THE AR. THE FACT THAT THE REAL ESTATE MARKET HAD BEEN ADVERSELY AND SEVERELY AFFECTED BY THE EVENTS IN THE LATE 2009 IS WELL KNOWN. THE APPELLAN T BEING IN THE REAL ESTATE MARKET WAS ALSO SIMILARLY AFFECT ED AS IS BORN OUT BY THE FACTS RELATING TO THE GROSS SALES A ND NET PROFIT SUBMITTED BY THE AR. THERE IS NO DISPUTE THA T THE APPELLANT HAD A NET PROFIT OF RS. 5.7 CRORES AS PER ITS OWN PROFIT AND LOSS ACCOUNT. HOWEVER PROFITS IN THE AC COUNTING SENSE DO NOT NECESSARILY TRANSLATE TO FUND FLOWS. A S PER THE BALANCE SHEET ITSELF THE CASH BALANCE AS ON 31/03/2010 WAS A MERE RS. 19 LAKHS. I AM THEREFORE CONVINCED ABOUT THE FACT THAT THE APPELLANT WAS IN DIRE FINANCIAL STRAITS AND WAS FACED WITH GENUINE DIFFIC ULTY IN MEETING ITS INCOME TAX LIABILITY. 6. IN THE CASE OF CIT VS. DADU WALA AND CO. [1988] 1770 ITR 491 (RAJ.) IT WAS HELD AS FOLLOWS WITH RE GARD TO LEVY OF PENALTY U/S 221: THE IMPOSITION OF PENALTY PROVIDED FOR THEREIN IS WITHIN THE DISCRETION OF THE ITO WHEN THE ASSESSEE IS IN DEFAULT IN MAKING PAYMENT OF INCOME-TAX. HOWEVER THE EXERCISE OF DISCRETION IS NOT TO BE ARBITRARY BUT IS DEPENDENT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS EQUALLY CLEAR THAT PENALTY IS NOT AUTOMATICALLY ATTRACTED IN CASE OF DEFAULT IN PAYMENT OF INCOME-TAX AND THE SAME HAS TO BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ON WHICH THE DISCRETION IS TO BE EXERCISED JUSTIFY IMPOSITION OF PENALTY. 7. IN THE CASE OF CIT VS. BHIKAJI RAMACHANDRA [1990 ] 183 ITR 478 (BOM) THE COURT HELD THAT THE FINDING BY T HE ITAT THAT THE ASSESSEE HAD BEEN PREVENTED FROM PAYING TH E ADVANCE TAX DUE TO FINANCIAL INABILITY WAS REALLY A FINDING OF FACT THAT THERE WAS GOOD AND SUFFICIENT CAUSE FO R NOT PAYING THE TAX. 8. IN THE CASE OF CHEMBARA PARK ESTATS LTD. THE ASSESSEE HAD FAILED TO PAY ADVANCE TAX DUE TO I.T.A. NO. 623/HYD/2013 M/S. VISHAL PROJECTS LTD. 4 UNFAVOURABLE FINANCIAL POSITION. THE ITAT HELD THAT PAUCITY OF FUNDS AND FINANCIAL STRINGENCY COULD BE CONSIDERED GOOD AND SUFFICIENT REASON FOR NOT PAYIN G THE TAX AND THAT PENALTY U/S 221 COULD NOT BE LEVIED. 9. THE SITUATION IS SIMILAR IN THE CASE OF THE APPE LLANT. THE APPELLANT WAS PREVENTED BY FINANCIAL DIFFICULTI ES FROM MAKING PAYMENT OF ADMITTED TAX. THE FAILURE TO PAY THE TAX WAS NOT WILFUL AND DELIBERATE BUT CAUSED BY GEN UINE DIFFICULTY. I THEREFORE HOLD THAT THE LEVY OF PEN ALTY WAS NOT JUSTIFIED AND ALLOW THE APPEAL. