Fountainhead Communications Ltd v. Additional Commissioner Of Income Tax, Company Range Ii

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 21.04.2006 CORAM: THE HON'BLE MR. JUSTICE K.MOHAN RAM Writ Petition No.11225 of 2006and W.P.M.P.No.12763 of 2006 Fountainhead Communications Ltd.,Represented by its Managing DirectorMr.Suresh Pillai,Chennai – 600 006. .. Petitioner -Vs- 1. Additional Commissioner of Income Tax, Company Range II, No.121, Mahatma Gandhi Road, Chennai – 600 034. 2. Commissioner of Income Tax, (Appeals) – III No.121, Mahatma Gandhi Road, Chennai – 600 034 3. Income Tax Appellate Tribunal Chennai – Bench :A, Rajaji Bhavan, Chennai. .. Respondents PRAYER : Petition filed under Article 226 of the Constitution ofIndia for the issuance of a Writ of Certiorari to set aside theorder dated 31.03.2006 passed by the third respondent. O R D E R Ms. Pushya Seetharaman, learned Senior Central GovernmentStanding Counsel, takes notice for the respondents. By consent ofboth the parties, the writ petition itself is taken up for final https://hcservices.ecourts.gov.in/hcservices/ disposal. 2. The prayer in the writ petition is for the issuance of aWrit of Certiorari to set aside the order dated 31.03.2006 passed bythe Income Tax Appellate Tribunal, Chennai – Bench :A. 3. The facts of the case are as follows:- The petitioner Company filed its returns for the assessmentyear 2003-2004 on 01.12.2003 declaring an income of Rs.30,00,780/-along with a tax audit report under Section 44AB as an annexureenlisting the cash transactions in excess of Rs.20,000/- to bringthe notice of authorities. Pursuant thereto, the AdditionalCommissioner of Income Tax, Company Range II, on 30.08.2004, issueda notice to furnish the reasons for the two transactions in cash inexcess of Rs.20,000/- failing which a penalty would be levied at therate of 100% of the amount transacted in cash. On 25.02.2005, thepetitioner Company filed its reply to the show cause noticeexplaining the pressing circumstances due to which cash transactionsin excess of Rs.20,000/- were executed. The First respondentrejected the explanations of the petitioner without giving reasonsand levied a penalty of Rs.11,65,240/-. The petitioner preferred anappeal to the second respondent. The second respondent upheld thefindings of the First respondent and dismissed the appeal. Hencethe petitioner preferred an appeal before the Income Tax AppellateTribunal and the same is pending for disposal. The First respondenthas been sending notices under Section 226(3) to various banks wherethe petitioner maintains an account and also to various clients ofthe petitioner. It is pertinent to submit that the First respondentissued notices to the tune of Rs.22,52,039/-, eventhough the penaltyunder Section 27(1) was only Rs.11,65,240/-. The petitioner filed astay petition before the Tribunal and the same was taken up forhearing on 31.03.2006 and the Tribunal passed the following order:- "By this stay petition, the assessee seeks stay forrecovery of disputed tax demand of Rs.11,65,240/- 2. After hearing the rival parties and perusing thematerial placed before us, we are of the opinion that itis not a fit case for grant of stay as the assessee hasnot paid any amount of the total demand raised by theDepartment and the tax due which is now sought to bestayed is in the nature of penalty. However, we areinclined to grant early hearing of the appeal andaccordingly direct the Registry to post the case forhearing on out of turn basis on 01.06.2006. It is alsodirected that the Assessee will not seek unnecessaryadjournment on the date of hearing of the appeal". Aggrieved by the said order the above writ petition hasbeen filed. 4. Heard Mr. P.S.Raman, learned Senior Counsel forthe petitioner, and Ms.Pushya Seetharaman, leanred SeniorStanding Counsel for the respondents. Aggrieved by the said order the above writ petition hasbeen filed. 4. Heard Mr. P.S.Raman, learned Senior Counsel forthe petitioner, and Ms.Pushya Seetharaman, leanred SeniorStanding Counsel for the respondents. 