COMMISSIONER OF INCOME TAX GURGAON vs. JAI CHAND BANSAL

PDF · subscribers
ITA/295/2014HC Punjab & HaryanaPHHC01109436201410 February 2015Bench: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE MAHABIR SINGH SINDHU3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the discretion exercised by the CIT(A) to reduce the penalty to 5% did not suffer from any error of jurisdiction, nor was it perverse or arbitrary. The Court noted that while there was a delay and the assessee was deemed in default, and the assessee did not respond to the show-cause notice, the CIT(A) had considered relevant facts. These included that taxes emanating from a search by the group had been paid, the Settlement Commission was approached, and a part of the self-assessment tax of Rs.97.81 lacs along with interest was paid by 31-12-2011. Evidence of payment by the assessee and the group was furnished. The CIT(A) considered the penalty levy due to non-payment of self-assessment tax and the assessee's lack of response to the show-cause notice, but ultimately found the 20% penalty to be harsh. The CIT(A)'s decision to direct the AO to levy penalty at 5% was based on a bonafide exercise of discretion after considering all relevant facts. The affirmation of this order by the Tribunal was also not considered perverse or arbitrary, and it did not give rise to any substantial question of law. The Court answered the question of law against the revenue and dismissed the appeal.

What were the facts?

The Revenue is in appeal before the High Court of Punjab and Haryana at Chandigarh against an order dated 26.02.2014 passed by the Income Tax Appellate Tribunal (ITAT). The ITAT had affirmed the order of the Commissioner of Income Tax (Appeals) (CIT(A)), Gurgaon, which reduced a penalty levied by the Assessing Officer (AO) from 20% to 5% of the unpaid self-assessment tax. The AO had levied the penalty for the assessee's failure to appear before the AO, deposit tax within time, and for providing a prima facie false explanation. The assessee is Shri Jai Chand Bansal, and the assessment year is not explicitly stated but relates to self-assessment tax payment due by 31-12-2011.

What were the issues?

1. Whether in law and in the circumstances of the case, the Hon'ble ITAT has erred by confirming the order of the CIT(A), restricting the quantum of penalty under Section 221(1) to 5% of the unpaid self-assessment tax instead of @ 20% levied by the assessing officer, in spite of the provisions of Section 249(4) by which appeal against penalty was not maintainable? Assessee's arguments: Not recorded in the judgment. Revenue's arguments: The assessee did not appear before the AO, failed to deposit the tax within time, and provided a prima facie false explanation. Therefore, the CIT(A) was not justified in reducing the penalty from 20% to 5%. The AO had already taken a lenient view by imposing only 20% penalty, as penalty up to 100% can be imposed. The reduction to 5% is not justified. The revenue also implicitly raises the issue of maintainability of appeal against penalty under Section 249(4) by including it in the substantial question of law.

Which sections of the Income-tax Act were involved?

Section 221(1),Section 140A(3),Section 249(4)

AI-generated summary — verify with the full judgment below

ITA-295-2014 [ 1 ] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA-295-2014

Decided on : 10.02.2015

Commissioner of Income Tax (Central), Gurgaon ..... Appellant

VERSUS Shri Jai Chand Bansal ..... Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE B. S. WALIA Present: Mr.Rajesh Sethi, Advocate, for the appellant.

******* RAJIVE BHALLA, J. (ORAL) The revenue is before us challenging order dated 26.02.2014, passed by the Income Tax Appellate Tribunal (hereinafter referred to as the 'Tribunal') Chandigarh Bench 'A', Chandigarh, by asserting that the Tribunal has erred in affirming the order passed by the Commissioner of Income Tax (Appeals) (hereinafter referred to as the 'CIT(A)', Gurgaon, reducing the penalty from 20% to 5%, by raising the following substantial question of law: - “(i) Whether in law and in the circumstances of the case, the Hon'ble ITAT has erred by confirming the order of the CIT(A), restricting the quantum of penalty u/s 221(1) to 5% of the unpaid self assessment tax instead of @ 20% levied by the assessing officer in spite of the provisions of section 249(4) by which appeal against penalty was not maintainable?”

ITA-295-2014 [ 2 ] Counsel for the revenue submits that as the assessee did not appear before the assessing officer, failed to deposit the tax within time and the explanation proffered by the assessee is prima- facie false, the CIT(A) is not justified in reducing the penalty from 20% to 5%. It is further submitted that as penalty to the extent of 100% can be imposed and the assessing officer had already taken a lenient view of the mater while imposing penalty of 20%, the reduction of penalty to 5% is not justified. We have heard counsel for the revenue and perused the orders passed by the Tribunal as well as the CIT(A). A perusal of the aforesaid orders reveals that discretion exercised by the CIT(A) to reduce penalty to 5% does not suffer from any error of jurisdiction much less is it perverse or arbitrary. A relevant extract from the order passed by the CIT(A), reads as follows: - “.... No doubt there was a delay and in terms of section 140A (3) and the assessee is deemed to be assessee in default. It is also seen that prior to the levy of penalty, opportunity was afforded followed by issue of show-cause. No submission nor any appearance was stated filed/made. However one cannot omit the fact that the taxes emanating from the search by the group had been paid and Settlement Commission was also approached. The self assessment tax of Rs.97.81 lacs alongwith the interest was also paid in part by 31-12-2011. Evidence of the payment by the assessee and the group was also furnished. Be that as it may, the levy of penalty was due to non-payment of self-assessment tax and assessee did not respond to the show cause notice issued by the A.O. in this regard. Hence considering the facts and circumstances of the case I think it will be in the fitness of things to direct the A.O. to levy penalty @ 5% instead of 20% which is considered a bit harsh.”

ITA-295-2014 [ 3 ] The CIT(A) has after considering all relevant facts proceeded to exercise bonafide discretion to reduce penalty. The decision so recorded is neither perverse nor arbitrary. The affirmation of this aforesaid order by the Tribunal cannot be said to be perverse or arbitrary much less does it give rise to any substantial question of law. As a consequence, we answer the question of law against the revenue and dismiss the appeal.

[ RAJIVE BHALLA ] JUDGE 10.02.2015

[ B. S. WALIA ] Shamsher S.Sabharwal JUDGE SHAMSHER SINGH 2015.02.12 12:15 I attest to the accuracy and authenticity of this document Chandigarh

More judgments on Section 221(1)

All 159 judgments and leading authorities on Section 221(1) →

Recent GST High Court judgments

Search GST case law →