Ita/117/2017 Of M/S Kbr Infratch Ltd v. Asst Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18 DAY OF DECEMBER, 2019) PRESENT THE HON'BLE MR.JUSTICE ARAVIND KUMAR AND THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ| 1L.T.A. NO.117 OF 201 BETWEEN: M/S KBR INFRATCH LTD., NO.1, 1 FLOOR, 8 MAIN.BALAJI LAYOUT,KODIGEHALLI MAIN ROAD|TATANAGARA, BENGALURU-5600094REPRESENTED BY|MANAGING DIRECTORSRI.K.BABU RAJU|MANAGING DIRECTOR _. APPEKELLANT| (BY MS. VARSHA SHETTY, ADVOCATE FORSRI. G.V. ASHOK, ADVOCATE OF FACTUM LAW) AND: 1.ASST. COMMISSIONBR OF INCOME TAXCIRCLE-2(1), BENGALURU FLOOR, HMT BHAVAN|NO.59, BELLARY ROADBENGALURU-560032 2. COMMISSIONER OF INCOME TAX-2. BENGALURU, 4 FLOOR,HMT BHAVAN, NO.S3QY,BELLARY ROAD BENGALURU-560032| —. RESPONDENTS. (BY SRI. K.V. ARAVIND, ADVOCATE) THIS APPEAL IS FILED UNDER SECTION 260-A OF.INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED|07.10.2016 PASSED IN ITA NO.1303/BANG/2015, FOR THEASSESSMENT YEAR 2013-2014 PRAYING TO FORMULATETHE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVEAND ALLOW THR APPBAL AND SET ASIDE THE ORDER OFTHE.INCOME.TAX|APPELLATETRIBUNAL|DATED|07.10.2016 BEARING IN ITA NO.1303/BANG/2015 FOR|THE ASSESSMENT YEAR 2013-14 AND BIC.| THIS APPEAL COMING ON FOR ADMISSION THIS.DAY,ARAVIND KUMARJayDELIVERED THE FOLLOWING :- JU DBiGMENT Assessee has preferred this appeal questioning the correctness and legality of the order dated 07.10.2016passed by Income Tax Appellate Tribunal, BangaloreBench ‘C’, Bangalore (for assessment year 2013-14)whereunder order passed by Commissioner of IncomeTax (Appeals)-13, Bangalore dated 14.08.2015 settingaside the levy of penalty of Rs.77,95,155/- came to bemodified by restricting the quantum of penalty toRs.20,95,973/-. ? On 29.07.2013, a survey came to be conductedunder Section 133A of Income Tax Act, 1961 (for short,‘tthe Act’) in the business premises of assessee and anorder under Section 201(1) of the Act came to be passedon 30.07.2013 enclosing therewith a demand notice. —On 02.08.2013, assessee paid the amount demandedunder the notice together with interest as requiredunder Section 201 (1) (A) of the Act. 3.Subsequently, proceedings under Section 221 ofthe Act came to be initiated by issuance of show causenotice to assessee. A reply came to be submitted by theappellant contending that lapse in remittance of amountcollected by way of TDS and retained by assessee wasout of acute liquidity crunch and not deliberate orintentional negligence. Said plea of the assessee did notfind favour with the Assessing Officer and as such, byorder dated 27.01.2014 (Annexure-B), plea of the assessee came to be rejected and levied a penalty ofRs.77,95,159/-.. 4Being aggrieved by said order, an appeal came tobe preferred by assessee before Commissioner of Income Tax (Appeals) in No.63/CIT(A)-13/2014-15, which foundfavour of the first Appellate Authority. Before the firstAppellate Authority, assessee reiterated the plea putforward before the Assessing Officer with regard tofinancial crunch and a finding of fact came to berecorded which is to the following effect: “9Q_It is also seen xxx on time.|Perusal of the appellant's submissionsalong with its balance sheet and otherfinancial statements show that it hadfaced genuine ffinancial difficultiesduring the said period.” 5.At this stage, it would be appropriate to noticethat Commissioner of Income Tax (Appeals) has notanalyzed and discussed or recorded a finding as to how 4Being aggrieved by said order, an appeal came tobe preferred by assessee before Commissioner of Income Tax (Appeals) in No.63/CIT(A)-13/2014-15, which foundfavour of the first Appellate Authority. Before the firstAppellate Authority, assessee reiterated the plea putforward before the Assessing Officer with regard tofinancial crunch and a finding of fact came to berecorded which is to the following effect: “9Q_It is also seen xxx on time.|Perusal of the appellant's submissionsalong with its balance sheet and otherfinancial statements show that it hadfaced genuine ffinancial difficultiesduring the said period.” 5.At this stage, it would be appropriate to noticethat Commissioner of Income Tax (Appeals) has notanalyzed and discussed or recorded a finding as to how the financial difficulty that was pleaded by the assesseewas proved by him, particularly, in the background ofAssessing Officer having recorded a finding of fact withregard to not only financial capacity of assessee but alsoassessee possessing surplus fund to the tune ofRs.7,89,/1,805/- for the year ending having beenrecorded. One another factor which swayed in the mindof Commissioner of Income Tax (Appeals) for settingaside the penalty levied is on the ground that assesseehad subsequently remitted TDS along with interestunder Section 221 (1)(A) of the Act @ 1.5% per monthand as such, Commissioner of Income Tax (Appeals) setaside the levy of penalty. 6.Revenue being aggrieved by said order preferredan appeal before the Income Tax Appellate Tribunal andtribunal while reversing the finding of Commissioner ofIncome Tax (Appeals) has extended olive branch to theaSSCSSEEby restrictingthe.levyot penaltyTO Rs.20,95,973/- in heu of Rs.77,95,15955/- which hadbeen levied by the Assessing Officer. Hence, thisappeal. T.We have heard Ms.Varsha Shetty, learned counselappearing for appellant-assessee and 9Sri.K.V.Aravind,learned Panel Counsel appearing for respondent. 