1999-VIL-109-ITAT-MUM

Equivalent Citation: [2000] 75 ITD 75, [2001] 71 TTJ 111

Income Tax Appellate Tribunal MUMBAI

IT APPEAL NO. 1610 (BOM.) OF 1983

Date: 29.11.1999

RAMESH T. SALVE

Vs

ASSISTANT COMMISSIONER OF INCOME-TAX

For the Appellant : K. Shivram
For the Respondent : B. L. Meena

BENCH

M. M. CHERIAN (ACCOUNTANT MEMBER) and R. P. TOLANI (JUDICIAL MEMBER)

JUDGMENT

Per D. Manmohan, Judicial Member This appeal filed by the assessee is directed against the order of the CIT(Appeals)-V, Mumbai and pertains to assessment year 1986-87. Penalty levied by the Assessing Officer under section 140A(3) of the Act is the subject matter of dispute.

2. For the year under consideration, the assessee filed its return declaring ';nil'; income. As per the return, self-assessment tax is not payable. However, the Assessing Officer was of the opinion that the assessee avoided payment of self-assessment tax by not taking into consideration the provisions of section 80VVA of the Income-tax Act. Admittedly, the gross income of the assessee before set off of unabsorbed investment allowance of earlier years is Rs. 3,17,679. Section 80VVA was introduced by Finance Act, 1983 and was operative from the assessment year 1984-85 onwards. As per the said section, the assessee-company is not entitled to claim set off of the unabsorbed depreciation fully. The set off of unabsorbed depreciation can be limited to 70% of the gross income of the assessee. In the instant case, the assessee is entitled to claim set off to the extent of Rs. 2,36,375 and the balance of Rs. 1,01,304 is taxable. The Assessing Officer was, therefore, of the opinion that as per the return filed by the assessee self-assessment tax is payable on the income of Rs. 1,01,304 and failure to pay such tax requires to be visited with penalty under section 140A(3) of the Act. The tax on the said sum works out to Rs. 44,296. For the default of 28 months, the Assessing Officer levied penalty of Rs. 24,752.

3. In the penalty order, the Assessing Officer observed that the provisions have come into operation from assessment year 1984-85 onwards and since the year under consideration is 1986-87, the assessee is well aware of the provisions of section 80VVA of the Act and assessee-company is also assisted by a qualified Chartered Accountant for auditing and finalising its accounts and therefore, the plea of ignorance of law cannot be raised to prove the bona fides.

4. Aggrieved, the assessee contended before the CIT(Appeals) that self-assessment tax is payable only on the returned income and not on the income that is arrived at by the Assessing Officer after making corrections to the returned income. It was, therefore, contended that penalty is not leviable under section 140A(3) of the Act. The CIT (Appeals) rejected the contention of the assessee and affirmed the action of the Assessing Officer.

5. Further aggrieved, the assessee is in appeal before us. The learned counsel appearing on behalf of the assessee submitted that on a plain reading of section 140A(1) of the Income-tax Act, tax is payable on the returned income and not on the income that might have been correctly shown or that might have been arrived at by the Assessing Officer after making certain adjustments as per law. He, therefore, pleaded that in the absence of any tax payable on the basis of the return filed, there is no obligation on the part of the assessee to pay self-assessment tax and consequently, penalty is not leviable under section 140A(3) of the Income-tax Act. He further contended that the return was filed overlooking the provisions of section 80VVA of the Act and since it was a bona fide mistake, penalty is not exigible merely for technical default.

6. Vide ground No. 2, the assessee contends that consequent to the order of the CIT (Appeals), in the quantum appeal, total tax payable by the assessee was reduced to Rs. 41,864 and after deducting pre-paid taxes of Rs. 19,991, the balance tax payable works out to only Rs. 21,873 and thus, penalty deserves to be scaled down by computing the same with reference to the balance tax payable.

7. On the other hand, the learned D.R. submitted that the assessee cannot plead ignorance of the provisions of section 80VVA of the Act and cannot claim any advantage by filing an incorrect return. He, thus, strongly supported the orders of the tax authorities.

