Introduction: The Madras High Court has intervened in the case of Annamalai Bus Transports P Ltd. vs PCIT, directing the CIT (Appeals) to promptly dispose of the appeal filed by the assessee within 60 days. The court observed procedural irregularities and a lack of adherence to principles of natural justice in the penalty proceedings, highlighting the absence of cash transactions.
1. The writ petition challenges the order of the first respondent dated 20.09.2023, directing the petitioner to pay 20% of the disputed demand for the Assessment Year 2018-19.
2. The petitioner’s case involved penalty proceedings under Section 271 D of the Income Tax Act, 1961, initiated erroneously. Previous writ petitions led to the setting aside of penalty proceedings for reconsideration.
3. Despite the petitioner’s appeals and responses during the penalty proceedings, the respondent finalized the penalty on 17.11.2022.
4. The petitioner filed an appeal before the National Faceless Appeal Center (NFAC) and sought a stay. However, the respondent, through the impugned order on 20.09.2023, granted conditional stay, requiring the petitioner to pay 20% of the disputed tax.
5. The learned counsel for the petitioner argued against the procedural irregularities and violation of principles of natural justice, emphasizing that no cash transaction occurred.
6. The court, after considering the petitioner’s contentions and reviewing the balance sheet, found no evidence of cash transactions. It directed the Appellate Authority to take up the appeal without insisting on any deposit and to consider the balance sheet details, disposing of the appeal within eight weeks.
Conclusion: The Madras High Court’s intervention in the Annamalai Bus Transports P Ltd. vs PCIT case ensures a fair and expedited resolution of the appeal, emphasizing the need to consider details from the balance sheet and addressing procedural irregularities. The directive to dispose of the appeal within 60 days aims at ensuring a swift and just resolution for the assessee.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The challenge in this Writ Petition is to the order dated 20.09.2023 passed by the first respondent for the Assessment Year 2018-19, whereby, the petitioner (assesseee) is directed to pay 20% of the disputed demand.
2. Facts of the case in brief are as follows:-
i) The petitioner filed his return of income for AY 2018-19 declaring the total income at (Rs.60,909/-). The petitioner’s case was selected for scrutiny, ultimately, resulting in initiation of penalty proceedings under Section 271 D of Income Tax Act, 1961 dated 12.02.2022 against the petitioner. Challenging the said penalty proceedings, the petitioner filed Writ Petitions before this Court in W.P.Nos.5911 and 5914 of 2022 and this Court vide order, dated 16.03.2022 set aside the penalty proceedings and remanded the matters for reconsideration.
ii) The respondent, in consequence of the said direction issued by this Court, issued a fresh notice to the petitioner in regard to the penalty proceedings initiated in terms of Section 271 D of I.T.Act and the petitioner, on receipt of such notices, had filed several responses and also appeared through video conference and pleaded for dropping the said proceedings as the same is in violation of provisions of Section 269 SS of the Act, however, the respondent, vide order dated 17.11.2022, finalized the penalty proceedings.
iii) Aggrieved against the said order dated 17.11.2022, the petitioner filed an Appeal on 05.12.2022 before the National Faceless Appeal Center (NFAC) and also filed a Petition before the Local Committee, seeking stay of disputed arrears pending Appeal before NFAC. However, the respondent passed the impugned order dated 20.09.2023, granting conditional stay, by directing the petitioner to pay 20% of the disputed tax. Hence, the present Writ Petition.
3. Mr.A.S.Sriraman, the learned counsel appearing for the petitioner would submit that demand was raised against the petitioner to the tune of Rs.41,74,41,800/- due to the reason that the petitioner has made cash transaction to the extent of the said amount, and thereby, the petitioner (assessee) has violated provisions of Section 269 SS of the Act. The learned counsel submitted that there was no cash transaction made by the petitioner either by way of cash or RTGS or through any other mode, and the loan amount of Rs.41.66 crores is with respect to the advance from their sister concern to the extent of purchase of shares from the sister concern and the petitioner is yet to discharge their liability and to substantiate the same, the learned counsel referred to the Balance Sheet as on 31.03.2018, pertaining to the financial year 2017-18, wherein, in respect of the Column ‘Non-Concurrent Liabilities, the other Long Terms Liabilities is mentioned as Rs.41,66,39,600/-, however, the respondent under an impression that there was a cash transaction made by the petitioner to the extent of said amount, imposed penalty at 100% against the petitioner. The learned counsel further submitted that aggrieved against the penalty proceedings, the petitioner preferred appeal before NFAC, along with a Petition for Stay, however, the respondent granted a conditional stay, by directing the petitioner to pay 20 % of the disputed tax. Therefore, the learned counsel assailed the impugned order by contending that the same suffers from procedural irregularity as well as from violation of principles of natural justice, inasmuch as, the report of the Assessing Officer which was referred to and relied on in the impugned order was not served on the petitioner and no opportunity was granted to the petitioner before passing the impugned order.
