THE COMMISSIONER OF INCOME TAX vs. M/S PURE DRINKS LTD

ITR/1720/1995HC Punjab & HaryanaPHHC01032230199529 April 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI3 pages
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What were the facts?

The assessee, Pure Drinks (New Delhi) Ltd., a dealer in soft drinks, filed income tax returns for assessment years 1982-83 and 1983-84 declaring substantial incomes. However, the assessee failed to pay the self-assessment tax as required under Section 140A(1) of the Income Tax Act, 1961. Consequently, penalty proceedings were initiated under Section 140A(3). The assessee's explanation for non-payment was a lack of funds. The Inspecting Assistant Commissioner imposed penalties of Rs.15,63,458/- for 1982-83 and Rs.39,12,544/- for 1983-84. Appeals to the Commissioner of Income Tax (Appeals) were dismissed. The Income Tax Appellate Tribunal (Tribunal) partly allowed the assessee's further appeals, cancelling the penalty for the period from 01.11.1984 onwards for both assessment years. The Revenue has referred a question of law to the High Court.

What did the High Court hold?

The High Court held that the Tribunal was right in considering the assessee's letter dated 22/25.03.1985, which detailed the substantial destruction of its factory premises at Najafgarh Road and Okhla Industrial Area by a mob. The Tribunal had found that the assessee received only nominal insurance claims, which were immediately reinvested in repairs, maintenance, and essential supplies. The High Court noted that while this fact was considered for the first time before the Tribunal, the Revenue did not controvert it. Furthermore, the Court acknowledged the widespread riots following Mrs. Indira Gandhi's assassination on 31.10.1984, which caused extensive damage to property in the National Capital Region. Therefore, the deletion of penalties from 01.11.1984 onwards was deemed fair and reasonable given the unfortunate circumstances and extensive damage suffered by the assessee. The question of law was answered in the affirmative, meaning against the Revenue and in favour of the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in cancelling the penalty levied under Section 140A(3) of the Act, for the period from 01.11.1984 onwards on the basis of the assessee’s letter dated 22/25.03.1985 being an extraneous piece of evidence in proceedings under Section 140A(1) of the Income Tax Act, 1961? Assessee's Contentions: The judgment does not explicitly record the assessee's arguments before the High Court. However, it is implied that the assessee supported the Tribunal's decision to cancel the penalty based on the damages suffered. Revenue's Contentions: The Revenue argued that the assessee's letter dated 22/25.03.1985, which cited damages to factory premises by a mob, was an extraneous piece of evidence to be considered in proceedings under Section 140A(1) and that the Tribunal was wrong in relying on it to cancel the penalty.

Which sections of the Income-tax Act were involved?

Section 140A(1),Section 140A(3),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

Date of Decision: 29.04.2013 ITR No.17 to 20 of 1995 The Commissioner of Income Tax, Patiala

....Appellant Versus Pure Drinks (New Delhi) Ltd., New Delhi

...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA

HON’BLE MS. JUSTICE RITU BAHRI Present: Ms. Savita Saxena, Advocate,

for the appellant.

M/s Akshay Bhan & Aalok Mittal, Advocates,

for the respondent.

HEMANT GUPTA, J.

Present reference under Section 256(1) of the Income Tax Act, 1961 (for short ‘the Act’) arises out of an order passed by the Income Tax Appellate Tribunal (for short ‘the Tribunal’) on 14.07.1993 referring the following substantial question of law pertaining to the assessment years 1982-83 and 1983-84: “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in cancelling the penalty levied under Section 140A(3) of the Act, for the period from 01.11.1984 onwards on the basis of the assessee’s letter dated 22/25.03.1985 being an extraneous piece of evidence in proceedings under Section 140A(1) of the Income Tax Act, 1961?”

Kumar V

The order continues below.

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