8. We have carefully considered the rival submissions and perused the record. Section 140A(1) imposes an obligation on the assessee to pay self-assessment tax. The language used in the section is "tax is payable on the basis of any return required to be furnished. . . ." A plain reading of the section indicates that self-assessment tax payable by the assessee should be determined with reference to the tax that is payable on the basis of any return required to be furnished and not the tax payable on the income returned. If we were to interpret the aforementioned words as analogous to the tax payable on the returned income, it would lead to anomaly which, in all probability, is not the intention of the legislature. For example, an assessee whose taxable income is Rs. 1 lakh but in order to avoid payment of self-assessment tax, he claims a particular deduction, which he is not entitled to, and reduces the income to Rs. 10,000 on which no tax is payable. Whereas in another case, the honest assessee, who correctly files the return by showing an income of Rs. 1 lakh but in the absence of payment of self-assessment tax, provisions of section 140A(3) gets attracted. In our opinion, the correct interpretation that requires to be placed on the language used in section 140A(1) of the Act is that of the tax payable as per the income required to be returned by the assessee. In the instant case, the returned income clearly indicates, without any doubt, that the provisions of section 80VVA was not taken into consideration by the assessee. Such being the case, the assessee can be said to have committed a default in payment of self assessment tax.

9. As regards ignorance of law or bona fide mistake, it is for the assessee to prove that self assessment tax was not paid because of the bona fide mistake in computation of income. Admittedly, section 80VVA was introduced by the Finance Act, 1983. The assessee had not made out a case to show that there was no occasion for the assessee-company, in the earlier assessment years, to consider the provisions of section 80VVA of the Act. It is not the case of the assessee that the return was filed without the assistance of a Chartered Accountant. Neither an affidavit of the Chartered Accountant nor the affidavit of any other person concerned was filed before us to support his submission that the provisions of section 80VVA was overlooked on account of somebody';s bona fide mistake for which the company should not be penalised. In fact, it appears that the assessee-company has not raised such an issue before the Assessing Officer which indicates that the explanation as to bona fide mistake of overlooking the provisions was an after-thought. Thus, looking at from any angle, the assessee has not given sufficient reasons for non-payment of self-assessment tax.

10. As regards reduction of self assessment tax payable and consequent plea of the assessee to reduce the penalty levied under section 140A(3), we are of the opinion that the plea of the assessee reserves favourable consideration, though for different reasons. Section 140A(3) as it existed before 1-4-1989 reads as under : -

"If an assessee fails to pay the tax on any part thereof in accordance with the provisions of sub-section (1), he shall, unless a regular assessment under section 143 or section 144 has been made before the expiry of the thirty days referred to in that sub-section, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, and in the case of a continuing failure, such further amount or amounts as the Income-tax Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed fifty per cent, of the amount of such tax or part, as the case may be :

Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard."

This section was subsequently amended by Finance Act, 1988 w.e.f. 1-4-1989 which reads as under : -

"If an assessee fails to pay the tax or any part thereof in accordance with the provisions of sub-section (1), the Assessing Officer may direct that a sum equal to two per cent of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues :

Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heared."

11. We are concerned with the assessment year 1986-87 and default was committed on 30-7-1986, i.e., the date of filing the return. Therefore, the provisions applicable are those which are on the statute book as on the date of default. The Assessing Officer levied penalty @ 2 per cent per month by mistakenly taking into consideration the amended provisions. Penalty order was passed in 1991. However, as per section 140A(3), as it existed at the relevant point of time, i.e., at the time of default, penalty is not directly linked to the number of months and penalty is leviable at the discretion of the Assessing Officer subject to a maximum of 50% of the self-assessment tax payable. Admittedly, the Assessing Officer has not exercised his discretion in the instant case. Considering the circumstances of the case, we are of the opinion that penalty of Rs. 5,000 under section 140A(3) would meet the ends of justice. The appeal is partly allowed.

 

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.