Case: Commissioner of Income Tax Vs. Hindustan Electro Graphites Ltd

the taxable turnover, was under bona fide belief that the amount of freight did not form part of the sale price and was not includable in the taxable turnover. A return cannot be said to be "false" unless there is an element of deliberateness in it. It is possible that even where the incorrectness of the return is claimed to be due to want of care on the part of assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the Court may, in a given case, infer deliberateness and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a "false" return inviting imposition of penalty. This Court said that Section 43 of the Madhya Pradesh General Sales Tax Act, 1958 providing for imposition of penalty was a penal in character and unless the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be involved for imposing penality. This Court further said that if the view canveased on behalf of the Revenue were accepted, the result would be that even if the assessee raised a bona fide contention that a particular item is not liable to be included in the taxable turnover, he would have to show it as forming part of the taxable turnover in his return and pay tax upon it on pain of being held liable for penalty in case his contention is ultimately found by the Court to be not acceptable. That surely could never have been intended by the Legislature, this Court as observed. 10. In Commissioner of Income-Tax v. Onkar Saran and Sons, (1992) 195 ITR 1 (SC) the assessee filed returns for the Assessment Years 1961-62 and 1962-63 disclosing incomes of Rs. 18,935 and Rs. 24,943 respectively. The assessments were completed in the total income of Rs. 28,513- and Rs. 28,463- respectively. Income-tax Officer having come to know subsequently that the assessee had failed to disclose its profits from sale of certain lands, issued notices under Section 148 for both the years. The assessee, however, disclosed the same income as in the original returns. Income-Tax Officer made additions and after completing the re-assessments on March 6, 1969 initiated proceedings under Section 271(1)(c) and the Inspecting Assistant Commissioner imposed penalty on the assessee on the basis of the amended Section 271(1)(c) w.e.f. April 1, 1968. This Court said that even in a case where a return is filed in response to a notice under Section 148 involving an element of concealment, the law applicable would be the law as it stood at the time when the original return was filed for the Assessment Year in question and not the law as it stood on the date on which the return as filed in response to notice under Section 148. 11. Decision of the Calcutta High Court in Modern Fibotex India Ltd. and another, 212 ITR 496 squarely covers the issue involved in the present appeal. Then we have to see the law on the date of filing of the return. The attract penal provisions there has been same element of lack of bonafides unless the law specifically provides otherwise.12. The case before us does not represent even a bona fide mistake. In fact it is not a case where under some mistaken belief the assessee did not disclose the cash compensatory support received by it which he could offer to tax. It is true that income by way of cash compensatory support became taxable retrospectively with effect from April, 1967 but that was by amendment of Section 28 by the Finance Act of 1990 which amendment could not have been known before the Finance Act came in to force. Levy of additional tax bears all the characteristics of penalty. Additional tax was levied as the assessee did not in his return show the income by way of cash compensatory support. Assessing Officer on that account levied additional income tax. No additional tax would have been leviable on the cash compensatory support if the Finance Act, 1990 had not so provided even though retrospectively. Assessee could not have suffered additional tax but for the Finance Act, 1990. After he had filed his return of income, which was correct as per law on the date of filing of the return, it was thereafter that the cash compensatory support also came within the sway of Section 28. When additional tax has imprint of penalty Revenue cannot be heard saying that levy of additional tax is automatic under Section 143(1A) of the Act. If additional tax could be levied in such circumstances it will be punishing the assessee for no fault of his. That cannot ever be the legislative intent. It shocks the very conscious if in the circumstances Section 143(1A) could be invoked to levy the additional tax. following observations by the Constitution Bench of his Court in Pannalal Binjraj and another v. The Union of India and others, (1957) 31 ITR 565 (SC are apt :- "A humane had considerate administration of the relevant provisions of the Income Tax Act would go a long way in allaying the apprehensions of the assesses and if that is done in the true spirit, no assessee will be in a position to charge the Revenue with administering the provisions of the Act with "an evil eye and unequal hand". 13. We uphold the view expressed by the Calcutta High Court. Keeping in view the principles laid by this Court it has to be held that in the circumstances of the present case levy of additional tax taking into account the income by way of cash compensatory support is not warrant. The question is answered in affirmative i.e. in favour of the assessee and against the Revenue. 14.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. Decision of the Calcutta High Court in Modern Fibotex India Ltd. and another, 212 ITR 496 squarely covers the issue involved in the present appeal. Then we have to see the law on the date of filing of the return. The attract penal provisions there has been same element of lack of bonafides unless the law specifically provides otherwise.12. The case before us does not represent even a bona fide mistake. In fact it is not a case where under some mistaken belief the assessee did not disclose the cash compensatory support received by it which he could offer to tax. It is true that income by way of cash compensatory support became taxable retrospectively with effect from April, 1967 but that was by amendment of Section 28 by the Finance Act of 1990 which amendment could not have been known before the Finance Act came in to force. Levy of additional tax bears all the characteristics of penalty. Additional tax was levied as the assessee did not in his return show the income by way of cash compensatory support. Assessing Officer on that account levied additional income tax. No additional tax would have been leviable on the cash compensatory support if the Finance Act, 1990 had not so provided even though retrospectively. Assessee could not have suffered additional tax but for the Finance Act, 1990. After he had filed his return of income, which was correct as per law on the date of filing of the return, it was thereafter that the cash compensatory support also came within the sway of Section 28. When additional tax has imprint of penalty Revenue cannot be heard saying that levy of additional tax is automatic under Section 143(1A) of the Act. If additional tax could be levied in such circumstances it will be punishing the assessee for no fault of his. That cannot ever be the legislative intent. It shocks the very conscious if in the circumstances Section 143(1A) could be invoked to levy the additional tax. following observations by the Constitution Bench of his Court in Pannalal Binjraj and another v. The Union of India and others, (1957) 31 ITR 565 (SC are apthumane had considerate administration of the relevant provisions of the Income Tax Act would go a long way in allaying the apprehensions of the assesses and if that is done in the true spirit, no assessee will be in a position to charge the Revenue with administering the provisions of the Act with "an evil eye and unequal hand".We uphold the view expressed by the Calcutta High Court. Keeping in view the principles laid by this Court it has to be held that in the circumstances of the present case levy of additional tax taking into account the income by way of cash compensatory support is not warrant. The question is answered in affirmative i.e. in favour of the assessee and against the Revenue