CIT-II, AMRITSAR V. M/S GREAT VALUE FOOD, NHRU SHPNG COMPLX. AMRTSR

ITA/283/2009

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax II, Amritsar, challenging the decision of the Income Tax Appellate Tribunal, Amritsar, which had deleted a penalty imposed on M/s Great Value Food for non-payment of tax and interest. The primary legal contention was whether the Tribunal erred in law and on facts in deleting the penalty without appreciating the provisions of section 140A(3) of the Income Tax Act, 1961, which pertains to the default in payment of tax or interest. The Tribunal's decision was based on the interpretation that the penalty under section 221(1) is applicable only in cases of default in tax payment, not interest, a view supported by precedents from the Calcutta and Bombay High Courts.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 720557 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 29-10-2013
• Assessment Year: misc
• Other Referred Cases: E.K.Varghese and another v. Income Tax Officer and others, Shreeniwas & Sons v. I.T.O., CIT v. P.B.Hathiramani
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AMAN BANSAL
• Assessee Lawyers: DINESH GOYAL
• Keywords: Amritsar; Assessment Year; Default; Income tax appellate tribunal; Interest payment; Penalty; Tax payment
• Section: 154; 143(1); 234B; 260A; 234C; 221; 140A(3)

Judgement Text

"ITA No.283 of 2009 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.283 of 2009 (O&M) Date of decision: 29.10.2013 Commissioner of Income Tax II, Amritsar …Appellant Vs. M/s Great Value Food, 93-Ground Floor, Nehru Shopping Complex, Amritsar. …Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Dinesh Goyal, Advocate for the revenue. Mr. Aman Bansal, Advocate for the assessee. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 8.10.2008, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.16/ASR/2008, for the assessment year 2004-05, claiming following substantial questions of law:- “a) Whether the Hon’ble ITAT Amritsar Bench, Armitsar erred in law and on facts in deleting the penalty of ` 11,50,000/- imposed by the Assessing Officer under section 221 of the IT Act, 1961 and duly confirmed by the learned CIT(A), without appreciating the fact that the assessee was treated in default under section 140A(3) of the IT Act, 1961 for non payment of tax due on returned income which also includes interest payment under section 234B and 2334C of the IT Act, 1961? Singh Gurbax 2013.11.19 10:05 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.283 of 2009 (O&M) 2 b) Whether the ITAT erred both in law and on fact in not correctly appreciating the provisions of Section 140A(3) of the IT Act, 1961 which clearly states that for default of whole or any part of tax or interest or both under section 140A(1) of the IT Act, 1961 which remain unpaid, all the provisions of this Act shall apply accordingly which also includes section 221 of the IT Act, 1961 under which penalty was imposed? c) Whether the ITAT erred in law and on fact in deleting the penalty amount of ` 11,50,000/- without considering the explanation 1 to section 140A(3) of the ITR Act, 1961 which clearly stipulates that where the amount paid by the assessee falls short of tax and interest, the amount of tax so paid shall be adjusted towards interest payable and the balance towards the tax payable?” 2. Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal, may be noticed. The assessee firm filed its return of income for the assessment year 2004-05 on 31.10.2004 showing total income of ` 3,33,29,720/-. There was a note given in the return that interest under sections 234B and 234C of the Act was liable to be waived. It was also stated that the assessee being new firm who started its business in the middle of February 2004 could not estimate its income. The return was processed under section 143(1) of the Act on 17.3.2006 and a demand of ` 13,51,857/- was raised. Later on, the assessee moved rectification application under section 154 of the Act and the order under Section 154 of the Act was passed by the Assessing Officer on 26.6.2006 creating rectified demand of ` 11,54,400/-. Since the assessee firm failed to pay the tax of ` 11,54,400/- under Section 140A(1) of the Act before filing the return of Singh Gurbax 2013.11.19 10:05 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.283 of 2009 (O&M) 3 income, it was treated as an assessee in default and penalty of `11,50,000/- was imposed under section 221(1) of the Act vide order dated 8.6.2007, Annexure A.1. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 20.11.2007, Annexure A.2, the appeal was dismissed and the penalty of ` 11,50,000/- was confirmed. Still not satisfied, the assessee filed appeal before the Tribunal. Vide order dated 8.10.2008, Annexure A.3, the Tribunal allowed the appeal and deleted the penalty. Hence the present appeal by the revenue. 