2014 (7) TMI 915 - HC - Income Tax

Penalty u/s 271D/ 271E Amount accepted or repaid in contravention of section 269SS and 269T Held that - Ample opportunity will be given to the assessee to submit its case - whether with respect to the transactions provisions of Sections 269-SS and 269-T of the Act would be applicable or not can be considered only after thorough enquiry and considering the activities of the petitioner as well as respective transaction even while conducting enquiry, relevant documents and other facts are required to be considered thus, let the assessee appear before the appropriate authority who has issued the Show Cause Notice - Decided in favour of Assessee.

Summary

Issues:
Challenge to impugned Show Cause Notices under Article 226 of the Constitution of India regarding penalty under section 271(D) / 271(E) of the Income Tax Act for contravention of Sections 269-SS and 269-T.

Analysis:

1. Challenge to Show Cause Notices:
The petitioner challenged the Show Cause Notices dated 28/3/2002 and 20/9/2002, alleging no breach of Sections 269-SS and 269-T of the Income Tax Act. The petitioner argued that the transactions related to cotton pooling activities were not subject to these sections. The petitioner detailed the process of cotton sales, account maintenance, and interest transfers, emphasizing that the transactions were not loans. The petitioner requested the quashing of the impugned notices.

2. Respondent's Opposition:
The respondent opposed the petition, highlighting that it was at the Show Cause Notice stage, requiring the petitioner to present a defense before the appropriate authority. The respondent stressed the need for a detailed inquiry to determine the applicability of penalty under section 271(D) / 271(E) of the Income Tax Act in contravention of Sections 269-SS and 269-T. The respondent urged not to delve into the case's merits prematurely but to allow the appropriate authority to assess the defense and contentions raised by the petitioner.

3. Judicial Decision:
The court noted that the petition challenged Show Cause Notices issued by the Joint Commissioner of Income Tax, Bharuch Range, calling for explanations on the alleged contravention of Sections 269-SS and 269-T. The court emphasized that the petitioner would have ample opportunity to present its case and defenses before the appropriate authority. The court refrained from expressing any opinion on the case's merits but directed the petitioner to file a detailed reply within three weeks. The court instructed the petitioner to appear before the appropriate authority, submit its case, and assured a fair consideration of the submissions in accordance with the law.

4. Disposition:
The court disposed of the Special Civil Application, discharging the rule and vacating any interim relief granted earlier. The judgment underscored the importance of the petitioner's appearance before the appropriate authority, emphasizing a fair and thorough consideration of the case in accordance with the law and on merits. The decision highlighted the procedural aspect of allowing the appropriate authority to assess the case comprehensively before making any determinations.