2018 (2) TMI 758 - HC - Income Tax

Stay of demand - Penalty u/s 271D - cash loans from parents - repayment of loan in cash to Mother - whether only impossible situations for compliance of the provision contained in Section 269SS would constitute reasonable cause within the meaning of Section 273B? - Held that - It would be inappropriate for this Court to consider the question as to whether the petitioner has made out a reasonable cause falling within the scope of Section 273B of the Act for non-compliance of the provisions contained in Section 266SS in respect of the transactions involved in this case, as the same is an issue primarily to be considered by the Appellate Authority in the appeals preferred by the petitioner. As seen that the income earned by the petitioner during the relevant year, even going by the assessment made by the Department, is only approximately ₹ 20,00,000/-, of which it is conceded that he has paid around ₹ 5,00,000/- towards tax. It is beyond dispute that if the petitioner does not remit the 15% of the amount directed to be paid, the benefit of the interim order will not be available to him. At the same time, if he is compelled to pay such a huge amount, there is force in the contention that the same will have an adverse impact on his business. In the circumstances, I deem it appropriate to modify Ext.P7 order granting stay for 95% of the demand covered by Ext.P1 order, on condition that he shall pay the remaining 5% in two instalments, the first of which shall be paid on or before 01/02/2018 and the second instalment before, 01/03/2018.

Summary

Issues:
1. Revision of assessment under the Income Tax Act for the assessment year 2014-15 leading to additional tax demand.
2. Imposition of penalties under Section 271D and 271E of the Act on the petitioner.
3. Challenge of penalty orders in appeal and applications for stay of enforcement.
4. Granting of conditional stay of enforcement by the Appellate Authority.
5. Interpretation of Section 273B of the Act regarding reasonable cause for non-compliance with Section 269SS.
6. Arguments by the petitioner and respondents regarding the imposition of penalties and conditions for granting stay.

Detailed Analysis:

1. The petitioner, a businessman, filed returns for the assessment year 2014-15 showing a taxable income of &8377; 12,69,781. However, after scrutiny, his taxable income was revised to &8377; 19,63,260, resulting in an additional tax demand of &8377; 2,87,610. This revision was made considering transactions where the petitioner received substantial sums from his parents and repaid a loan to his mother.

2. Subsequently, the petitioner was penalized under Section 271D for contravening Section 269SS of the Act regarding personal advances from parents and under Section 271E for contravening Section 269T for loan repayment to his mother. The penalties imposed were &8377; 2,38,09,645 and &8377; 2,50,000 respectively.

3. The petitioner appealed against these penalty orders and sought a stay of enforcement during the appeal process. The Appellate Authority granted a conditional stay, directing the petitioner to pay 15% of the penalty amount in two equal monthly installments.

4. The petitioner argued that there was a reasonable cause for receiving the personal advances from his parents, citing Section 273B of the Act. He contended that the condition to pay 15% of the penalty amount was onerous and could adversely affect his business.

5. The respondents argued that only impossible situations for compliance with Section 269SS would constitute a reasonable cause under Section 273B of the Act.

6. The Court modified the stay order, reducing the payment condition to 5% of the penalty amount in two installments, considering the petitioner's income and potential impact on his business. The Court refrained from determining the reasonable cause issue, leaving it for the Appellate Authority to decide during the appeal process.