THE PANNIYANKARA SERVICE CO-OPERATIVE BANK V. JOINT COMMISSIONER OF INCOME TAX

WP(C)/2736/2019

AI Insights

The case involves the Panniyankara Service Co-operative Bank, which challenged the orders of the First Appellate Authority that required them to deposit Rs. 2.5 crores as a condition for staying the recovery of penalties imposed for accepting cash deposits exceeding Rs. 20,000, in violation of Sections 269SS and 269T of the Income Tax Act. The penalties were substantial, amounting to approximately Rs. 48 crores and Rs. 44 crores under Sections 271D and 271E respectively. The petitioner argued that their financial condition could not support the payment of the demanded amounts. The court, considering the prolonged delay in the appellate process and the financial strain on the petitioner, decided to direct the Appellate Authority to expedite the decision on the appeals.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 754613 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 11-10-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: S RAJ; C T SUJA; ARJUN RAJ
• Keywords: Appeal; Cash deposit; Financial Position; Penalty; Stay Application
• Section: 271D; 271E; 269SS; 269T

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 11TH DAY OF OCTOBER 2019 / 19TH ASWINA, 1941 WP(C).No.2736 OF 2019(N) PETITIONER: THE PANNIYANKARA SERVICE CO-OPERATIVE BANK KALLAI, KOZHIKODE-673 003 REPRESENTED BY ITS SECRETARY P.MAHESH CHANDRA. BY ADVS. SRI.S.ARUN RAJ SMT.C.T.SUJA SRI.ARJUN S.RAJ RESPONDENTS: 1 JOINT COMMISSIONER OF INCOME TAX RANGE-1, AAYAKAR BHAVAN, KOZHIKODE-673 001. 2 THE PRINCIPAL COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001. 3 THE COMMISSIONER OF INCOME TAX (APPEALS) AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001. 4 INCOME TAX OFFICER WARD 1(3), AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001. R1-4 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P(C) No.2736/19 2 JUDGMENT The challenge in this Writ Petition is against Exts.P11 and P12 orders passed by the 3rd respondent First Appellate Authority in stay applications filed by the petitioner along with Appeals against penalty orders passed in terms of Section 271D and 271E of the Income Tax Act during the assessment year 2015-2016. The facts stated in the Writ Petition would reveal that the petitioner, which is a primary agricultural credit society and an assessee to income tax on the rolls of the 4th respondent, had accepted deposits from its members by cash in excess of Rs.20,000/-, which was in contravention of the provisions of Section 269SS and 269T of the Income Tax Act. For the said contravention they were imposed a penalty in terms of Section 271D and 271E of the IT Act in an amount equal to the deposits accepted in cash in excess of Rs.20,000/-. The demand against the petitioner by way of penalty for the said offence is in an amount of Rs.48,79,81,702/- under Section 271D and Rs.44,38,36,515/- under Section 271E of the IT Act. 2. In the stay applications filed along with the Appeals preferred against the penalty orders the petitioner had sought for a stay of recovery of penalty orders confirmed against him pending disposal of the Appeals by the Appellate Authority. The Appellate Authority considered the said applications and directed the petitioner to remit a total of Rs.2.5 crores each in the respective Appeals as a condition for grant of stay of recovery of the balance amounts of penalty that were confirmed against the petitioner through the penalty orders. It is these orders of the Appellate Authority that W.P(C) No.2736/19 3 are impugned in this Writ Petition, inter alia, on the contention that the financial position of the petitioner society is bleak and it will not be in a position to even pay the amount of Rs.2.5 crores each ordered by the First Appellate Authority. 