2016 (8) TMI 279 - HC - Income Tax

Penalty proceedings u/s 271F and prosecution u/s 276CC - Non-filing of return by the co-operative society - Notice calling upon the petitioner-Society to furnish their return of income immediately and produce the copy of the acknowledgement by 13.04.2016 - Held that - It cannot be disputed that every person who is receiving income, within the taxable limit or otherwise, is statutorily bound to file their returns. Therefore, the petitioner-Society will not be fully justified in taking a stand that they will not file their return of Income. However, this should not automatically lead to a threat being meted out to the Society, at the instance of the respondent by initiating prosecution proceedings and penalty proceedings. In the light of the recent statement made by the Hon ble Union Finance Minister, that the attitude of the Assessing Officer towards the assessee should have a change, more particularly in the instance case, since the petitioner is a Co-operative Society and it is being controlled by the Managing Director, which is a Government Official in the cadre of Joint Registrar of Co-operative Societies. However, for that reason, the petitioner cannot be permitted to keep quiet in the matter and not subject themselves to the proceedings under the Income Tax Act. Thus the petitioner is directed to appear before the respondent, within a period of four weeks from the date of receipt of a copy of this order and file a detailed representation along with their return of income and on receipt of the representation and the return of income, the respondent is directed to proceed further in accordance with law, after affording an effective opportunity to the petitioner. However, the prosecution which is threatened to be launched in the impugned notice shall remain stayed.

Summary

Issues:
Challenging notice to furnish income return and produce acknowledgment within a specified date; Threat of penalty and prosecution under Income Tax Act, 1961; Delay in compensation payment leading to society's defunct state; Statutory obligation to file income returns; Assessing Officer's attitude towards the assessee; Society controlled by a Government Official; Directives for the petitioner to appear and file representation.

Analysis:
The petitioner, a cooperative society, challenged a notice from the respondent to furnish their income return and produce acknowledgment by a specified date, facing penalties and prosecution under the Income Tax Act, 1961. The society owned land acquired by the government, leading to delayed compensation payment, causing financial distress and defunct operations. While acknowledging the statutory obligation to file income returns, the court noted the recent statement by the Union Finance Minister emphasizing a change in the Assessing Officer's approach towards taxpayers. Despite being controlled by a Government Official, the society was directed to comply with income tax proceedings.

The court recognized the society's obligation to file income returns but found the threat of prosecution and penalties disproportionate. Considering the peculiar circumstances, the court directed the society to appear before the respondent within four weeks, file a detailed representation along with their income return, and allowed further proceedings under the law. However, the prosecution threatened in the notice was stayed. The judgment aimed to balance the statutory requirements with the society's financial hardships and the need for fair treatment by the tax authorities.