4. Per contra, Mr.R.S.Balaji, learned Senior Standing Counsel assisted by Ms. S. Premalatha, learned Junior Standing Counsel for the respondent would submit that during the scrutiny of assessment proceedings in respect of the Income Tax Return filed by the petitioner for AY 2017-18, it is noticed that the petitioner-assessee has accepted the loan and advance amounting to Rs.41,66,39,600/- and Rs.8,02,200/- from related parties, viz., M/s.ABT Investment (India) Pvt. Ltd., and ABT Ltd., and the said loan is shown towards purchase of unlisted shares of the said Companies, and the said loan was certainly received in the mode other than account payee cheque, bank draft or use of electronic clearing system or through any other electronic mode and hence, the petitioner has violated the provision of Section 269 SS of the Act, therefore, penalty proceedings were initiated against the petitioner and though the petitioner challenged the same by Appeal before NFAC, pending Appeal, the petitioner sought for a Stay, and the respondent while granting stay, since the huge amount was involved, directed the petitioner to pay 20% of the outstanding amount, and the same does not call for interference.
5. Heard the learned counsel appearing for the petitioner and the learned Senior Standing counsel appearing for the respondents and perused the materials available on record.
6. In the instant case, it is seen that demand was raised by the respondent-Department to the extent of Rs.41,74,41,800/-. The said demand was raised under an impression that there was cash transaction made by the petitioner to that extent of the said amount, which is not in consonance with the provisions of Section 269 SS of the Act, and hence, 100% penalty has been imposed against the petitioner. According to the petitioner, there is no liability, inasmuch as, no cash transaction has taken place and to substantiate his contention, the learned counsel referred to the Balance Sheet pertaining to the financial year 2017-18, wherein, in respect of the Column ‘Non-Concurrent Liabilities, the other Long Terms Liabilities is mentioned as Rs.41,66,39,600/-, and since the petitioner is yet to discharge their liability, they have mentioned the said amount in respect of the Column, Long Term Liabilities.
6.1 As far as investment to an extent of Rs. 41,66,39,600/-is concerned, the amount is yet to be paid and that is the reason why, the petitioner has showed in the column ‘Long Term Liabilities’, which is equivalent to the said investment. All these aspects, the Assessing Officer should have considered, however, he has failed to do the same.
7. Thus, on mere perusal of the balance sheet referred to by the learned counsel for the petitioner, it is clear that no amount has been passed on by the petitioner either by way of cash or RTGS or any other modes. In these circumstances, this Court is of the view that initiation of penalty proceedings under an impression that 100% cash transaction to the tune of Rs.41,66,39,600/- had taken place, is not proper and such initiation of proceedings is due to wrongful interpretation of the balance sheet of the petitioner’s Company, based on which, the 1strespondent passed the impugned order dated 20.09.2023, directing the petitioner to pay 20% of the outstanding demand and the balance 80% of the demand is stayed till the disposal of the Appeal by NFAC/Appellate Authority. Since this Court is of the above view that as there was no cash transaction and no amount was transferred, therefore, the impugned proceedings, based on the audited balance sheet and asking the petitioner to pay the deposit of 20% is not proper and also not justifiable. Therefore, this Court directs the Appellate Authority to take the Appeal on file without insisting upon any deposit and to consider the aspect of transfer of cash by taking into consideration of the entry made under the head Notes.4 and Note7.1 in the Balance sheet of the petitioner-Company as on 31.03.2018 (wherein, the investment made in shares, the amount is yet to be paid, and this aspect is clear from the fact that an equivalent amount is shown in respect of the column ‘Other Long Term Liabilities’, which ultimately shows that the consideration is yet to be passed on) and dispose of the Appeal in accordance with law within a period of eight weeks from the date of receipt of a copy of this order.
8. With these observations, this Writ Petition is disposed of. Consequently, connected Miscellaneous Petition is closed. No costs.