Case Law Details
Anamallais Bus Transports P Ltd Vs PCIT (Madras High Court)
Introduction: The Madras High Court, in the matter of Anamallais Bus Transports P Ltd vs. PCIT, has issued a directive challenging the penalty proceedings under Section 271-E of the Income Tax Act. The court’s preliminary view suggests a lack of cash transactions, prompting a reevaluation by the Appellate Authority.
This writ petition challenges the order dated 09.10.2023, asserting that the petitioner, Anamallais Bus Transports P Ltd, faced unjust penalty proceedings. The company had extended a sum of Rs.14,00,00,000/- to M/s. Shakti Sugar Ltd, prompting repayments to other entities. The court, upon examination, finds no violation of the Income Tax Act.
Background: The petitioner contends that despite clear indications in audited accounts of no cash transactions, the Assessing Officer imposed a penalty under Section 271-E. The petitioner filed an appeal, but the Appellate Authority demanded a 20% deposit. This led to the filing of the present writ petition.
Court’s Observation: The court observes that the transactions between the petitioner and M/s. Shakti Sugar Ltd, resulting in the reduction of liabilities, were in accordance with the law. It notes that the Assessing Officer assumed a cash transaction, leading to the incorrect imposition of penalties. The court holds a prima facie view that the penalty proceedings should be set aside.
Directive to Appellate Authority: The Madras High Court directs the Appellate Authority to take the petitioner’s appeal on file without insisting on any pre-deposit. It further instructs the authority to consider the issues highlighted in the order and dispose of the appeal within eight weeks.
Conclusion: The court’s preliminary assessment in the Anamallais Bus Transports P Ltd vs. PCIT case leans towards setting aside penalty proceedings. This decision emphasizes the absence of cash transactions and calls for a reevaluation by the Appellate Authority, providing relief to the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition has been filed challenging the order dated 09.10.2023 passed by the respondent.
2. The main grievance of the petitioner is that the petitioner-assessee-Company has advanced a sum of Rs.14,00,00,000/- to M/s. Shakti Sugar Ltd., and M/s.Shakti Sugar Ltd., on the request of the petitioner-assessee-Company, (since M/s. Shakti Sugar Ltd., is liable to pay Rs.14,00,00,000/- to the petitioner) made the repayment of the said sum to three entities, viz., M/s.Hapline Commodities Ltd, ii) M/s.Padam Sugar Company and iii) M/s.Medicare Clinic Pvt. Ltd to a sum of Rs.3,55,00,000/-, Rs.4,59,50,000/- and Rs.20,50,000/- respectively, and the petitioner-Compay is liable to pay sum of Rs.8,75,00,000/- to all the three entities, and accordingly, the suitabe entries have been made in the books of M/s. Shakti Sugar Ltd and also in the books of the assessee company, with regard to the reduction of liabilities of M/s. Shakti Sugar Ltd.
4. Mr.A.S.Sriraman, learned counsel for the petitioner would submit that there was no cash transaction made by the petitioner and the same has also been clearly stated in the audited books of accounts and therefore, there is no violation of the provisions of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). In spite of that, the respondent/Assessing Officer passed the assessment order imposing the penalty under Section 271-E of the Act. Against the said order, an appeal has been filed by the petitioner along with an application for stay, however, the respondent/Appellate Authority directed the petitioner to pay 20% of the demand. Hence, the present writ petition has been filed.
5. On the other hand, Mr.R.S.Balaji, learned Senior Standing Counsel assisted by Ms.S.Premalatha, learned Junior Standing Counsel for the respondent would submit that in a similar issue, this Court has already passed an order directing the respondent/Appellate authority to dispose of the appeal within a period of eight (8) weeks from the date of receipt of the order, without insisting upon any deposit
6. Heard both sides and also perused the materials available on record.
7. The petitioner-Assesse has advanced a sum of Rs.14,00,00,000/- to M/s. Shakti Sugar Ltd., which, in turn, made repayment to the 3 entities viz., M/s. Hapline Commodities Ltd, M/s.Padam Sugar Company and M/s. Medicare Clinic Pvt., to a sum of Rs.3,55,00,000/-, Rs.4,59,50,000/- and Rs.20,50,000/- respectively. The said sum of Rs.14,00,00,000/- was paid by M/s. Shakti Sugar Ltd on the request made by the petitioner, since M/s. Shakti Sugar Ltd is liable to pay Rs.14,00,00,000/- to the petitioner- Company and with regard to such payments, suitable entries have also been made both in the books of M/s. Shakti Sugar Ltd., and also in the petitioner- Company and the same has been reflected in the audited books of accounts.
7.1 On a perusal of records, it is revealed that the transactions between the two concerns, whereby, the liability of M/s. Shakti Sugar Ltd., has been reduced to an extent on payment made to clear the liablities of the assesse company appears to be in accordance with law and it is permissible. Hence, the question of dealing with cash transaction does not arise. In the present case, the Assessing Officer concerned, proceeded, as if, there was a cash transaction, and therefore, construed the entire repayment of loan by M/s. Shakti Sugar Ltd. as income of the petitioner and proceeded in accordance with law in terms of the Income Tax Act.
7.2 As discussed above, with regard to the grant of loan by the petitioner to M/s. Shakti Sugar Ltd. and repayment of the same made by M/s. Shakti Sugar Ltd. to the aforesaid three entitiled based on the instructions of the petitioner and as regards the discharge of liabilities, suitable enteries have been made both in the books of account of the petitioner as well as M/s. Shakti Sugar Ltd. and in a similar way, the same was reflected in the audited books of account. When such being the case, initiation of proceedings against the petitioner appears to have been made under an wrong assumption that there was cash transaction. However, all these aspects have not been dealt with by the Assessing Officer and the same can be gone into by the Appeallate Authority in an Appeal pending before him.
7.3 Therefore, this Court, prima facie is of the view that the entire penalty proceedings passed under Section 271-E of the Act is liable to be set aside. Accordingly, this Court directs the Appeallate Authority concerned to to take the petitioner’s Appeal on file without insisting upon any pre-deposit and consider the issues that were discussed by this Court in this order and thereafter, shall dispose the appeal in accordance with law, within a period of eight (8) weeks from the date of receipt of a copy of this order.
8. Accordingly, the Writ Petition stands disposed of. No costs. Consequently, connected miscellaneous petition is closed.
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