2013 (5) TMI 132 - HC - Income Tax

Penalty U/s 271(1)(c) of the Income Tax Act, 1961 - Stay of recovery - Held that - there is nothing to indicate that there was negligence or inaction on the part of the Petitioner in pursuing the appeals. - On these facts, especially having regard to the fact that a stay has been sought in respect of the recovery of penalties under Section 271(1)(c) - We are of the view that an order of dispensation ought to have been granted. Accordingly, we allow the petition by setting aside the impugned order dated 26 February 2013 of the CIT-10, Mumbai, directing the Petitioner to deposit an amount of Rs. 8.85 crores towards the demand on account of penalty. We also direct the CIT(A)-22 before whom the appeals are pending to expeditiously dispose of the appeals preferably within a period of two months from the date on which an authenticated copy of this order is produced on his record - The Petitioner shall appear before the CIT(A) together with an authenticated copy of this order on 1 April 2013 for expeditious disposal of the appeals - Rule is made absolute to the aforesaid extent - We clarify that all the rights and contentions of the parties are kept open.

Summary

Issues:
Challenging order of Commissioner of Income Tax on penalty stay application under Section 271(1)(c) of Income Tax Act, 1961.

Analysis:
1. The petitioner challenged the Commissioner of Income Tax-10's order dated 26 February 2013 regarding the stay of recovery of a penalty demand under Section 271(1)(c) of the Income Tax Act, 1961. The petitioner had filed returns showing losses for Assessment Years 2004-05 to 2007-08, which were redetermined by the Assessing Officer. The CIT(A) upheld the additions and disallowances, leading to penalty proceedings and subsequent penalties being levied for each year.

2. The petitioner, a Public Sector Corporation, argued financial difficulties and a restructuring proposal approved by the Cabinet Committee on Economic Affairs. The petitioner sought a stay of recovery pending appeals before the CIT(A), emphasizing a strong prima facie case and government backing. The petitioner highlighted the previous stay granted until a specified date or appeal decision, attributing any delay to the CIT(A).

3. The High Court reviewed the case, considering the penalties under Section 271(1)(c) for the mentioned years and the petitioner's efforts in pursuing appeals before the CIT(A). Noting no fault on the petitioner's part, the Court acknowledged the petitioner's public sector status and infrastructure contributions, supported by government notifications. The Court found merit in the petitioner's case and directed a dispensation of deposit, urging the CIT(A) for an expeditious appeal hearing within two months.

4. Consequently, the Court allowed the petition, setting aside the CIT-10's order for deposit and instructing the CIT(A) to expedite appeal disposal. The petitioner was required to appear before the CIT(A) with a copy of the Court's order for prompt resolution. The ruling clarified the preservation of parties' rights and contentions, with no costs imposed.

5. In conclusion, the High Court's judgment favored the petitioner, recognizing the circumstances and directing relief from the penalty deposit, along with expeditious appeal resolution by the CIT(A).