Commissioner Of Income Tax v. Pure Drinks (New Delhi) Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.R. No.19 of 1996Date of decision: 8.10.2010 Commissioner of Income Tax. Vs. Pure Drinks (New Delhi) Ltd. -----Applicant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE ALOK SINGH Present:-Mr. T.K. Joshi, Standing Counselfor the applicant. for the applicant. Mr. Akshay Bhan, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1. Following question of law has been referred foropinion of this Court by the Income Tax Appellate Tribunal,Chandigarh, arising out of itsorder dated 13.12.1994 in I.T.A.No.397/89 for the assessment year 1984-85:- “Whether, on the facts and in the circumstances of thecase, the Tribunal was right in law in quashing thepenalty for the period from 25.2.1985 to 31.10.1985and sustaining it from 1.11.1985 to 24.3.1986, u/s140-A(3) of the Income Tax Act, 1961? 2. The assessee was engaged in the business ofmanufacturing and bottling of soft drinks. It failed to deposit theentire amount of advance tax, on account of which, the AssessingOfficer initiated proceedings under Section 140-A of the IncomeTax Act, 1961 (for short, “the Act”) for levy of penalty. Thedefence of the assessee was that default in making payment wason account of financial stringency due to destruction ofequipments and material during riots in November, 1984. TheAssessing Officer did not accept the explanation and imposedpenalty @ 2% per month. The CIT(A) accepted the explanationof the assessee for the period from 1.11.1984 to 25.2.1985 i.e. forabout four months. On further appeals, by the revenue as well asby the assessee, the Tribunal held that for the period from1.11.1984 to 25.2.1985, for which relief was allowed by the CIT(A), penalty had not even been levied by the Assessing Officer.The Tribunal granted relief for the period from 25.2.1985 to31.10.1985. 3. We have heard learned counsel for the parties. 4. Learned counsel for the revenue referred to para 9 ofthe order of the Tribunal, taking a view that plea of financialhardship could not be accepted, for the reasons mentionedtherein and submitted that thereafter, relief could not have beengiven. On the other hand, learned counsel for the assesseerelies on finding of the Tribunal in para 11, as under:- 11.......We have already seen that the Tribunal in theassessee’s case relating to earlier two assessmentyears thought it appropriate to give benefit on accountof difficulties faced by the assessee because of riotsand fire on 1.11.1984. In our opinion, certainbreathing period should be reasonably allowed to theassessee on account of unprecedented andunfortunate incidents on account of which it sufferedextensive damage and huge losses. Therefore, wefind it appropriate to allow relief from 25.2.85 to31.10.1985.” 5. It is clear from the finding recorded by the Tribunalthat breathing period was allowed to the assessee on account ofriots and fire in November, 1984. The said event is a well knownevent. It cannot be disputed that under Section 140-A(3) of theAct, levy of penalty is not mandatory. There is no minimumpenalty provided. On the facts and circumstances, if the Tribunalhaving regard to the hardship to the assessee, has waivedpenalty for a limited period, the view so taken cannot be held tobe erroneous. 6. Accordingly, question of law is answered against therevenue and in favour of the assessee. 7. The reference is disposed of. (ADARSH KUMAR GOEL) JUDGE October 08, 2010ashwani (ALOK SINGH) JUDGE