Decided on February 11,1994



M.A. Bakshi, Manzoor Ahmed (Judicial Member) - (1.) THE dispute, in this appeal, of the revenue, which is directed against the order dated 8-12-1989 of CIT(A) � I, New Delhi is relating to cancellation of penalty of Rs. 6,48,045 imposed under Section 140A(3) of the Income-tax Act, 1961.
(2.) Briefly stating the facts the assessee-company filed its return of income for assessment year 1987-88 on 31st of July, 1987 declaring income of Rs. 5,89,14,251. However, self-assessment tax had not been paid before filing of the return. The assessee paid the self-assessment tax on the basis of the return only on 12-9-1987. Assessing Officer issued a notice to the assessee as to why penalty under Section 140A(3) may not be imposed for non-payment of tax on the basis of the return as per Section 140A. Assessee furnished written reply, which is reproduced hereunder: (1) There is no default in terms of Section 140A(1) & (3) because the assessee did not have the requisite funds which were remitted to India on 11-9-1987. (2) The levy of penalty is not automatic and an opportunity of being heard should be granted. (3) As the Co. was not is possession of funds on 31-7-1987 and the remittance was made only on 9-9-1987 the payment could not have been made before 10-9-1987. The assessee has sought to place reliance on a decision of the Hon'ble Delhi High Court in 137 ITR, p. 378.... The Assessing Officer rejected the claim of the assessee on the ground that the entire amount of consultancy fees had been received by the assessee-company in London from M/s. Sumitomo Sheti Kaisha Ltd. Corporation, Tokyo, Japan. According to the Assessing Officer, the amount being available to the assessee in London, the assessee should have repatriated the said amount in time so that payment under Section 140A could be made. The Assessing Officer observed that the funds were under the control of the assessee-company and as and when the assessee decided to repatriate the funds, the same were brought into India. It was, accordingly, held that the assessee cannot take advantage of scarcity of liquid funds and as such, the assessee was held to be liable to penalty, under Section 140(3).
(3.) THE learned CIT(A) has considered the explanation of the assessee that as per the agreement and the decision of the Foreign Exchange Regulation Appellate Board, the assessee became lawful owner of the amount only in August 1987 and the money could not have been repatriated by the assessee before becoming the lawful owner of it by virtue of an agreement. Reliance has been placed on the decision of the Delhi High Court in the case of Addl. CITv. Freewheels IndiaLtd. [1982] 137ITR378, 386 where it has been held that in the case of non-payment of self-assessment tax due to financial difficulties, the penalty under Section 140A(3) was not justified, to delete the penalty.;

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