ANTONY SUNNY V. THE JOINT COMMISSIONER OF INCOME TAX

WP(C)/1106/2018

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The case involves Antony Sunny, a businessman and assessee under the Income Tax Act, who faced penalties under Sections 271D and 271E for accepting and repaying loans in cash, which were deemed in contravention of Sections 269SS and 269T respectively. The penalties were imposed following a revised assessment of his taxable income for the year 2014-15. Antony challenged the penalties in an appeal, seeking a stay on their enforcement. The Appellate Authority granted a conditional stay, requiring payment of 15% of the penalty. Dissatisfied with this condition, Antony approached the High Court, which modified the stay conditions to reduce the immediate financial impact on his business.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 755363 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 23-01-2018
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Sunil Kumar Goel [(2009) 315 ITR 163 (P&H)]
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: V K SHAMSUDHEEN
• Assessee Lawyers: K SRIKUMAR; K CHANDRAN; P R AJITHKUMAR
• Keywords: Conditional stay; Income Tax; Penalty; Personal Advances; Business Impact
• Section: 143(3); 271D; 273B; 271E; 269SS; 269T

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR TUESDAY, THE 23RD DAY OF JANUARY 2018 / 3RD MAGHA, 1939 WP(C).No. 1106 of 2018 PETITIONER ANTONY SUNNY VELLARA HOUSE, CONVENT ROAD, VADAKKEKAD, NHAMANGHAT P.O., THRISSUR-679 563. BY ADVS.SRI.K.SRIKUMAR (SR.) SRI.K.MANOJ CHANDRAN SRI.P.R.AJITHKUMAR RESPONDENTS: 1. THE JOINT COMMISSIONER OF INCOME TAX RANGE-1, THRISSUR, DEPARTMENT OF INCOME TAXES, AAYAKAR BHAVAN, SAKTHAN THAMPURAN NAGAR, THRISSUR-680 001. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) 3RD FLOOR, AAYAKAR BHAVAN, THRISSUR-680 001. BY GOVERNMENT PLEADER:SRI.V.K.SHAMSUDHEEN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23-01-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 1106 of 2018 (K) APPENDIX PETITIONER'S EXHIBITS EXHIBIT P1 TRUE COPY OF THE PENALTY ORDER DATED 16-12-2016 EXHIBIT P2 TRUE COPY OF THE PENALTY ORDER DATED 16-12-2016 PASSED U/S. 271E OF THE INCOME TAX ACT. EXHIBIT P3 TRUE COPY OF THE APPEAL DATED 27.02.2017 EXHIBIT P4 TRUE COPY OF THE OFFICE MEMORANDUM F.NO. 404/72/ITCC DATED 29-01-2016 EXHIBIT P5 TRUE COPY OF THE JUDGMENT DATED 12-04-2017 IN WPC NO. 13364/2017 EXHIBIT P6 TRUE COPY OF THE STAY PETITION DATED 02-05-2017. EXHIBIT P6(a) TRUE COPY OF THE STAY PETITION DATED 02-05-2017 EXHIBIT P7 TRUE COPY OF THE STAY ORDER DATED 22-12-2017 IN APPEAL NO. ITA-1271/2016-17. EXHIBIT P7(a) TRUE COPY OF THE STAY ORDER DATED 22-12-2017 IN APPEAL NO. ITA 1341/2016-17. RESPONDENT'S EXHIBITS:NIL //TRUE COPY// PA TO JUDGE rsr P.B.SURESH KUMAR, J. -------------------------------------------- W.P.(C).No.1106 of 2018 --------------------------------------------------------------- Dated this the 23rd day of January, 2018 JUDGMENT Petitioner is a business man. He is an assessee under the Income T ax Act (the Act) on the rolls of the first respondent. For the assessment year 2014-15, the petitioner filed returns under the Act disclosing a taxable income of Rs.12,69,781/-. The self assessment made by the petitioner for the said year was revised on scrutiny under Section 143(3) of the Act determining his taxable income at Rs.19,63,260/- and raising an additional demand for Rs.2,87,610/- towards tax. The said assessment was without prejudice to the proceedings for imposition of penalties under the Act. It is conceded by the petitioner that he has introduced during the relevant W.P.(c).No.1106 of 2018 : 2 : year a sum of Rs.45,79,790/- received by him from his father and a sum of Rs.1,92,29,855/- received by him from his mother as capital in his business. Further, it is also conceded by the petitioner that during the very same year, he has also repaid in cash a loan of Rs.2,50,000/- received earlier by him from his mother. The parents of the petitioner have also confirmed the said personal advances made to the petitioner. The assessment of the petitioner has been revised having regard to the said transactions as well. It is seen that after the revision of the assessment, petitioner was imposed penalty under Section 271D as also under Section 271E of the Act. Exts.P1 and P2 are the orders imposing penalty on the petitioner under the said provisions. As per Ext.P1 order, the petitioner was imposed a penalty of Rs.2,38,09,645/- on the ground that the advances amounting to Rs.2,38,09,645/- received by him from his parents during the relevant year was in contravention of the provisions contained in Section 269SS of the Act. As per Ext.P2 order, the petitioner was imposed a penalty of Rs.2,50,000/- on the W.P.