IT : Where stay had been granted in respect of recovery of penalties till disposal of assessee's appeal, but appeal was still pending for no fault of assessee, stay was to be continued
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[2013] 33 taxmann.com 509 (Bombay)
HIGH COURT OF BOMBAY
Konkan Railway Corporation Ltd.
v.
Assistant Commissioner of Income-tax - 10(3), Mumbai*
DR. D.Y. CHANDRACHUD AND A.A. SAYED, JJ.
WRIT PETITION (L) NOS. 610, 612, 614 & 616 OF 2013
MARCH 21, 2013
Section 220, read with section 271(1)(c), of the Income-tax Act, 1961 - Collection and recovery of tax - When tax payable and when assessee deemed in default [Stay] - Assessment years 2004-05 to 2007-08 - Petitioner was a sick public sector undertaking - It filed appeal against imposition of penalty under section 271(1)(c) which was pending - Proceedings for recovery of penalty were stayed till specified date or until disposal of appeal - Despite petitioner being ready and willing to proceed with hearing, decision in appeal was still pending - Whether impugned order of Commissioner (Appeals) directing petitioner to deposit a portion of penalty was to be stayed - Held, yes [Para 6] [In favour of assessee]
FACTS
| ■ | The petitioner returned certain losses which were redetermined by the Assessing Officer. The Commissioner (Appeals) upheld the redetermination made in the orders of assessment. | |
| ■ | In the meantime, penalty proceedings were initiated under section 271(1)(c) and the penalties had been levied. The petitioner has filed appeals before the Commissioner (Appeals) which were pending. | |
| ■ | A stay was earlier granted to the petitioner till 15-12-2012 or until the disposal of appeal. A communication was issued to the petitioner stating that if no decision was rendered till December 15 then the petitioner would have to pay the instalments as agreed. The petitioner submitted that even being a sick company, no relief from payment of income tax was provided under the approved rehabilitation package. Subsequently, the petitioner was directed to pay 20 per cent of the total demand by February 2013 or until decision of the Commissioner (Appeals), whichever is earlier. | |
| ■ | The petitioner filed stay petition before the Commissioner, which was disposed of directing the petitioner to deposit 20 per cent by March 7, 2013. | |
| ■ | In the instant writ, the case of the petitioner was that the petitioner was not at fault since the failure was on the part of the Commissioner (Appeals) to dispose of the appeals by 15-12-2012. |
HELD
| ■ | There was no failure or inaction on the part of the petitioner in pursuing the first appeals which are pending. The petitioner is ready and willing to proceed with the hearing of the appeals immediately, with a view to establishing before the appellate authority that a case was not made out for imposition of penalty. Since the recovery of demand was initially stayed, though for a specified period, that itself indicates that the Commissioner was of the view that the issues which have been raised by the petitioner deserve serious consideration. The fact that the appeals have not been disposed of by the Commissioner (Appeals) is not a matter for which the Petitioner is responsible since there is nothing to indicate that there was negligence or inaction on the part of the Petitioner in pursuing the appeals. The Petitioner is a public sector enterprise promoted by the Union Government in consultation with four State Governments. The Petitioner has been constituted with a view to providing infrastructural facilities. The press note of the Government of India dated 4-12-2008 indicates that the Petitioner has been instrumental for social and economic development in the States of Maharashtra, Goa, Karnataka and Kerala by providing the shortest railway route from Mumbai to Mangalore. The notification of the Union Government in the Ministry of Railways dated 7-1-2009 also indicates that the financial restructuring package for the Petitioner was recommended initially by the BRPSE and was subsequently approved by the CCEA. [Para 5] | |
| ■ | On these facts, especially having regard to the fact that a stay has been sought in respect of the recovery of penalties under section 271(1)(c), an order of dispensation ought to have been granted. While issuing a direction in these terms the Commissioner (Appeals) before whom the appeals are pending is directed to take steps for expeditious hearing of the appeals. Accordingly, the petition was allowed by setting aside the impugned order dated 26-2-2013 of the Commissioner (Appeals), directing the Petitioner to deposit an amount of Rs. 8.85 crores towards the demand on account of penalty. [Para 6] |
K. Gopal, Jitendra Singh and Satendra Pandey for the Petitioner. Tejveer Singh for the Respondent.
ORDER
1. In the four Writ Petitions, which form the subject matter of the proceedings before the Court, the Petitioner has challenged an order of the Commissioner of Income Tax-10, Mumbai, dated 26 February 2013 on an application for stay of recovery of a demand on account of a penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. The Petitioner filed its returns of income for A.Ys. 2004-05 to 2007-08 and returned the following loss:
| Assessment year | Returned Income/Loss Rupees in crores. |
| 2004-05 | (-) Rs.545.69 |
| 2005-06 | (-) Rs.462.08 |
| 2006-07 | (-) Rs.327.75 |
| 2007-08 | (-) Rs. 293.51 |
The Assessing Officer passed orders of assessment for the aforesaid assessment years by which the loss was redetermined as follows:
| Assessment Year | Date of Order | Assessed Income/Loss Rupees in crores |
| 2004-05 | 27.08.2007 | (-) Rs.495.50 |
| 2005-06 | 31-12-2007 | (-) Rs.407.16 |
| 2006-07 | 06-11-2009 | (-) Rs.282.86 (-) |
| 2007-08 | 07-12-2009 | Rs.241.20 |
The assessee filed appeals before the CIT(A). The CIT(A) by an order dated 20 December 2010 upheld the additions and disallowances made in the orders of assessment. In the meantime, penalty proceedings were initiated under Section 271(1)(c) and the following penalties have been levied:
| Assessment Year | Date of Order | Concealment Penalty Rupees in crores |
| 2004-05 | 28-03-2012 | Rs.11.07 |
| 2005-06 | 28-03-2012 | Rs.16.64 |
| 2006-07 | 28-03-2012 | Rs. 6.44 |
| 2007-08 | 28-03-2012 | Rs.10.11 |
| Total | Rs.44.29 |
The Petitioner has filed appeals before the CIT(A) which are pending. The Petitioner applied for stay of recovery of demand.
