PRINCIPAL COMMISSIONER OF INCOME TAX 2 vs. GUJARAT TEA PROCESSORS AND PACKERS LTD

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TAXAP/350/2018HC GujaratGJHC24011186201816 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court noted that the issue pertained to a penalty under Section 271E for contravention of Section 269T. The facts indicated that the assessee made repayments to distributors through adjustments. The CIT(A) had accepted the assessee's explanation that these were regular distributors and that the transactions involved sales, delayed payments, and adjustments of deposits and interest. The final payment, after adjustments, was made via cheque or demand draft. While the CIT(A) and ITAT proceeded on the basis of sufficient cause for not making repayment through prescribed sources, the High Court expressed doubt as to whether the provisions regarding demand before payment of tax would apply in such a scenario. Ultimately, the Court concluded that no question of law arose for consideration and therefore dismissed the appeal.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax 2, is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated August 4, 2017. The appeal concerns a penalty of Rs. 11,57,320 levied under Section 271E of the Income Tax Act, 1961, for alleged contravention of Section 269T. The Assessing Officer had imposed the penalty, which was subsequently deleted by the Commissioner of Income Tax (Appeals) and confirmed by the ITAT. The dispute arises from the assessee company's method of making repayments to certain distributors, which involved adjustments rather than direct cash payments. The CIT(A) and ITAT accepted the assessee's contention that these were regular distributors with whom sales transactions occurred, and payments were made after adjusting deposits and interest.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in deleting the penalty of Rs. 11,57,320 levied under Section 271E of the Act for making payment in contravention of Section 269T of the Act without appreciating the facts of the case? 2. Whether the Appellate Tribunal erred in law and on facts by not appreciating that the assessee company had transferred the deposit amount of its distributors to the current account vide Journal entries and therefore had violated the provision of Section 269T of the Act? Assessee's Contentions: The assessee contended that the repayments to distributors were made after adjusting their deposit amounts and accrued interest. These adjustments were made against sales transactions, and any remaining balance was paid via cheque or demand draft upon the distributor's request to close their account. The CIT(A) accepted these as regular distributors and the transactions as normal business dealings. Revenue's Contentions: The Revenue argued that the transfer of deposit amounts to the current account via journal entries constituted a violation of Section 269T, thereby attracting penalty under Section 271E. The Revenue questioned the ITAT's deletion of the penalty.

Which sections of the Income-tax Act were involved?

Section 271E,Section 269T

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/350/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 350 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus GUJARAT TEA PROCESSORS AND PACKERS LTD ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 16/04/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue   is   in   appeal   against   the   judgment   of   the Income Tax Appellate Tribunal dated 04.08.2017, raising following questions for our consideration: “[A] Whether the Appellate Tribunal has erred in law   and   on   facts   in   deleting   the   penalty   of Rs.11,57,320/­ levied u/s. 271E of the Act for making payment in contravention of Section 269T of   the   Act   without   appreciating   the   facts   of case ? [B] Whether the Appellate Tribunal erred in law and   on   facts   by   not   appreciating   that   the assessee   company   had   transferred   the   deposit amount   of   its   distributors   to   the   current account vide Journal entries and therefore had violated   the  provision  of  Section  269T  of  the Act ?”

2.

Issue pertains to penalty under section 271E of the  the Income Tax Act, 1961 ('the Act' for short) imposed by the Assessing Officer, but was deleted by the   Commissioner   of   Income   Tax   (Appeals)   and confirmed   by   the   Tribunal.     The   facts   on   record C/TAXAP/350/2018 ORDER suggest that the assessee had to make repayments to certain   distributors   which   was   made   through adjustments.     Commissioner   of   Income   Tax   (Appeals) accepted   the   assessee's   contention   that   they   were regular distributors and there were transactions on account   of   sales   on   delayed   payment   etc.     The assessee raising the payment against the sales and when the account was closed on the request of the distributor, the remaining payment was made through the   cheque   or   demand   draft   after   adjusting   the deposited amount and the interest thereon.   It was, thus, a mere question of adjusting the amount before actually making the payment.  Though the Commissioner of   Income   Tax   (Appeals)  and   the   Tribunal   had proceeded   on   the   basis   that   the   assessee   had sufficient cause for not making repayment through the prescribed sources, we have very doubt that in case of such demand before payment of tax would apply at all.  Be that as it may, no question of law arises.

3.

Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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