(c).No.1106 of 2018 : 3 : ground that the repayment of the loan of RS.2,50,000/- made to him by his mother during the relevant year was in contravention of the provisions contained in Section 269T of the Act. Petitioner challenged Exts.P1 and P2 orders in appeal before the second respondent. In the said appeal, petitioner preferred applications for stay of enforcement of the impugned orders pending disposal of the appeals. The applications for stay preferred by the petitioner in the appeals have now been disposed of by the Appellate Authority in terms of Exts.P7 and P7(a) orders. As per the said orders, the Appellate Authority stayed the enforcement of the impugned orders to the extent of 85% subject to the condition that the petitioner shall pay the remaining 15% in two equal monthly instalments. Exts.P7 and P7(a) orders are under challenge in the writ petition. 2. Heard the learned Senior Counsel for the petitioner as also the learned Standing Counsel for the respondents. 3. The learned Senior Counsel for the petitioner W.P.(c).No.1106 of 2018 : 4 : has not addressed any argument as regards Ext.P7(a) order granting conditional stay of enforcement of Ext.P2 order. 4. Section 271D of the Act provides that if a person takes or accepts any loan or deposit or a specified sum in contravention of the provisions of Section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. Section 273B of the Act provides that notwithstanding anything contained in the provisions of Section 271D, no penalty shall be imposable on the person or the assessee as the case may be, for failure referred to in Section 271D, if he proves that there was reasonable cause for the said failure. The learned Senior Counsel for the petitioner, relying on the provisions contained in Section 273B of the Act, vehemently contended that one of the contentions raised by the petitioner in the appeal challenging Ext.P1 order is that there was reasonable cause for receiving the personal advances made to him by his parents, and if the said contention is accepted by the W.P.(c).No.1106 of 2018 : 5 : Appellate Authority, Ext.P1 order would be interfered with. According to the learned Senior Counsel, in so far as the income earned by the petitioner during the relevant year, even according to the Department, being only Rs.19,63,260/- and since the petitioner has paid already almost 30% of the same towards the tax, the condition imposed in terms of Ext.P7 order directing the petitioner to pay 15% of the penalty amounting to Rs.35,71,446/- is not only onerous but would ruin the business of the petitioner by the time the appeal is heard. The learned Senior Counsel for the petitioner also contended, relying on the Division Bench decision of the Punjab and Haryana High Court in Commissioner of Income Tax v. Sunil Kumar Goel [(2009) 315 ITR 163 (P&H)] that bonafide belief coupled with genuineness of the transactions would constitute reasonable cause under Section 273B of the Act and in so far as the genuineness of the transactions and the bonafides of the petitioner are not doubted in the order impugned in the appeal, the appellate authority ought not have imposed the W.P.(c).No.1106 of 2018 : 6 : aforesaid onerous condition while granting the stay sought for by the petitioner. 5. Per contra, the learned Standing Counsel for the respondents vehemently contended that only impossible situations for compliance of the provision contained in Section 269SS would constitute \"reasonable cause\" within the meaning of Section 273B of the Act. 6. Having regard to the facts and circumstances of the case, I am of the view that it would be inappropriate for this Court to consider the question as to whether the petitioner has made out a reasonable cause falling within the scope of Section 273B of the Act for non-compliance of the provisions contained in Section 266SS in respect of the transactions involved in this case, as the same is an issue primarily to be considered by the Appellate Authority in the appeals preferred by the petitioner. But at the same time, it is seen that the income earned by the petitioner during the relevant year, even going by the assessment made by the Department, is only approximately Rs.20,00,000/-, of which W.P.(c).No.1106 of 2018 : 7 : it is conceded that he has paid around Rs.5,00,000/- towards tax. It is conceded by the learned Senior Counsel that the petitioner has earned income on almost same lines for the years preceding and after the relevant year as well. It is beyond dispute that if the petitioner does not remit the 15% of the amount directed to be paid, the benefit of the interim order will not be available to him. At the same time, if he is compelled to pay such a huge amount, there is force in the contention that the same will have an adverse impact on his business. In the circumstances, I deem it appropriate to modify Ext.P7 order granting stay for 95% of the demand covered by Ext.P1 order, on condition that he shall pay the remaining 5% in two instalments, the first of which shall be paid on or before 01/02/2018 and the second instalment before, 01/03/2018. Ordered accordingly. Sd/- P.B.SURESH KUMAR JUDGE rsr "