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT AT THE TIME OF FILING OF RETURN OF INCOME THE ASSESSEE HAD NOT PAID THE ADMITTED TAX LIABILITY WHICH HAS PROVOKED THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS U /S 221(1) OF THE ACT. IT IS ALSO A FACT THAT THE ASSESSING OFFICER HAS IM POSED PENALTY U/S 221(1) OF THE ACT IN ABSENCE OF ANY EXPLANATION FUR NISHED BY THE ASSESSEE FOR WHATEVER MAY BE THE REASON. HOWEVER THE READING OF THE PROVISIONS CONTAINED U/S 221(1) OF THE ACT WOUL D SHOW THAT THE EXPRESSION USED U/S 221(1) IS MAY AND NOT SHALL WHICH IS SUGGESTIVE OF THE FACT THAT IMPOSITION OF PENALTY I S NEITHER AUTOMATIC NOR MANDATORY. A DISCRETION IS LEFT WITH THE AO TO DECIDE WHETHER TO IMPOSE PENALTY OR NOT BY CONSIDERING THE EXPLANATIO N OF THE ASSESSEE. THIS FACT IS EVIDENT FROM THE PROVISIONS OF SECTION 221(1) OF THE ACT WHEREIN NOT ONLY THE OPPORTUNITY OF BEING HEARD HA S BEEN PROVIDED TO THE ASSESSEE BUT ALSO THE AO HAS BEEN VESTED WITH P OWER TO NOT IMPOSE PENALTY IF ASSESSEE PROVES TO THE SATISFACTI ON OF THE AO THAT THE DEFAULT WAS FOR GOOD AND SUFFICIENT CAUSE. AS C AN BE SEEN FROM THE DISCUSSIONS MADE IN THE ORDER OF THE CIT(A) TH E ASSESSEE HAS EXPLAINED THE CAUSE FOR NOT PAYING THE ADMITTED TAX AT THE TIME OF FILING OF RETURN. THE CAUSE SHOWN BY THE ASSESSEE CERTAINLY CANNOT BE BRUSHED ASIDE. FURTHER AS CAN BE SEEN FROM THE DETAILS SUBMITTED BY THE LEARNED AR THE ASSESSEE HAS PAID A TOTAL AM OUNT OF RS. 1 15 98 948/- TOWARDS ADMITTED TAX LIABILITY AND IN TEREST U/S 234B & 234C OF THE ACT. THEREFORE THERE IS NO PREJUDICE T O THE DEPARTMENT I.T.A. NO. 623/HYD/2013 M/S. VISHAL PROJECTS LTD. 5 SINCE THE ASSESSEE HAS NOT ONLY DISCHARGED THE TAX LIABILITY BUT HAS ALSO PAID THE INTEREST. THEREFORE THE ACTION OF TH E CIT(A) IN DELETING THE PENALTY UPON CONSIDERING THE EXPLANATION OF THE ASSESSEE CANNOT BE FAULTED WITH AS IN OUR OPINION THERE WAS A REA SONABLE CAUSE FOR NOT PAYING THE ADMITTED TAX LIABILITY AT THE TIME O F FILING OF RETURN OF INCOME. IN THE AFORESAID VIEW OF THE MATTER WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS ACCORDINGLY CONFIRMED AND GROUNDS RAISED BY THE DEPARTMENT IN T HIS REGARD ARE DISMISSED. 7. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/04/ 2014. SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD DATED 2 ND APRIL 2014 KV COPY FORWARDED TO: 1. THE DY. CIT CIRCLE-3(3) HYDERABAD. 2. M/S. VISHAL PROJECTS LTD. PLOT NO. 22 1 ST FLOOR VISHAL HOUSE CHANDRAGIRI COLONY TRIMULGHERRY SECUNDERAB AD 500 015. 3. THE CIT(A)-IV HYDERABAD. 4. THE CIT-III HYDERABAD 5. THE DR ITAT HYDERABAD I.T.A. NO. 623/HYD/2013 M/S. VISHAL PROJECTS LTD. 6