2013 (12) TMI 365 - HC - Income Tax

Penalty u/s 271(1)(c) - Held that - The Commissioner of Income Tax has applied his mind to the facts of the case and granted substantial relief to the petitioner - It is not a case of any financial hardship to the petitioner and this Court should not interfere in the present matter in exercise of its jurisdiction - The Court cannot express any opinion on the merits of the case - The Commissioner of Income Tax Appeal has considered the facts of the case objectively and has granted the relief staying 70% of the total demand - If the petitioner deposits the first installment within a week from today, the appeal shall be heard and decided within one month thereafter, and till the disposal of the appeal the recovery of balance amount shall remain stayed - Partly allowed in favour of assessee.

Summary

Issues:
1. Stay of demand for penalty under Section 271(1)(C) of Income Tax Act till disposal of appeal before CIT(A).

Analysis:
The petitioner sought a writ to direct the respondents to stay the demand of Rs. 12.53 crores for the assessment year 2003-04 arising from a penalty under Section 271(1)(C) of the Income Tax Act until the appeal pending before CIT(A) was resolved. The petitioner had filed an appeal against the penalty, and the Commissioner of Income Tax had stayed 50% of the demand. Subsequently, the petitioner filed another application for staying the recovery of the demand, but no order was passed. A previous writ petition had directed the Commissioner of Income Tax (Appeals) to decide on the interim relief application. In response, the Commissioner directed the petitioner to deposit 30% of the total demand in installments, with the remaining demand stayed till the appeal's disposal. The petitioner, still aggrieved, filed the present writ petition challenging the order.

The petitioner argued that no penalty should be levied under Section 271(1)(C) as there was no concealment of income particulars, and the issue of whether the sales tax subsidy was a revenue or capital receipt was debatable. Citing legal precedents, the petitioner contended that subsidies should be treated as capital receipts, making them non-taxable and ineligible for the penalty. On the other hand, the Senior Standing Counsel for the Income Tax Department argued that the impugned order was interlocutory, the Commissioner had considered the case facts, granted substantial relief, and there was no financial hardship to the petitioner. The Court refrained from expressing an opinion on the penalty's merits, noting that the matter was pending before the Commissioner of Income Tax (Appeals), who had already granted significant relief by staying 70% of the total demand.

Considering the circumstances, the Court directed that if the petitioner deposited the first installment promptly, the appeal would be heard and decided within a month, with the recovery of the balance amount stayed until the appeal's conclusion. The petitioner was exempted from depositing the second installment. In case of the petitioner's success in the appeal, the department was instructed to expedite the refund process within a month. The writ was partially allowed based on the aforementioned directions.