2009 (7) TMI 893 - HC - Income Tax

Appeal dismissed; penalty under s.271(1)(c) quashed as assessee did not conceal or furnish incorrect particulars despite nil return under s.10(29)

Commissioner of Income Tax, Panchkula Versus Haryana Warehousing Corporation

HC dismissed the appeal and upheld the Tribunal's order quashing penalty under s.271(1)(c), holding the assessee had not concealed particulars nor ... Imposition of penalty u/s 271(1)(c) - Concealment of Income Or furnishing incorrect particulars of income - nil return claiming exemption u/s 10(29) - application of mind - evasion of tax - HELD THAT:- Despite the fact that the respondent-assessee had filed a nil income tax return for the assessment year 1993-94, claiming exemption under section 10(29) of the Act, yet it had disclosed its entire income by, depicting clearly the various heads under which the said income had been earned. And as such, it was not as if the respondent assessee had 'concealed the particulars of his income' or 'furnished inaccurate particulars of his income'. It seems to us that the revenue functions in the same manner as other departments of administration, wherein the accepted norm is, to shift the responsibility of decision making to the judiciary. In sum and substance, the judiciary not only adjudicates upon legitimate controversies between quarreling parties, but also discharges the executive function of decision making. In furtherance of the intention expressed by this Court the revenue took two steps. Firstly, it moved civil miscellaneous application, so as to place on the record of this case an affidavit of the Commissioner of Income, Panchkula. And secondly, it engaged services of a senior counsel to represent the revenue in the instant appeal before this Court, so as to require this Court to discharge its executive function of decision making. Section 271(1)(c) of the Act can be invoked for imposing a penalty on an assessee, only if there is a 'concealment of particulars of income' or alternatively if an assessee furnishes 'incorrect particulars of income'. The respondent-assessee in the present controversy is guilty of neither of the above. Accordingly, we are satisfied that in the absence of the two pre-requisites postulated u/s 271(1)(c) of the Act, it was not open to the appellant-revenue to inflict any penalty on the respondent-assessee. To our mind all the five issues taken into consideration by the Income Tax Appellate Tribunal, while passing the impugned order dated 4.10.2007, were individually sufficient to accept the claim of the respondent-assessee. We are satisfied, that the instant appeal was not filed after due application of mind. Even after the passing of the order dated 11.2.2009, the appellant failed to examine the controversy in its correct perspective. Without any justification whatsoever, the appellant has pressed the instant appeal. As noticed, we were convinced that the instant appeal was frivolous and ought not to have been filed. We, for the present, refrain ourselves from imposing any costs on the appellant. This restraint is, because of our desire to awaken the revenue to its responsibility. Since however, notice had not been issued to the respondent-assessee in the instant appeal, we feel that our note of caution and vigil, at the time of filing appeals, will suffice for the present. Thus, the instant appeal is dismissed, without imposing any costs on the appellant-revenue. Issues Involved:1. Assessment of income tax liability for the assessment year 1993-94.2. Imposition of penalty under section 271(1)(c) of the Income Tax Act.3. Interpretation and application of section 10(29) of the Income Tax Act.4. Validity of the Income Tax Appellate Tribunal's decision to set aside the penalty.5. Relevance of conflicting High Court judgments and Supreme Court's stance on the matter.Detailed Analysis:1. Assessment of Income Tax Liability for the Assessment Year 1993-94:The respondent-assessee, Haryana Warehousing Corporation, filed a nil income tax return for the assessment year 1993-94, claiming exemption under section 10(29) of the Income Tax Act. The Assessing Officer assessed the income at Rs.1,04,61,330/- and imposed a penalty for evasion of tax. This determination was affirmed by the Commissioner of Income Tax (Appeals).2. Imposition of Penalty Under Section 271(1)(c) of the Income Tax Act:The Assessing Officer imposed a penalty of Rs.1,04,61,330/- on the respondent-assessee for allegedly concealing income. This penalty was upheld by the Commissioner of Income Tax (Appeals), who noted that the assessee had wrongly and deliberately claimed the entire income as exempt. However, the Income Tax Appellate Tribunal set aside this penalty, stating that the respondent-assessee had disclosed all income particulars and had not concealed any income.3. Interpretation and Application of Section 10(29) of the Income Tax Act:Section 10(29) exempts income derived from letting out godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The respondent-assessee claimed exemption based on this section. The Tribunal noted that the respondent-assessee had relied on a favorable judgment from the Allahabad High Court, which was upheld by the Supreme Court, and that the legal position was still in flux due to conflicting judgments from other High Courts.4. Validity of the Income Tax Appellate Tribunal's Decision to Set Aside the Penalty:The Tribunal concluded that the respondent-assessee could not be penalized for filing a false or inaccurate return as it had disclosed its entire income and relied on prevailing legal interpretations. The Tribunal's decision was challenged by the revenue, but the High Court upheld the Tribunal's findings, noting that the revenue had not controverted the factual position that the respondent-assessee had not furnished inaccurate particulars nor concealed any income.5. Relevance of Conflicting High Court Judgments and Supreme Court's Stance on the Matter:The High Court acknowledged the conflicting judgments from different High Courts and noted that the Supreme Court had referred the issue to a larger Bench. The High Court emphasized that the respondent-assessee's claim was bona fide given the legal uncertainty and the pending appeals before the Supreme Court.Conclusion:The High Court dismissed the revenue's appeal, finding no merit in the contentions advanced. The Court noted that the respondent-assessee had disclosed all income particulars and relied on a bona fide interpretation of the law. The Court also criticized the revenue for filing a frivolous appeal without proper application of mind and cautioned against such practices in the future. The appeal was dismissed without imposing costs on the appellant-revenue.