5. Mr.P.S.Raman, learned Senior Counsel for thepetitioner, drew the attention of this Court to theprovisions contained in Section 269(SS), 271(D) and 273(B)of the Income Tax Act and submitted that the order of theFirst Appellate Authority is a non speaking order anddrew the attention of this Court to paragraph 6 of theorder of the First Appellate Authority is as follows:- "6. I have considered the rival submissions. Theappellant stated that the cash loan was taken to settle asupplier payment and to get its cheques honoured. I donot find any considerable force in the submissions of theappellant. In the circumstances of the case, I do notfind any infirmity in the action of the AdditionalCommissioner of Income-tax who levied the penalty, as thiscase is a fit case for levy of penalty. The penalty ofRs.11,65,240/- levied u/s 271D is confirmed. Theappellant fails on this ground". 6. Referring to the above said order of the First AppellateAuthority, the learned Senior Counsel submits that though all thetransactions are reflected in the account books and there is noallegation of any suppression of income etc., the First AppellateAuthority has not at all considered the explanations submitted bythe petitioner in the grounds of appeal filed and in the petitionseeking for waiver and sufficient grounds have been raised toestablish a prima facie case for grant of waiver. But the Tribunalhas not at all considered any of these aspects, but has simplyrejected the petition and fixed an early date for hearing. 7. Ms.Pushya Seetharaman, learned Senior Standing Counsel forthe Income Tax Department submits that the Tribunal has fixed anearly date for the hearing of the appeal, since the liability on thepetitioner is huge. She submitted that some conditions should beimposed for granting interim orders. 8. The said submissions made by the learned Senior Counsel forthe petitioner are acceptable and it is prima facie seen that theFirst Appellate Authority has not at all considered the case onmerits and has also not considered the various objections andexplanations offered by the petitioner. The order of the FirstAppellate Authority is virtually a non speaking order passed in a mechanical manner. The Tribunal ought to have considered theseaspects of the matter and considered the petition filed by thepetitioner for waiver in accordance with law. But, instead of doingthat, the Tribunal has passed an order rejecting the petitionstating that it is not a fit case for grant of stay, as the assesseehas not paid any amount towards the total demand raised by theDepartment and the tax due which is now sought to be stayed is inthe nature of penalty. This Court is of the considered view thatthe Tribunal has also committed an error in not considering as towhether a prima face case has been made out for granting waiver, asprayed for by the petitioner when a huge amount is demanded from thepetitioner assessee that too in the nature of penalty. The Tribunalought to have considered whether a prima facie case is made out ornot. Since the order suffers from non application of mind, the sameis liable to be set aside. 9.Considering the fact that all the transactions in questionare reflected in the accounts as submitted by the learned SeniorCounsel for the petitioner and there is no suppression, there shallbe an order of interim stay till the disposal of the Appeal. Sincethe Tribunal has fixed an early date for final disposal of theappeal i.e. on 01.06.2006, the petitioner shall not seek anyadjournment on that date and cooperate with the Tribunal indisposing of the appeal. 9.Considering the fact that all the transactions in questionare reflected in the accounts as submitted by the learned SeniorCounsel for the petitioner and there is no suppression, there shallbe an order of interim stay till the disposal of the Appeal. Sincethe Tribunal has fixed an early date for final disposal of theappeal i.e. on 01.06.2006, the petitioner shall not seek anyadjournment on that date and cooperate with the Tribunal indisposing of the appeal. With the above directions the writ petition is disposed of. Nocosts. Consequently, connected W.P.M.P is closed. Sd/Asst.Registrar/true copy/ Sd/Asst.RegistrarSub Asst.Registrar jbm/rpa To 1. Additional Commissioner of Income Tax, Company Range II, No.121, Mahatma Gandhi Road, Chennai – 600 034.2. Commissioner of Income Tax, (Appeals) – III No.121, Mahatma Gandhi Road, Chennai – 600 034 3. Income Tax Appellate Tribunal Chennai – Bench :A, Chennai – Bench :A, Rajaji Bhavan, Chennai. +1cc to Mr.Sivam Sivanandraj, Advocate Sr 20786 +1cc to M/s. Pushya Sitaraman,Senior Standing Counsel (IT) Sr 20794 MS (CO)km/5.5. Writ Petition No.11225 of 2006and W.P.M.P.No.12763 of 2006