COMMISSIONER OF INCOME TAX vs. SHREE AMBICA FLOUR MILLS COR- PORATION

ITR/42/1998HC GujaratGJHC24024400199816 April 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED5 pages
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What were the facts?

The Income Tax Appellate Tribunal (ITAT) referred four questions to the High Court concerning penalties levied under Sections 271D and 271E of the Income Tax Act, 1961. The Revenue challenged the ITAT's cancellation of these penalties. For Section 271D, the Assessing Officer (AO) imposed a penalty of Rs. 81,000 for violating Section 269SS. The ITAT noted transactions in the name of Manal Anandkumar and Sun Tours & Travels, where cash payments were made. For Section 271E, the AO imposed a penalty of Rs. 71,500 for cash payments totaling Rs. 2,11,531, violating Section 269T. The Commissioner (Appeals) confirmed both penalties.

What did the High Court hold?

The High Court held that the ITAT had appreciated the facts and evidence on record. Regarding the penalty under Section 271D, the Tribunal found that the amount in the case of Manal Anandkumar was for safe custody, and in the case of Sun Tours & Travels, it was a Sharafi account, and the assessee had reasonable cause. For the penalty under Section 271E, the Tribunal concluded that transactions between sister concerns were not covered by Sections 269SS or 269T, and such payments were a common trading practice. The Tribunal viewed the default, if any, as venial. The High Court found no evidence to suggest that the ITAT's appreciation of facts and evidence was incorrect or perverse. Therefore, the ITAT's order deleting the penalties under Sections 271D and 271E was upheld. All four questions were answered in the affirmative, in favour of the assessee and against the Revenue.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in cancelling the penalty levied under section 271D (relating to violation of Section 269SS)? 2. Whether the Appellate Tribunal has correctly appreciated the facts on records so as to cancel the penalty levied under section 271D? 3. Whether the Appellate Tribunal is right in law and on facts in cancelling the penalty levied under section 271E (relating to violation of Section 269T)? 4. Whether the Appellate Tribunal has correctly appreciated the facts on record so as to cancel the penalty levied under section 271E? Assessee's Contentions (as recorded by the Tribunal): For Section 271D, the assessee argued that the cash payments were not business dealings but receipts of cash gifts deposited in the company's books. In the case of Manal Anandkumar, the amount was for safe custody. For Sun Tours & Travels, it was a Sharafi account. The assessee claimed reasonable cause for accepting cash. Revenue's Contentions: The Revenue's primary contention, implicit in its challenge to the ITAT's order, is that the ITAT erred in cancelling the penalties, implying that the violations of Sections 269SS and 269T were established and the penalties were justified.

Which sections of the Income-tax Act were involved?

Section 271D,Section 271E,Section 256(1),Section 269SS,Section 269T

AI-generated summary — verify with the full judgment below

ITR/42/1998 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 42 of 1998 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED ============================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ===================================================== COMMISSIONER OF INCOME TAX - Applicant(s) Versus SHREE AMBICA FLOUR MILLS COR- PORATION - Respondent(s) ===================================================== Appearance : MR BB NAIK for Applicant(s) : 1, SERVED BY RPAD - (R) for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 16/04/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

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