2012 (9) TMI 513 - HC - Income Tax

Penalty u/s 271(D) - Difference of opinion between the members of Tribunal on stay application - notice demanding payment of the penalty and threatening of coercive action in the event of default issued - Held that - As a case of stay is pending before tribunal it shall expeditiously hear and pass orders on stay and in the meantime subject to the petitioner remitting an amount of Rs.15,00,000/- towards penalty within three weeks from today, further proceedings pursuant to Ext.P6 notice will be kept in abeyance.

Summary

Issues:
1. Penalty proceedings under Section 271D of the Income Tax Act against a Charitable Trust for establishing an Engineering College.
2. Rejection of appeals filed by the Trust against penalty orders.
3. Difference of opinion between members of the Tribunal leading to referral to a 3rd member.
4. Issuance of a notice demanding penalty payment and coercive action by the Department.
5. Writ petition filed by the Trust challenging the penalty and coercive action.

Analysis:
The judgment by MR. JUSTICE ANTONY DOMINIC of the Kerala High Court dealt with penalty proceedings initiated under Section 271D of the Income Tax Act against a Charitable Trust that established an Engineering College. The Trust had filed appeals (Exts.P3 and P4) against the penalty orders (Exts.P1 and P2) which were rejected. The Tribunal, after hearing the appeals, faced a difference of opinion among members, leading to the matter being referred to a 3rd member. Meanwhile, a notice (Ext.P6) was issued demanding penalty payment and threatening coercive action, prompting the Trust to file a writ petition.

The learned Standing Counsel for the respondents argued that in the absence of a stay order, the Department was entitled to issue Ext.P6 for realizing the penalty amounts. However, the Court noted that the appeals had been heard, and due to the unique circumstances, the matter was referred to a 3rd member. The senior counsel for the petitioner informed the Court that a partial payment of Rs.25,72,602/- had been made.

In response to the situation, the Court disposed of the writ petition by directing the Tribunal to expedite the hearing and decision on the appeals (Exts.P3 and P4). Additionally, the Court ordered that further proceedings related to Ext.P6 would be put on hold if the Trust remitted Rs.15,00,000/- within three weeks from the judgment date. This decision aimed to balance the interests of both parties while ensuring a fair resolution to the penalty proceedings against the Charitable Trust.