The Madras High Court set aside the penalty proceedings under the Income Tax Act, 1961 initiated on the wrong assumption.
Anamallais Bus Transports P Ltd, the petitioner assessee-Company has advanced a sum of Rs.14,00,00,000/- to M/s. Shakti Sugar Ltd., and M/s. Shakti Sugar Ltd., on the request of the petitioner assessee-Company, (since M/s. Shakti Sugar Ltd., is liable to pay Rs.14,00,00,000/- to the petitioner) made the repayment of the said sum to three entities, viz., M/s.Hapline Commodities Ltd, ii) M/s.Padam Sugar Company and iii) M/s.Medicare Clinic Pvt. Ltd to a sum of Rs.3,55,00,000/-, Rs.4,59,50,000/- and Rs.20,50,000/- respectively, and the petitioner-Compay is liable to pay sum of Rs.8,75,00,000/- to all the three entities, and accordingly, the suitabe entries have been made in the books of M/s. Shakti Sugar Ltd and also in the books of the assessee company, about the reduction of liabilities of M/s. Shakti Sugar Ltd.
Mr.A.S.Sriraman, counsel for the petitioner submitted that there was no cash transaction made by the petitioner and the same has also been clearly stated in the audited books of accounts and therefore, there is no violation of the provisions of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The respondent/Assessing Officer passed the assessment order imposing the penalty under Section 271E of the Act. Against the said order, an appeal has been filed by the petitioner along with an application for stay, however, the respondent/Appellate Authority directed the petitioner to pay 20% of the demand.
On the other hand, Mr.R.S.Balaji, Senior Standing Counsel assisted by Ms.S.Premalatha, Junior Standing Counsel for the respondent would submit that in a similar issue, this Court has already passed an order directing the respondent/Appellate authority to dispose of the appeal within eight (8) weeks from the date of receipt of the order, without insisting upon any deposit.
The petitioner-Assessee has advanced a sum of Rs.14,00,00,000/- to M/s. Shakti Sugar Ltd., which, in turn, made repayment to the 3 entities viz., M/s. Hapline Commodities Ltd, M/s.Padam Sugar Company and M/s. Medicare Clinic Pvt., to a sum of Rs.3,55,00,000/-, Rs.4,59,50,000/- and Rs.20,50,000/- respectively. The said sum of Rs.14,00,00,000/- was paid by M/s. Shakti Sugar Ltd on the request made by the petitioner, since M/s. Shakti Sugar Ltd is liable to pay Rs.14,00,00,000/- to the petitioner Company and about such payments, suitable entries have also been made both in the books of M/s. Shakti Sugar Ltd., and also in the petitioner Company and the same has been reflected in the audited books of accounts.
On a perusal of records, it is revealed that the transactions between the two concerns, whereby, the liability of M/s. Shakti Sugar Ltd. has been reduced to an extent on payment made to clear the liabilities of the assesse company appears to be by law and it is permissible. Hence, the question of dealing with cash transactions does not arise. In the present case, the Assessing Officer concerned, proceeded, as if, there was a cash transaction, and therefore, construed the entire repayment of the loan by M/s. Shakti Sugar Ltd. as income of the petitioner and proceeded by law in terms of the Income Tax Act.
A single-member bench comprising Justice Krishnan Ramasamy set aside the entire penalty proceedings passed under Section 271-E of the Act. The Court directs the Appellate Authority concerned to take the petitioner’s Appeal on file without insisting upon any pre-deposit and consider the issues that were discussed by this Court in this order and thereafter, shall dispose of the appeal by law, within eight (8) weeks.
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