3. On 24 January 2013, a communication was issued to the Petitioner drawing the attention to the order-sheet noting dated 28 September 2012 to the effect that the demand was stayed till 15 December 2012 or until the decision of the appeals before the CIT(A). There was a direction that if no decision was rendered till 15 December 2012, the Petitioner shall pay the demand on instalments as agreed upon. The Petitioner had submitted that it is a sick company. The Petitioner was informed that under the terms of the package approved for rehabilitation, no relief had been granted from the payment of income tax. Consequently, the Petitioner was directed to pay 20% of the total demand by 7 February 2013, while for the balance, a stay on recovery was granted until 31 July 2013 or until the decision of the CIT(A) whichever is earlier. The Petitioner filed a stay application before the CIT-10. The application has been disposed of by directing the Petitioner to deposit 20% of the demand amounting to Rs.8.85 crores by 7 March 2013.
4. The contentions of the Petitioner before the Court are the following:
(i) The Petitioner is a Public Sector Corporation formed by the Union Government together with the State Governments of Maharashtra, Goa, Kerala and Karnataka. In view of the financial difficulties faced by the Petitioner, the Board of Directors together with the Union Ministry of Railways had approached the Board for Reconstruction for Public Sector Enterprises (BRPSE) with a financial restructuring proposal. After the proposal was recommended by the BRPSE, a proposal was submitted to the Cabinet Committee on Economic Affairs (CCEA). The CCEA has approved a financial restructuring proposal on 7 January 2009;
(ii) The demand of which a stay of recovery is sought is on account of a penalty levied under Section 271(1)(c). The appeals are pending before the CIT(A). The petitioner has, in fact, moved the CIT(A) and has submitted a note on the basis of which an expeditious hearing has been sought since the Petitioner has more than a prima facie case;
(iii) In the present case, having due regard to the fact that the Petitioner has a strong prima facie case, and that it is fully held by the Union Government together with four State Governments, a dispensation of deposit ought to have been granted;
(iv) As a matter of fact, a stay was granted to the Petitioner till 15 December 2012 or until the decision of the first appeal. The Petitioner is not at fault since the failure was on the part of the CIT(A) to dispose of the appeals by 15 December 2012.
5. The material before the Court indicates that the demand is on account of the penalties levied under Section 271(1)(c) for A.Ys. 2004-05 to 2007-08. The Assessing Officer in the original orders of assessment had redetermined the loss as returned by making certain additions and disallowances. The orders under Section 271(1)(c) have been challenged in appeals before the CIT(A). On the application filed by the Petitioner for stay, a stay was, in fact, granted until 15 December 2012 or until the first appeal is disposed of whichever is earlier. The record before the Court indicates that there was no failure or inaction on the part of the Petitioner in pursuing the first appeals which are pending. As a matter of fact, Counsel appearing on behalf of the Petitioner states that the Petitioner is ready and willing to proceed with the hearing of the appeals immediately, with a view to establishing before the appellate authority that a case was not made out for imposition of penalty. Since the recovery of demand was initially stayed, though for a specified period, that itself indicates that the CIT was of the view that the issues which have been raised by the Petitioner deserve serious consideration. The fact that the appeals have not been disposed of by the CIT(A), is not a matter for which the Petitioner is responsible since there is nothing to indicate that there was negligence or inaction on the part of the Petitioner in pursuing the appeals. The Petitioner is a public sector enterprise promoted by the Union Government in consultation with four State Governments. The Petitioner has been constituted with a view to providing infrastructural facilities. The press note of the Government of India dated 4 December 2008, which is part of the record, indicates that the Petitioner has been instrumental for social and economic development in the States of Maharashtra, Goa, Karnataka and Kerala by providing the shortest railway route from Mumbai to Mangalore. The Petitioner also produced on the record, a notification of the Union Government in the Ministry of Railways dated 7 January 2009 which indicates that the financial restructuring package for the Petitioner was recommended initially by the BRPSE and was subsequently approved by the CCEA.
6. On these facts, especially having regard to the fact that a stay has been sought in respect of the recovery of penalties under Section 271(1)(c), we are of the view that an order of dispensation ought to have been granted. While issuing a direction in these terms, we also propose to direct the CIT(A) before whom the appeals are pending, to take steps for expeditious hearing of the appeals. Accordingly, we allow the petition by setting aside the impugned order dated 26 February 2013 of the CIT-10, Mumbai, directing the Petitioner to deposit an amount of Rs. 8.85 crores towards the demand on account of penalty. We also direct the CIT(A)-22 before whom the appeals are pending to expeditiously dispose of the appeals preferably within a period of two months from the date on which an authenticated copy of this order is produced on his record. The Petitioner shall appear before the CIT(A) together with an authenticated copy of this order on 1 April 2013 for expeditious disposal of the appeals.
7. Rule is made absolute to the aforesaid extent. We clarify that all the rights and contentions of the parties are kept open. There shall be no order as to costs.
SB*In favour of assessee.
Regards
Prarthana Jalan
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