Court upholds penalty under Income-Tax Act, emphasizes statutory appeal remedy

The High Court dismissed the petitions seeking to quash the penalty imposed under Section 201 of the Income-Tax Act, 1961 on a government college for failure to deduct tax at source in payments to Guest Faculty Lecturers. The Court held that writ jurisdiction should not be exercised when disputed questions of fact exist, emphasizing the availability of the statutory remedy of appeal under Section 246. The petitioner was granted 45 days to appeal before the Appellate Authority, with the interim order remaining in place solely to facilitate the appeal process. Failure to appeal within the specified period would allow the Revenue to execute the assessment order.

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Issues:
Petitions filed under Article 226 seeking quashment of penalty imposed under Section 201 of the Income-Tax Act, 1961 for failure to deduct tax at source in regard to payments made to Guest Faculty Lecturers for the assessment year 2017-18.

Analysis:
The main issue in this case revolves around the imposition of a penalty under Section 201 of the Income-Tax Act, 1961 on a government college for not deducting tax at source in payments to Guest Faculty Lecturers. The petitioner argues that the statutory remedy of appeal under Section 246 of the Act is not efficacious due to the nature of the services provided by the Guest Faculty Lecturers. The petitioner relies on a recent decision of the Supreme Court to support this argument.

On the other hand, the respondent argues that disputed questions of fact are involved in determining whether the relationship between the college and the Guest Faculty Lecturers satisfies the requirements of professional or technical services under Section 194J of the Income Tax Act. The respondent contends that such factual inquiries should be left to the fact-finding authority rather than being addressed in writ jurisdiction.

The High Court notes that writ jurisdiction should not be exercised when disputed questions of fact are involved, especially when an alternative statutory remedy of appeal is available. The Court emphasizes that the petitioner did not avail the statutory remedy of appeal before the Commissioner (Appeals) under Section 246 of the Income Tax Act. The Court finds no jurisdictional error in the Assessing Authority's order and concludes that exceptions laid down in previous case law do not apply in this situation.

Considering the interim order passed by the Court, the petitioner is granted 45 days to approach the Appellate Authority under Section 246 of the Act. The interim order will continue to subsist until then. However, it is clarified that the continuation of the interim order is solely to facilitate the petitioner's appeal process and should not influence the Appellate Authority's decision-making process. If no appeal is filed within the stipulated period, the Revenue is free to execute the impugned assessment order.

In conclusion, the petitions are disposed of with the observation that the petitioner should pursue the appropriate appellate forum within the given time frame, and the interim order is maintained to facilitate this process without prejudicing the Appellate Authority's decision-making independence.

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