M/S METALWAYS PVT. LTD. CHD vs. CIT PATIALA

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ITR/10/1997HC Punjab & HaryanaPHHC01035336199707 September 2009Author: MRS JUSTICE DAYA CHAUDHARY3 pages
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What did the High Court hold?

The High Court held that the question of whether tax paid without filing an estimate is deductible for penalty imposition should be answered in favour of the assessee and against the revenue. The court relied on the Supreme Court's decision in Commissioner of Income Tax Vs. Kohinoor Flour Mills (P) Ltd. (1991) 187 ITR 585, which supported the assessee's claim that advance tax payments are deductible in determining the penalty. The court explicitly stated that no contrary view was presented. The High Court clarified that it was not expressing any opinion on the justification or otherwise of the levy of penalty itself, as no reference was sought or made on that specific aspect. The reference was disposed of on this basis.

What were the facts?

The assessee, M/s Metalways (P) Ltd., failed to file an estimate of advance tax for the assessment year 1978-79 as required by Section 212(3) of the Income Tax Act, 1961. Despite this non-compliance, the assessee did deposit the advance tax. Penalty proceedings were initiated for the failure to file the estimate. The Commissioner of Income Tax (Appeals) initially set aside the penalty, holding that Section 209-A, which mandated filing estimates, was effective from April 1, 1979. However, the Income Tax Appellate Tribunal reversed this decision, stating that a similar requirement existed under Section 212(3) and the penalty proceedings were justified. Subsequently, the assessee sought a reference to the High Court, which was directed by the Supreme Court.

What were the issues?

1. Whether the tax paid within the stipulated period without filing an estimate is deductible while imposing penalty? (Question of law, turning on Section 212(3) and potentially Section 271(1)(c) of the Income Tax Act, 1961). Assessee's contention: The assessee argued that the tax paid should be deductible when determining the basis for penalty, relying on the Supreme Court judgment in Commissioner of Income Tax Vs. Kohinoor Flour Mills (P) Ltd. (1991) 187 ITR 585. Revenue's contention: The revenue raised an objection that the question referred to the High Court did not arise from the Tribunal's order. However, the High Court noted that the question was considered by the CIT(Appeals) and thus arose before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 212(3),Section 209-A,Section 256(2),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

I.T.R. No.10 of 1997 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I. T. R NO. 10 OF 1997 DECIDED ON: 07.09.2009 M/s Metalways (P) Ltd. ...Applicant Versus The Commissioner of Income Tax, Patiala ...Respondent CORAM : HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present: Mr. S. K. Mukhi, Advocate, for the applicant-assessee. Ms. Urvashi Dhugga, Advocate, for the respondent-revenue. ADARSH KUMAR GOEL, J. (ORAL)

1.

The following question has been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench under Section 256(2) of the Income Tax Act, 1961 (in short 'the Act') arising out of its order dated 17.09.1979 in I.T.A. No.535/Chandi/83 relating to assessment year 1978-79 in:- “Whether the tax paid within the stipulated period without filing an estimate and treated as advance is deductible while imposing penalty?”

2.

The assessee did not file estimate of advance tax by the year ending 31.03.1978 in terms of Section 212 (3) of the Act.

I.T.R. No.10 of 1997 -2- However, the advance tax was deposited. Penalty proceedings were initiated for non-compliance of provisions of Section 212 (3) for not filing the estimate. After consideration, penalty was imposed.

3.

The CIT (Appeals) set aside the penalty proceedings only on the ground that Section 209-A which laid down requirement of filing of estimate came into force w.e.f. 01.04.1979. This view was reversed by the Tribunal with the observation that same requirement existed under Section 212 (3) of the Act and initiation of penalty proceedings was justified. Thereafter, at the instance of the assessee, the above question has been referred for opinion of this Court.

4.

We have heard learned counsel for the parties.

5.

Learned counsel for the Revenue raises objection that the question does not arise from the order of the Tribunal.

6.

Learned counsel for the assessee submits that the question having been raised before the CIT (Appeals) as noted para 3 of the order cannot be said to be not arising before the Tribunal. The Tribunal while reversing the order of the Tribunal had to deal with the said question. We are unable to accept the objection of learned counsel for the revenue as the reference itself has been made under orders of Hon'ble Supreme Court mentioned in para 1 of statement of case.

7.

Learned counsel for the assessee relies on judgment of Hon'ble Supreme Court in “Commissioner of Income Tax Vs. Kohinoor Flour Mills (P) Ltd.” (1991) 187 ITR 585 to submit that the assessee was entitled to deduct the payment of tax made for determination of basis for penalty. No contrary view has been I.T.R. No.10 of 1997 -3- shown. Accordingly, question has to be referred in favour of the assessee and against the revenue.

8.

It is, however, made clear that no reference having been sought or made on question of justification or otherwise for levy of penalty, we do not express any view on the said view.

9.

The reference is disposed of. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY)

JUDGE September 07, 2009 Shalini/Gaurav

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