COMMISSIONER OF INCOME TAX-II CHANDIGARH vs. M/S ARSH INTERNATIONAL

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ITA/71/2013HC Punjab & HaryanaPHHC01105282201307 May 2015Bench: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE A.B. CHAUDHARI2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that while the issue regarding the applicability of Section 40(a)(ia) of the Income Tax Act, 1961, to cases where payments were made to the payee by the end of the assessment year had been decided in favor of the revenue in other group appeals, the Tribunal had taken a contrary view in the case of ACIT Vs Merilyn Shipping & Transports [136 ITD 23(SB) (Vishakhapatnam)]. The High Court acknowledged that a contrary view had also been taken by the Allahabad High Court. In light of this prevailing uncertainty and the existence of a contrary Special Bench decision of the Tribunal, the High Court found no warrant to interfere with the Tribunal's exercise of discretion in setting aside the order of penalty. Therefore, the substantial question of law was answered against the revenue and in favor of the assessee. The appeal was dismissed.

What were the facts?

This case involves an appeal by the Commissioner of Income Tax-II, Chandigarh (the revenue) against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had dismissed the revenue's appeal against the Commissioner of Income Tax (Appeals) order, which had set aside a penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed for failure to deduct tax at source as required by Chapter 17. The dispute centers around the applicability of Section 40(a)(ia) to cases where payments were made to payees by the end of the assessment year. The High Court had previously decided this issue in favor of the revenue in other cases.

What were the issues?

1. Whether, in view of the facts, law, and circumstances, the learned ITAT erred in law in deleting the penalty levied under Section 271(1)(c) for furnishing inaccurate particulars of income by making a patently wrong claim of expenses, resulting in non-payment of due taxes on its income? Assessee's contentions: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT's decision to set aside the penalty implies that the assessee likely argued that the penalty was not warranted. Revenue's contentions: The revenue argued that the ITAT erred in deleting the penalty. The core of the revenue's argument, as inferred from the judgment, is that the assessee made a patently wrong claim of expenses, leading to non-payment of taxes, and thus penalty under Section 271(1)(c) was justified. The revenue also relied on the High Court's earlier decision in favor of the revenue regarding the applicability of Section 40(a)(ia).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA-71-2013 (O&M) Date of decision:- 07.05.2015

The Commissioner of Income Tax-II, Chandigarh ...Appellant Versus

M/s Arsh International, Mohali ...Respondent

CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE

HON’BLE MR. JUSTICE G.S. SANDHAWALIA

Present: Ms. Urvashi Dhugga, Advocate,

for the appellant.

* * * * S.J. VAZIFDAR, A.C.J. (ORAL)

This is an appeal against the order of the Tribunal dated 30.08.2012 dismissing the appeal against the order of the Commissioner of Income Tax (Appeals) setting aside the penalty under Section 271 (1) (c) of the Income Tax Act, 1961 for failure to deduct tax at source as required by Chapter 17. 2. The appeal was admitted by an order dated 08.10.2013 on the following substantial question of law:- “Whether in view of the facts law and circumstances of the case, the ld. ITAT erred in law in deleting the penalty levied u/s 271(1)(c) for furnishing inaccurate particulars of income by making patently wrong claim of expenses, resulting in non- payment of due taxes on its income?”

3.

The issue as to whether the provisions of Section 40 (a) (ia) of the Income Tax Act, 1961 are applicable to cases where payments have been made to the payee by the end of the assessment year was decided by us in favour of the revenue in a group of appeals decided on 29.04.2015 the first of which is ITA-716-2009 titled as P.M.S. Diesels, Phagwara Vs Commissioner of Income Tax-II, Jalandhar. AMODH SHARMA 2015.05.08 18:54 I attest to the accuracy and authenticity of this document chandigarh

ITA-71-2013 (O&M)

2 4. We have held in favour of the revenue on all counts in this regard. However, at the relevant time, a Special Bench of the Tribunal had taken a contrary view in the case of ACIT Vs Merilyn Shipping & Transports [136 ITD 23(SB) (Vishakhapatnam)]. As we noted in our judgement, a contrary view had been taken by the Allahabad High Court. In these circumstances, we see no warrant to interfere with the exercise of discretion of the Tribunal in setting aside the order of penalty. 5. The question of law is accordingly answered against the revenue and in favour of the assessee/respondent. The appeal is accordingly dismissed.

There shall be, however, no order as to costs.

(S.J. VAZIFDAR) ACTING CHIEF JUSTICE

(G.S. SANDHAWALIA)

JUDGE 07.05.2015 Amodh AMODH SHARMA 2015.05.08 18:54 I attest to the accuracy and authenticity of this document chandigarh

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