3. Learned counsel for the revenue submitted that the Tribunal was in error in deleting the penalty imposed under section 221(1) of the Act as the assessee had failed to deposit the interest under sections 234B and 234C of the Act. According to the learned counsel, the payment was made on 28.6.2006 for the assessment year 2004-05 and therefore, the Assessing Officer and the CIT(A) had rightly imposed the penalty on the assessee. Support was drawn from judgment of the Kerala High Court in E.K.Varghese and another v. Income Tax Officer and others, (1974) 96 ITR 577. 4. Controverting the submissions made by learned counsel for the revenue, learned counsel for the assessee relied upon judgments in Shreeniwas & Sons v. I.T.O., (1974) 96 ITR 562 (Calcutta) and CIT v. P.B.Hathiramani, (1994) 207 ITR 483 (Bombay) to submit that no penalty under Section 221(1) of the Act could be levied where there was default in making the payment of interest. According to the aforesaid provision, where there was default in deposit of tax, only then penalty was leviable. Singh Gurbax 2013.11.19 10:05 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.283 of 2009 (O&M) 4 Reference was also made to CBDT circular/notification dated 23.5.1996 issued under Section 119(2) (a) of the Act to contend that even the interest levied under Sections 234B and 234C of the Act were liable to be waived for which an application was pending with the Chief Commissioner of Income Tax. 5. After hearing learned counsel for the parties, we do not find any merit in the appeal. 6. The relevant portion of Section 221(1) of the Act reads thus:- “221(1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub section (2) of section 220, be liable, by way of penalty, to pay such amount as the Assessing Officer may direct and in the case of continuing default, such further amount or amounts as the Assessing Officer may, from time to time, direct, so however, that the total amount of penalty does not exceed the amount of tax in arrears.” 7. According to the aforesaid provision, wherever there is default in deposit of the tax, the assessee in addition to the amount of arrears and the amount of interest payable under section 220, is liable for penalty which shall not exceed the amount of tax in arrears. 8. 'Tax' has been defined in Section 2(43) of the Act, as under:- “2(43) 'tax' in relation to the assessment year commending on the Ist day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income tax and Singh Gurbax 2013.11.19 10:05 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.283 of 2009 (O&M) 5 super-tax chargeable under the provisions of this Act prior to the aforesaid date.” The tax, penalty and interest are different concepts under the Act. The definition of 'tax' under Section 2(43) of the Act does not include penalty or interest. Similar view was taken by the Calcutta High Court in Shreeniwas & Sons's case (supra) wherein it was noticed that interest cannot be held to be 'additional tax'. 9. The Bombay High Court in P.B.Hathiramani's case (supra), applying the principles as laid down in Shreeniwas & Sons's case (supra) interpreted the provisions of section 221(1) with section 2(43) of the Act as under:- “4. A bare reading of this provision shows that penalty under section 221 is leviable only when the assessee is in default or is deemed to be in default to making a payment of \"tax\". The expression \"tax\" has been defined in section 2 (43) of the Act as under : \"2. In this Act, unless the context otherwise requires - (43) 'tax' in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date :\" Reading the two provisions together, it is clear that, unless the assessee is or is deemed to be in default in making a payment of \"tax\", as defined in section 2(43) of the Act, which means that he is in default or in deemed default in payment of income-tax chargeable under the provisions of the Act or super-tax chargeable under the provisions of the Singh Gurbax 2013.11.19 10:05 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.283 of 2009 (O&M) 6 Act, depending upon the assessment year in question, there could be no levy of penalty under section 221(1).” 10. Adverting to the judgment in E.K.Varghese's case (supra) relied upon by learned counsel for the revenue, the issue before the Court therein was whether advance tax was to be characterised as tax or not. It was held that advance tax would fall within the ambit of tax. The position in the present case is different as it relates to interest and not advance tax and, therefore, no benefit can be derived by the revenue from the aforesaid pronouncement. 11. In view of the above, the substantial questions of law are answered accordingly and finding no merit in the appeal, the same is hereby dismissed. (Ajay Kumar Mittal) Judge October 29, 2013 (Jaspal Singh) ‘gs’ Judge Singh Gurbax 2013.11.19 10:05 I attest to the accuracy and integrity of this document High Court Chandigarh "