THE COMMISSIONER OF INCOME TAX V. M/S PURE DRINKS LTD

ITR/1720/1995

AI Insights

The case revolves around the penalties imposed on Pure Drinks (New Delhi) Ltd. for non-payment of self-assessment tax for the assessment years 1982-83 and 1983-84. The penalties were initially imposed by the Inspecting Assistant Commissioner due to non-payment of tax, citing the assessee's lack of funds as insufficient justification. However, the Tribunal later found that the penalties should be cancelled from 01.11.1984 onwards, considering the severe financial impact on the assessee due to property damage from riots following the assassination of Mrs. Indira Gandhi. The High Court's decision affirmed the Tribunal's ruling, emphasizing the extraordinary circumstances that justified the cancellation of penalties.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 677934 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 29-04-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AKSHAY BHAN; AALOK MITTAL
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Income Tax; Insurance Claim; Penalty; Self-assessment tax; Liquidity of funds; Riots; Property damage
• Section: 256(1); 140A(1); 140A(3)

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 29.04.2013 ITR No.17 to 20 of 1995 The Commissioner of Income Tax, Patiala ....Appellant Versus Pure Drinks (New Delhi) Ltd., New Delhi ...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Ms. Savita Saxena, Advocate, for the appellant. M/s Akshay Bhan & Aalok Mittal, Advocates, for the respondent. HEMANT GUPTA, J. Present reference under Section 256(1) of the Income Tax Act, 1961 (for short ‘the Act’) arises out of an order passed by the Income Tax Appellate Tribunal (for short ‘the Tribunal’) on 14.07.1993 referring the following substantial question of law pertaining to the assessment years 1982-83 and 1983-84: “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in cancelling the penalty levied under Section 140A(3) of the Act, for the period from 01.11.1984 onwards on the basis of the assessee’s letter dated 22/25.03.1985 being an extraneous piece of evidence in proceedings under Section 140A(1) of the Income Tax Act, 1961?” Kumar Vimal 2013.05.09 10:59 I attest to the accuracy and integrity of this document Chandigarh ITR No.17 to 20 of 1995 2 The assessee, a dealer in soft drinks, filed returns for the Assessment Years 1982-83 and 1983-84 on 15.01.1983 and 20.01.1984 declaring income of Rs.1,03,71,037/- and Rs.2,22,68,800/- respectively. The assessee was liable to pay self-assessment tax in terms of Section 140A(1) of the Act, but the same was not paid. Therefore, penalty proceedings were initiated under Section 140A(3) of the Act. The assessee submitted explanation for not paying tax, which was non-availability of funds. The Inspecting Assistant Commissioner imposed penalty of Rs.15,63,458/- and Rs.39,12,544/- for the Assessment Years 1982-83 and 1983-84 respectively. The appeals against the orders of penalty were dismissed by the Commissioner of Income Tax (Appeals), but the Tribunal in further appeals partly allowed the appeals filed by the assessee and cancelled the penalty for the period from 01.11.1984 onwards for both the years. In view of the said fact, the above question of law was referred for the opinion of this Court. The Tribunal has returned a finding that though the stand of the assessee was lack of liquidity of funds, but in view of communication dated 22/25.03.1985 that the factory premises of the assessee situated at Najafgarh Road and Okhla Industrial Area were substantially destroyed by a mob, when such mob forced their entry into the factory premises and burnt and damaged the trucks parked inside and set on fire the furniture and factory. The Tribunal recorded a finding that the assessee has been given very nominal payment of insurance claim and that such amount had to be immediately invested in the repairs and maintenance of the plants and buildings and purchase of shells besides the basic raw materials. Therefore the orders of penalty were quashed w.e.f. 01.11.1984 onwards. Kumar Vimal 2013.05.09 10:59 I attest to the accuracy and integrity of this document Chandigarh ITR No.17 to 20 of 1995 3 Though the Tribunal has taken into consideration the assessee’s letter dated 22/25.03.1985 in respect of damages to the property for the first time in appeal before it, but the fact remains that such fact is uncontroverted by the Revenue. It is also matter of common knowledge that the assassination of Mrs. Indira Gandhi on 31.10.1984 led to wide spread riots in National Capital Region of Delhi, wherein the property of a particular community was extensively damaged. Therefore, the order of deletion of penalties after 01.11.1984 onwards is fair and reasonable keeping in view the unfortunate circumstances, which led the assessee to suffer extensive damage. Consequently, in respect of question of law, we find that the communication dated 22/25.03.1985 has been rightly taken into consideration by the Tribunal to delete the order of penalty after 01.11.1984. Accordingly, the question of law is answered in affirmative i.e. against the Revenue and in favour of the assessee. (HEMANT GUPTA) JUDGE 29.04.2013 (RITU BAHRI) Vimal JUDGE Kumar Vimal 2013.05.09 10:59 I attest to the accuracy and integrity of this document Chandigarh "