CIT-II, AMRITSAR vs. M/S GREAT VALUE FOOD, NHRU SHPNG COMPLX. AMRTSR

ITA/283/2009HC Punjab & HaryanaPHHC01084374200929 October 2013Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE JASPAL SINGH6 pages
AI SummaryDismissed

What were the facts?

The revenue (Commissioner of Income Tax II, Amritsar) appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated 8.10.2008, which deleted a penalty of ₹11,50,000. The penalty was imposed under Section 221 of the Income Tax Act, 1961, for the assessment year 2004-05. The assessee, M/s Great Value Food, filed its return on 31.10.2004, showing a total income of ₹3,33,29,720 and noting that interest under Sections 234B and 234C was liable to be waived. The return was processed under Section 143(1) on 17.3.2006, raising a demand of ₹13,51,857. A rectification under Section 154 resulted in a revised demand of ₹11,54,400. The assessee failed to pay this amount under Section 140A(1) before filing the return, leading to the penalty. The CIT(A) had confirmed the penalty, but the ITAT deleted it.

What did the High Court hold?

The High Court held that there was no merit in the revenue's appeal. The Court analyzed Section 221(1) of the Act, which states that an assessee in default in making a payment of 'tax' is liable for penalty. The definition of 'tax' in Section 2(43) of the Act means income-tax chargeable under the Act and does not include penalty or interest. Therefore, a default in payment of interest alone does not attract penalty under Section 221(1). The Court distinguished the revenue's cited case of E.K. Varghese, which dealt with advance tax (considered 'tax'), from the present case concerning interest. The judgments of the Calcutta High Court in Shreeniwas & Sons and the Bombay High Court in P.B. Hathiramani were relied upon, confirming that interest is not 'additional tax' and penalty under Section 221(1) is leviable only for default in payment of 'tax' as defined. Consequently, the ITAT's deletion of the penalty was upheld. The substantial questions of law were answered accordingly, and the appeal was dismissed. No issue was expressly left undecided.

What were the issues?

1. Whether the ITAT erred in deleting the penalty of ₹11,50,000 imposed under Section 221 of the IT Act, 1961, when the assessee was treated as in default under Section 140A(3) for non-payment of tax due, including interest under Sections 234B and 234C? (Question of law and fact, concerning Section 221, 140A(3), 234B, 234C) 2. Whether the ITAT erred in not correctly appreciating Section 140A(3) of the IT Act, 1961, which states that all provisions of the Act apply to a default in payment of tax or interest under Section 140A(1), including Section 221? (Question of law and fact, concerning Section 140A(3), 221) 3. Whether the ITAT erred in deleting the penalty without considering Explanation 1 to Section 140A(3), which stipulates adjustment of payments towards interest first and then tax? (Question of law and fact, concerning Section 140A(3)) Revenue's contentions: The Tribunal erred in deleting the penalty as the assessee failed to deposit interest under Sections 234B and 234C, and the payment was made late. Relied on E.K. Varghese and another v. Income Tax Officer and others (1974) 96 ITR 577. Assessee's contentions: No penalty under Section 221(1) can be levied for default in payment of interest, as the provision applies only to default in payment of 'tax'. Relied on Shreeniwas & Sons v. I.T.O. (1974) 96 ITR 562 (Calcutta) and CIT v. P.B. Hathiramani (1994) 207 ITR 483 (Bombay). Also referred to CBDT circular/notification dated 23.5.1996 under Section 119(2)(a) regarding waiver of interest.

Which sections of the Income-tax Act were involved?

Section 260A,Section 221,Section 140A(3),Section 234B,Section 234C,Section 143(1),Section 154,Section 220,Section 2(43),Section 119(2)(a)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 29.10.2013 Commissioner of Income Tax II, Amritsar …Appellant Vs. M/s Great Value Food, 93-Ground Floor, Nehru Shopping Complex, Amritsar. …Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Dinesh Goyal, Advocate for the revenue. Mr. Aman Bansal, Advocate for the assessee. Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 8.10.2008, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.16/ASR/2008, for the assessment year 2004-05, claiming following substantial questions of law:- “a) Whether the Hon’ble ITAT Amritsar Bench, Armitsar erred in law and on facts in deleting the penalty of ` 11,50,000/- imposed by the Assessing Officer under section 221 of the IT Act, 1961 and duly confirmed by the learned CIT(A), without appreciating the fact that the assessee was treated in default under section 140A(3) of the IT Act, 1961 for non pay

The order continues below.

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