Wp(C)/2736/2019 Of The Panniyankara Service Co-Operative Bank v. Joint Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 11TH DAY OF OCTOBER 2019 / 19TH ASWINA, 1941 WP(C).No.2736 OF 2019(N) PETITIONER: THE PANNIYANKARA SERVICE CO-OPERATIVE BANKKALLAI, KOZHIKODE-673 003 REPRESENTED BY ITS SECRETARY P.MAHESH CHANDRA. BY ADVS.SRI.S.ARUN RAJSMT.C.T.SUJASRI.ARJUN S.RAJ RESPONDENTS: 1JOINT COMMISSIONER OF INCOME TAXRANGE-1, AAYAKAR BHAVAN, KOZHIKODE-673 001.RANGE-1, AAYAKAR BHAVAN, KOZHIKODE-673 001. 2THE PRINCIPAL COMMISSIONER OF INCOME TAXAAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001.AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001. 3THE COMMISSIONER OF INCOME TAX (APPEALS)AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001.AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001.4INCOME TAX OFFICERWARD 1(3), AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001.WARD 1(3), AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-673 001. R1-4 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON11.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT The challenge in this Writ Petition is against Exts.P11 and P12 orderspassed by the 3[rd] respondent First Appellate Authority in stay applicationsfiled by the petitioner along with Appeals against penalty orders passed interms of Section 271D and 271E of the Income Tax Act during theassessment year 2015-2016. The facts stated in the Writ Petition wouldreveal that the petitioner, which is a primary agricultural credit society andan assessee to income tax on the rolls of the 4[th] respondent, had accepteddeposits from its members by cash in excess of Rs.20,000/-, which was incontravention of the provisions of Section 269SS and 269T of the Income TaxAct. For the said contravention they were imposed a penalty in terms ofSection 271D and 271E of the IT Act in an amount equal to the depositsaccepted in cash in excess of Rs.20,000/-. The demand against the petitionerby way of penalty for the said offence is in an amount of Rs.48,79,81,702/-under Section 271D and Rs.44,38,36,515/- under Section 271E of the IT Act. 2.In the stay applications filed along with the Appeals preferred againstthe penalty orders the petitioner had sought for a stay of recovery of penaltyorders confirmed against him pending disposal of the Appeals by theAppellate Authority. The Appellate Authority considered the saidapplications and directed the petitioner to remit a total of Rs.2.5 crores eachin the respective Appeals as a condition for grant of stay of recovery of thebalance amounts of penalty that were confirmed against the petitionerthrough the penalty orders. It is these orders of the Appellate Authority that are impugned in this Writ Petition, inter alia, on the contention that thefinancial position of the petitioner society is bleak and it will not be in aposition to even pay the amount of Rs.2.5 crores each ordered by the FirstAppellate Authority. 3.When the matter came up for admission before this Court on30.01.2019, this Court while admitting the Writ Petition also granted aninterim stay of further proceedings pursuant to the penalty orders and on thestrength of the said order the payments directed in Exts.P11 and P12 ordershave not been effected by the petitioner. 4.I have heard Sri.Arun Raj S., the learned counsel for the petitioner andSri.Christopher Abraham, the learned Standing Counsel for the respondents. are impugned in this Writ Petition, inter alia, on the contention that thefinancial position of the petitioner society is bleak and it will not be in aposition to even pay the amount of Rs.2.5 crores each ordered by the FirstAppellate Authority. 3.When the matter came up for admission before this Court on30.01.2019, this Court while admitting the Writ Petition also granted aninterim stay of further proceedings pursuant to the penalty orders and on thestrength of the said order the payments directed in Exts.P11 and P12 ordershave not been effected by the petitioner. 4.I have heard Sri.Arun Raj S., the learned counsel for the petitioner andSri.Christopher Abraham, the learned Standing Counsel for the respondents. 5. I find that Exts.P11 and P12 orders of the First Appellate Authority haverequired the petitioner society to pay only Rs.2.5 crores each as againstpenalty amounts of Rs.48 crores and Rs.44 crores (approximately), thatwere imposed on the petitioner. Under normal circumstances this wouldhave been viewed as a reasonable and valid exercise of discretion by theFirst Appellate Authority that does not call for any interference by thisCourt in this proceedings under Article 226 of the Constitution of India. Inthe instant case, however, the financial position of the petitioner society isprojected as weak, and more importantly, it has been more than 8 monthssince the Appeals have been filed before the Appellate Authority and thepetitioner has been enjoying the benefit of a stay from this Court sincerequired the petitioner