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

2. Respondent, the assessee, filed its return of income for the assessment yearThe return was filed on December 29, 1989. It was filed under Section 139 of the income Tax Act, 1961 (for short, the `Act).Before the insertion of clause (iii)(b), cash assistance received by any person against exports under any scheme of the Government would not be chargeable to income tax under the head "Profits and gains of business or profession". The assessee had received in the previous year relevant to the assessment yeara sum of Rs. 1,31,41,030by way of cash assistance. Since clause (iii)(b) was inserted in Section 28, though having retrospective operation by the finance Act, 1990, the assessee did not include this income in its return which, as noted above, was filed on December 29, 1989. The assessee is a public limited company and for the assessment yearlast date of filing of return of income was December 31, 1989.5. Deputy Commissioner Income Tax (Assessment) Special Range, Bhopal was the Assessing Officer. He by his order dated May 5, 1990 passed under Section 143(1)(a)[143(i)(a) where a return has been made under section 139, or in response to a notice under(1) of sectionThe assessee filed an appeal against the order of the Assessing Officer before the Commissioner of Income Tax (Appeal), Bhopal who partly allowed the appeal on that part with which we are not concerned. The assessee then took the matter in appeal to the Income Tax Appellate Tribunal (Indore Bench), Indore (for short, the `Tribunal). The Tribunal by its order dated August 11, 1982 allowed the appeal holding that no additional tax could be levied in respect of the amount of cash compensatory support and no interest under Section 234 could be charged on the said amount. Now, it was the Revenue which was agrived. At the instance of the Revenue, the Tribunal referred the question to the High Court of Madhya Pradesh under Section 256(1) of the Act for its opinion. High Court by its impugned judgment dated September 11, 1997 answered the question in affirmative, i.e. in favour of the assessee and against the Revenue. Against the judgment of the High Court, Revenue sought leave to appeal to this Court which was granted and that is how the matter is now before us.

Court's reasoning:
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