8.Learned counsel appearing for assessee wouldcontend that when in the instant case assessee had|remitted the amount within four days from the date ofdemand notice issued, assessee cannot be considered orheld to be an assessee in default and as such, she.would submit that substantial question of law whichhas been formulated in the appeal memorandumrequires to be formulated, adjudicated and answered infavour of assessee. QOPer contra, learned Panel Counsel appearing forrespondent would submit that order passed by the tribunal reducing penalty itself is erroneous for whichrevenue would have preferred the appeal but for thequantum of revenue involved and since the extantcircular restricts the right of revenue to challenge thesame on the monetary restrictions placed for filingappeal same has not been filed by the revenue. Hewould also submit that plea now put forward by theassessee iS purely question of fact and there is noquestion of law involved to formulate, adjudicate andthat too for being answered in favour of the assessee. —Hence, he prays for dismissal of the appeal. 10,Having heard learned counsel appearing forparties and on perusal of record, we are of theconsidered view that appeal deserves to be dismissed atthe threshold for the reasons indicated herein below. 11.At the outset, it is requires to be noticed that onSurvey conducted on 29.07.2013 in the businesspremises of appellant, the factum of non-remittance of TDS, which assessee had collected or retained with it)had surfaced. It iS on account of such survey)conducted, proceedings under Section 201 (1)(A) of theAct was initiated and assessee in question was declaredas an assessee in default under Section 2O1 of the Act|by order dated 30.07.2013. Said order has reachedfinality or in other words undisputedly assessee has notChallenged the said order. 10,Having heard learned counsel appearing forparties and on perusal of record, we are of theconsidered view that appeal deserves to be dismissed atthe threshold for the reasons indicated herein below. 11.At the outset, it is requires to be noticed that onSurvey conducted on 29.07.2013 in the businesspremises of appellant, the factum of non-remittance of TDS, which assessee had collected or retained with it)had surfaced. It iS on account of such survey)conducted, proceedings under Section 201 (1)(A) of theAct was initiated and assessee in question was declaredas an assessee in default under Section 2O1 of the Act|by order dated 30.07.2013. Said order has reachedfinality or in other words undisputedly assessee has notChallenged the said order. 12)Pursuant to said order, demand was raised andimmediately within four days i1e., on 02.08.2013,assessee remitted the amount along with interest. It isthereafter the penalty proceedings came to be initiatedby issuing notice under Section 221 of the Act to theassessee. In the penalty proceedings, assessee admittedthat it was an assessee in default. However, a pleacame to be raised that within four days of the orderpassed under Section 201 of the Act, amount which was_required to be remitted along with interest had been remitted/paid and contended that delay of 15 months innot remitting the amount of tax to the tune of 2.09.crores which was relatable to salary deductions,contract payments, professional fee, etc., paid orpayable to parties during the year ending 31.01.2012had not been remitted or assessee had failed to remit|the said amount so deducted to the account of the!Central Government was due to financial crisis. Hence, |the only plea which was available to assessee in thepenalty proceedings is to explain the cause for delay. Itis in this background, Assessing Officer amongst severalquestions raised had called upon assessee to answerthree pertinent questions which has been noticed by theCommissioner of Income Tax (Appeals) in Paragraph 3.1.of the order and a plain reading of the same woulddisclose that during the financial year ending inquestion, assessee was possessing surplus funds ofRs.7,89,/1,805/-. That apart, assessee had made threepayments for purchase of sites, three payment for purchase of cars and as such, it was noticed that carswhich were purchased was in addition to the existingfour cars purchased in the earlier year and the reasonof business expediency raised or pleaded by assesseewas not suspectable as it was not in the proximity oftruth. This finding of fact which had been recorded bythe Assessing Officer when being set aside by the 1[,4]appellate authority the least that was expected fromCommissioner of Income Tax (Appeals) was to record afinding which would disprove said fact or in other words.reasons had to be assigned. This exercise having notbeen undertaken by Commissioner of Income Tax(Appeals) and by a cryptic order as noticed herein,finding of the Assessing Officer having been set aside,this has persuaded the tribunal to reverse the finding ofCommissioner of Income Tax (Appeals) and restore thefinding of the Assessing Officer in part viz., affirminglevy of penalty but reducing the quantum of penalty. —We find from the order of tribunal that the finding recorded by the tribunal to arrive at a conclusion isbased on sound appreciation of material available beforeit. In fact, a clear finding has been recorded by thetribunal that question of financial stringency pleaded byassessee was not proved. Even otherwise, it has beenheld that financial stringency would not justify the non-remittance of TDS to the Government, in as much as, it)would amount to utilization of money payable to theappropriate government. As such, by extending itsbenevolence, tribunal has directed the Assessing Officerto restrict the levy of penalty to a sum of Rs.20,559,973/-in substitution to Rs.77,95,155/- levied by Assessingofficer. This finding would not call for interference byus particularly when assessee having been declared asan assessee in default under Section 201 (1) of the Act.by order dated 30.07.2013 and said order having notbeen challenged by the assessee. For the reasons aforestated, we do not find any other good ground to entertain this appeal. Accordingly, without framing substantial question of law as pleaded by the assessee, appeal stands dismissed. Prs* Sd/-. JUDGE| Sd/-. JUDGE