society to pay only Rs.2.5 crores each as againstpenalty amounts of Rs.48 crores and Rs.44 crores (approximately), thatwere imposed on the petitioner. Under normal circumstances this wouldhave been viewed as a reasonable and valid exercise of discretion by theFirst Appellate Authority that does not call for any interference by thisCourt in this proceedings under Article 226 of the Constitution of India. Inthe instant case, however, the financial position of the petitioner society isprojected as weak, and more importantly, it has been more than 8 monthssince the Appeals have been filed before the Appellate Authority and thepetitioner has been enjoying the benefit of a stay from this Court since okb January 2019. Under such circumstances, I deem it appropriate to disposethe Writ Petition with a direction to the 3[rd] respondent Appellate Authority,before whom the Appeals preferred by the petitioner against the orders ofpenalty are pending, to consider and pass orders in the said Appeals withina period of three months from the date of receipt of a copy of the judgment,after hearing the petitioner. It is also made clear that till such time as the3[rd] respondent passes orders in the Appeals and communicates the orders tothe petitioner, the stay granted by this Court, against recovery of thepenalty amounts confirmed against the petitioner, shall be kept in abeyance.The petitioner shall produce a copy of the Writ Petition, together with a copyof this judgment before the 3[rd] respondent for further action. The Writ Petition is disposed as above. Sd/-A.K.JAYASANKARAN NAMBIAR JUDGE //True copy// P.S. to Judge APPENDIX OF WP(C) 2736/2019 PETITIONER'S/S EXHIBITS: EXHIBIT P1TRUE COPY OF THE REPLY DATED 27.11.2017 SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT.SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT. EXHIBIT P1 ATRUE COPY OF THE REPLY DATED 6.12.2017 SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT.SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT. EXHIBIT P2TRUE COPY OF THE ASSESSMENT ORDER DATED 20.12.2017 PASSED BY THE INCOME TAX OFFICERRANGE-1(3), KOZHIKODE FOR THE AY 2015-16.20.12.2017 PASSED BY THE INCOME TAX OFFICERRANGE-1(3), KOZHIKODE FOR THE AY 2015-16. EXHIBIT P3TRUE COPY OF THE MEMORANDUM OF FIRST APPEALFIELD BY THE PETITIONER CHALLENGING EXHIBITP-2 ASSESSMENT ORDER.FIELD BY THE PETITIONER CHALLENGING EXHIBITP-2 ASSESSMENT ORDER. //True copy// P.S. to Judge APPENDIX OF WP(C) 2736/2019 PETITIONER'S/S EXHIBITS: EXHIBIT P1TRUE COPY OF THE REPLY DATED 27.11.2017 SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT.SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT. EXHIBIT P1 ATRUE COPY OF THE REPLY DATED 6.12.2017 SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT.SUBMITTED BY THE PETITIONER TO THE 4TH RESPONDENT. EXHIBIT P2TRUE COPY OF THE ASSESSMENT ORDER DATED 20.12.2017 PASSED BY THE INCOME TAX OFFICERRANGE-1(3), KOZHIKODE FOR THE AY 2015-16.20.12.2017 PASSED BY THE INCOME TAX OFFICERRANGE-1(3), KOZHIKODE FOR THE AY 2015-16. EXHIBIT P3TRUE COPY OF THE MEMORANDUM OF FIRST APPEALFIELD BY THE PETITIONER CHALLENGING EXHIBITP-2 ASSESSMENT ORDER.FIELD BY THE PETITIONER CHALLENGING EXHIBITP-2 ASSESSMENT ORDER. EXHIBIT P4TRUE COPY OF THE REPLY DATED 10.1.2018 FILED BY THE PETITIONER BEFORE THE IST RESPONDENT OBJECTING TO EH PROPOSAL TO IMPOSE PENALTY UNDER SECTION 271 D OF TE ACT.FILED BY THE PETITIONER BEFORE THE IST RESPONDENT OBJECTING TO EH PROPOSAL TO IMPOSE PENALTY UNDER SECTION 271 D OF TE ACT. EXHIBIT P4 ATRUE COPY OF THE REPLY DATED 4.8.2018 FILEDBY THE PETITIONER BEFORE THE IST RESPONDENTOBJECTING TO EH PROPOSAL TO IMPOSE PENALTY UNDER SECTION 271 E OF THE ACT.BY THE PETITIONER BEFORE THE IST RESPONDENTOBJECTING TO EH PROPOSAL TO IMPOSE PENALTY UNDER SECTION 271 E OF THE ACT. EXHIBIT P5TRUE COPY OF THE PENALTY ORDER UNDER SECTION 271 D PASSED BY THE IST RESPONDENT FOR THE AY 2015-16.SECTION 271 D PASSED BY THE IST RESPONDENT FOR THE AY 2015-16. EXHIBIT P6TRUE COPY OF THE PENALTY ORDER UNDER SECTION 271 E PASSED BY THE IST RESPONDENT FOR THE AY 2015-16.SECTION 271 E PASSED BY THE IST RESPONDENT FOR THE AY 2015-16. EXHIBIT P7TRUE COPY OF THE APPEAL MEMORANDUM DFILED BY THE PETITIONER BEFORE THE 3RD RESPONDENTAGAINST EXHIBIT P-5 ORDER FOR THE AY 2015-16.BY THE PETITIONER BEFORE THE 3RD RESPONDENTAGAINST EXHIBIT P-5 ORDER FOR THE AY 2015-16. EXHIBIT P8 TRUE COPY OF THE APPEAL MEMORANDUM FILED BYTHE PETITIONER BEFORE THE 3RD RESPONDENT AGAINST EXHIBIT P-6 ORDER FOR THE AY 2015-16. EXHIBIT P9TRUE COPY OF THE STAY PETITION FILED BEFORETHE 3RD RESPONDENT IN EXHIBIT P-7 APPEAL.EXHIBIT P10TRUE COPY OF THE STAY PETITION FILED BEFORETHE 3RD RESPONDENT IN EXHIBIT P-8 APPEAL. EXHIBIT P11TRUE COPY OF THE ORDER DATED 18.1.2019 PASSED BY THE 2ND RESPONDENG DISPOSING EXHIBIT P-9 STAY PETITION FOR THE AY 2015-16. EXHIBIT P12TRUE COPY OF THE ORDER DATED 18.1.2019 PASSED BY THE 2ND RESPONDENT DISPOSING EXHIBIT P-10 STAY PETITION FOR AY-2015-16