PERUVAYAL SERVICE CO-OPERATIVE BANK LTD. V. ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX /INCOME TAX OFFICER

WP(C)/15861/2022

AI Insights

The case involves M/s. Peruvayal Service Co-operative Bank Ltd., which challenged an order imposing a penalty of Rs. 54 lakhs for alleged underreporting of income in their tax return. The petitioner argued that the penalty was unjustified as there was no tax liability post-assessment and claimed that the error was technical. The respondent, represented by the Income Tax Department, contended that the petitioner had an effective alternative remedy through an appeal and that the penalty was within jurisdiction. The court found merit in the petitioner's argument regarding the absence of tax liability and directed that the penalty order be kept in abeyance pending the decision on the stay petition in the appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 751310 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 24-06-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: T M SREEDHARAN; V P NARAYANAN; ALAN DEV
• Keywords: Appeal; Penalty; Stay Petition; Tax liability; Technical error; Underreporting of income
• Section: 270A

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. FRIDAY, THE 24TH DAY OF JUNE 2022 / 3RD ASHADHA, 1944 WP(C) NO. 15861 OF 2022 PETITIONER: M/S.PERUVAYAL SERVICE CO-OPERATIVE BANK LTD., PERUVAYAL POST, KOZHIKODE - 673 008, REPRESENTED BY ITS SECRETARY. BY ADVS. T.M.SREEDHARAN (SR.) V.P.NARAYANAN ALAN PRIYADARSHI DEV RESPONDENT: THE ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX /INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, INCOME TAX DEPARTMENT, MINISTRY OF FINANCE, ROOM NO.401, 2ND FLOOR, E-RAMP, JAWAHARLAL STADIUM, DELHI - 110 003. SRI. CHRISTOPHER ABRAHAM (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24.06.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 15861 OF 2022 2 JUDGMENT The petitioner has approached this Court challenging Ext.P2 order imposing penalty under Section 270A of the Income Tax Act. 2. The learned counsel appearing for the petitioner submits that Ext.P2 order is absolutely illegal and unsustainable in law. It is submitted that for a technical error committed by the assessee while furnishing its return of income, a huge penalty of Rs.54 lakhs has been imposed by Ext.P2 order. It is submitted that following the completion of assessment, there is no tax liability in so far as the petitioner / assessee is concerned. It is submitted that in such circumstances, there was no under reporting of income as alleged and a huge penalty of Rs.54 lakhs ought not to have been imposed especially considering the fact that the provisions of Section 270A of the Income Tax Act does not provide for a mandatory penalty. The learned counsel for the petitioner further points out that going by the provisions of sub-section (6) of Section 270A of the Income Tax Act, since there was no suppression or underreporting of any income by the petitioner and all materials were placed before the Assessing Officer, the petitioner could not have been mulcted with any liability. WP(C) NO. 15861 OF 2022 3 3. The learned Standing Counsel appearing for the respondent submits that the petitioner has an effective alternative remedy by way of appeal and there are no special circumstances, which will enable the petitioner to approach this court directly under Section Article 226 of the Constitution of India. It is pointed out that even if the contention of the petitioner is accepted, the authority is acted within its jurisdiction and the quantum of penalty by itself cannot be a reason for this Court to interfere under Article 226 of the Constitution of India, especially when there is an effective alternative remedy as far as the petitioner is concerned. 4. Having heard the learned counsel for the petitioner and the learned Standing counsel for the respondent, I am of the opinion that the petitioner can be relegated to the remedy of appeal. I find that the Standing Counsel for the Department is right in contending that there is no jurisdictional error warranting interference with Ext.P2 order of penalty directly in exercise of jurisdiction under Article 226 of the Constitution of India. However, taking note of the fact that there was no tax liability after assessment and the petitioner is a society running at a loss, I am of the opinion that Ext.P2 order can be directed to be kept in abeyance till a decision is taken on the stay petition in the appeal to be filed by the petitioner. Accordingly, this writ petition will WP(C) NO. 15861 OF 2022 4 stand disposed of directing that if the petitioner files an appeal against Ext.P2 order along with an application for stay within three weeks from the date of receipt of a certified copy of this judgment, the stay petition shall be considered and decided on merits by the appellate authority after affording an opportunity of hearing to the petitioner. The period during which this writ petition was pending before this Court shall be excluded for the purpose of computing any period of limitation for filing the appeal. The appellate authority shall dispose of the stay petition having due regard to the provisions of sub-section (6) of Section 270A of the Income Tax Act. Till a decision is taken on the application for stay, all coercive steps to recover the amount in Ext.P2 shall be kept in abeyance. Sd/- GOPINATH P. JUDGE DK WP(C) NO. 15861 OF 2022 5 APPENDIX OF WP(C) 15861/2022 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 15.2.2021 PASSED BY THE RESPONDENT FOR AY-2018-19. Exhibit P2 TRUE COPY OF THE ORDER IMPOSING PENALTY U/S 270A OF THE INCOME TAX ACT 1961, DATED 04.02.2022 PASSED BY THE RESPONDENT FOR THE AY 2018-19. Exhibit P3 TRUE COPY OF THE PROCEEDINGS OF THE INCOME TAX OFFICER, WARD 2 (3) KOZHIKODE FOR THE ASSESSMENT YEAR 2007-08 Exhibit P4 TRUE COPY OF THE PROCEEDINGS OF INCOME TAX OFFICER, WARD 2 (3), KOZHIKODE FOR ASSESSMENT YEAR 2008-09 Exhibit P5 TRUE COPY OF THE PROCEEDINGS OF INCOME TAX OFFICER, WARD 2 (3), KOZHIKODE FOR THE ASSESSMENT YEAR 2009-10 Exhibit P6 TRUE COPY OF THE PROCEEDINGS OF THE INCOME TAX OFFICER, WARD 2 (3), KOZHIKODE FOR THE ASSESSMENT YEAR 2012-13 Exhibit P7 TRUE COPY OF THE APPELLATE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS), KOZHIKODE DATED 07/09/2017 FOR THE ASSESSMENT YEAR 2013-14 "