Financial Crunch is no reason of Non-Remittance of TDS amount to Govt -Karnataka HC

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Relevant extract of Judgement is as follows :

12. Pursuant to said order, demand was raised and immediately within four days i.e., on 02.08.2013, assessee remitted the amount along with interest. It is thereafter the penalty proceedings came to be initiated by issuing notice under Section 221 of the Act to the assessee. In the penalty proceedings, assessee admitted that it was an assessee in default. However, a plea came to be raised that within four days of the order passed 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 in not remitting the amount of tax to the tune of 2.05 crores which was relatable to salary deductions, contract payments, professional fee, etc., paid or payable to parties during the year ending 31.01.2012 had 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 the penalty proceedings is to explain the cause for delay. It is in this background, Assessing Officer amongst several questions raised had called upon assessee to answer three pertinent questions which has been noticed by the Commissioner of Income Tax (Appeals) in Paragraph 3.1 of the order and a plain reading of the same would disclose that during the financial year ending in question, assessee was possessing surplus funds of Rs.7,85,71,805/-. That apart, assessee had made three payments for purchase of sites, three payment for purchase of cars and as such, it was noticed that cars which were purchased was in addition to the existing four cars purchased in the earlier year and the reason of business expediency raised or pleaded by assessee was not suspectable as it was not in the proximity of truth. This finding of fact which had been recorded by the Assessing Officer when being set aside by the 1st appellate authority the least that was expected from Commissioner of Income Tax (Appeals) was to record a finding which would disprove said fact or in other words reasons had to be assigned. This exercise having not been 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 of Commissioner of Income Tax (Appeals) and restore the finding of the Assessing Officer in part viz., affirming levy 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 is based on sound appreciation of material available before it. In fact, a clear finding has been recorded by the tribunal that question of financial stringency pleaded by assessee was not proved. Even otherwise, it has been held 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 the appropriate government. As such, by extending its benevolence, tribunal has directed the Assessing Officer to restrict the levy of penalty to a sum of Rs.20,55,573/- in substitution to Rs.77,95,155/- levied by Assessing officer. This finding would not call for interference by us particularly when assessee having been declared as an assessee in default under Section 201 (1) of the Act by order dated 30.07.2013 and said order having not been challenged by the assessee.

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