Decided on February 22,2008



M.A. Bakshi, Vice President - (1.) THE Revenue is in appeal against the decision of the CIT(A)-II, Dehradun dt. 12th May, 2005 by virtue of which penalty of Rs. 21 lakhs imposed under Section 221 of the IT Act, 1961 has been cancelled.
(2.) We have heard the parties and perused the records. Relevant facts briefly stated are that the assessee had filed a return of income for the asst. yr. 2000-01 on 31st Oct., 2000 declaring an income of Rs. 76,73,190 from the real estate business The assessee had paid self-assessment tax of only Rs. 7,50,000. The return was processed under Section 143(1) on 22nd Jan., 2001 and demand of Rs. 30,52,501 created (tax plus surcharge of Rs. 25,32,153 with interest under Section 234B at Rs. 3,79,815 and under Section 234C at Rs. 1,40,533). The assessee was unable to pay the aggregate demand. The sum of Rs. 7,50,000 had been paid by the assessee earlier leaving balance demand of Rs. 23,02,501 as outstanding. A request had been made to the AO for granting instalments. The assessee had made the payments of Rs. 23,00,000 from 16th Nov., 2000 to 4th March, 2002 as per the details contained in para 2 of the CIT(A)'s order. The AO initiated penalty proceedings under Section 222(1) and issued a show-cause notice dt. 10th May, 2002 asking the assessee to explain as to why penalty under Section 222(1) may not be imposed for the delay in payment of taxes. Written explanation was submitted by the assessee but the AO was not satisfied with the same. The assessee was accordingly held to be guilty of having defaulted in the payment of taxes and accordingly liable to penalty under Section 221 of the Act. A penalty of Rs. 21 lakhs was imposed. The CIT(A) has in the impugned order pointed out that the entire demand along with interest had been paid by the assessee by 4th March, 2002 and that the AO had issued a notice for imposition of penalty only after the entire demand was paid by the assessee. The CIT(A) has further referred to the explanation of the assessee for the delay in making the payments. It is further been pointed out that the AO vide order sheet entry dt. 21st Jan., 2002 had noted as under: Shri Avdesh Kumar Parvinder S. Kochar appeared. He has been asked to pay Rs. 6 lakhs by 30th Jan., 2002 and the balance by 15th Feb., 2002. It has also been pointed out by the CIT(A) that the assessee has paid a sum of Rs. 6 lakhs on 25th Jan., 2002 and the balance demand of Rs. 5 lakhs was paid on 4th March, 2002. The CIT(A) has also referred to the CBDT Circular No. 20(LXXXVI)-D of 1964 dt. 7th July, 1964 which contains a reference to the speech of the Finance Minister assuring the House that instructions will be issued to officers that wherever it is justifiable, no penalty should be imposed. The CIT(A) has, after taking into account financial difficulties of the assessee in making the payment, the time extended by the ITO for making the payments, the circular of the Board and various judicial decisions held that it was not a fit case for imposition of penalty under Section 221. The CIT(A) has further made reference to various other cases where the AO has not imposed penalty under similar circumstances. The CIT(A) has also pointed out that this is perhaps a first case where the AO has imposed a penalty of Rs. 21 lakhs which in this case is equivalent to 100 per cent of the demand in respect of which there was delay in payment. According to the CIT(A), the AO has erred in imposing the penalty. He has accordingly deleted the penalty against which the Revenue is in appeal before us.
(3.) THE learned Departmental Representative contended before us that there was admitted default in making the payments and therefore the assessee was liable to penalty under Section 221 of the Act. THEre was no stay granted by the AO for the payment of the disputed demand. THE explanation furnished by the assessee for the delay in making the payments was not satisfactory. THErefore, the penalty was rightly imposed by the AO. It was accordingly pleaded that the order of the CIT(A) may be set aside and that of the AO restored.;

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