3. When the matter came up for admission before this Court on 30.01.2019, this Court while admitting the Writ Petition also granted an interim stay of further proceedings pursuant to the penalty orders and on the strength of the said order the payments directed in Exts.P11 and P12 orders have not been effected by the petitioner. 4. I have heard Sri.Arun Raj S., the learned counsel for the petitioner and Sri.Christopher Abraham, the learned Standing Counsel for the respondents. 5. I find that Exts.P11 and P12 orders of the First Appellate Authority have required the petitioner society to pay only Rs.2.5 crores each as against penalty amounts of Rs.48 crores and Rs.44 crores (approximately), that were imposed on the petitioner. Under normal circumstances this would have been viewed as a reasonable and valid exercise of discretion by the First Appellate Authority that does not call for any interference by this Court in this proceedings under Article 226 of the Constitution of India. In the instant case, however, the financial position of the petitioner society is projected as weak, and more importantly, it has been more than 8 months since the Appeals have been filed before the Appellate Authority and the petitioner has been enjoying the benefit of a stay from this Court since W.P(C) No.2736/19 4 January 2019. Under such circumstances, I deem it appropriate to dispose the Writ Petition with a direction to the 3rd respondent Appellate Authority, before whom the Appeals preferred by the petitioner against the orders of penalty are pending, to consider and pass orders in the said Appeals within a period of three months from the date of receipt of a copy of the judgment, after hearing the petitioner. It is also made clear that till such time as the 3rd respondent passes orders in the Appeals and communicates the orders to the petitioner, the stay granted by this Court, against recovery of the penalty amounts confirmed against the petitioner, shall be kept in abeyance. The petitioner shall produce a copy of the Writ Petition, together with a copy of this judgment before the 3rd respondent for further action. The Writ Petition is disposed as above. Sd/- A.K.JAYASANKARAN NAMBIAR JUDGE okb //True copy// P.S. to Judge W.P(C) No.2736/19 5 APPENDIX OF WP(C) 2736/2019 PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE REPLY DATED 27.11.2017 SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT. EXHIBIT P1 A TRUE COPY OF THE REPLY DATED 6.12.2017 SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT. EXHIBIT P2 TRUE COPY OF THE ASSESSMENT ORDER DATED 20.12.2017 PASSED BY THE INCOME TAX OFFICER RANGE-1(3), KOZHIKODE FOR THE AY 2015-16. EXHIBIT P3 TRUE COPY OF THE MEMORANDUM OF FIRST APPEAL FIELD BY THE PETITIONER CHALLENGING EXHIBIT P-2 ASSESSMENT ORDER. EXHIBIT P4 TRUE COPY OF THE REPLY DATED 10.1.2018 FILED BY THE PETITIONER BEFORE THE IST RESPONDENT OBJECTING TO EH PROPOSAL TO IMPOSE PENALTY UNDER SECTION 271 D OF TE ACT. EXHIBIT P4 A TRUE COPY OF THE REPLY DATED 4.8.2018 FILED BY THE PETITIONER BEFORE THE IST RESPONDENT OBJECTING TO EH PROPOSAL TO IMPOSE PENALTY UNDER SECTION 271 E OF THE ACT. EXHIBIT P5 TRUE COPY OF THE PENALTY ORDER UNDER SECTION 271 D PASSED BY THE IST RESPONDENT FOR THE AY 2015-16. EXHIBIT P6 TRUE COPY OF THE PENALTY ORDER UNDER SECTION 271 E PASSED BY THE IST RESPONDENT FOR THE AY 2015-16. EXHIBIT P7 TRUE COPY OF THE APPEAL MEMORANDUM DFILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT AGAINST EXHIBIT P-5 ORDER FOR THE AY 2015- 16. W.P(C) No.2736/19 6 EXHIBIT P8 TRUE COPY OF THE APPEAL MEMORANDUM FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT AGAINST EXHIBIT P-6 ORDER FOR THE AY 2015- 16. EXHIBIT P9 TRUE COPY OF THE STAY PETITION FILED BEFORE THE 3RD RESPONDENT IN EXHIBIT P-7 APPEAL. EXHIBIT P10 TRUE COPY OF THE STAY PETITION FILED BEFORE THE 3RD RESPONDENT IN EXHIBIT P-8 APPEAL. EXHIBIT P11 TRUE COPY OF THE ORDER DATED 18.1.2019 PASSED BY THE 2ND RESPONDENG DISPOSING EXHIBIT P-9 STAY PETITION FOR THE AY 2015- 16. EXHIBIT P12 TRUE COPY OF THE ORDER DATED 18.1.2019 PASSED BY THE 2ND RESPONDENT DISPOSING EXHIBIT P-10 STAY PETITION FOR AY-2015-16 W.P(C) No.2736/19 7 "