Commissioner of Income Tax, Panchkula Versus Haryana Warehousing Corporation [2009 -TMI - 34005 - PUNJAB AND HARYANA HIGH COURT]

Facts of the instant case:

The assessee i.e. the Haryana Warehousing Corporation, is a State Government Undertaking created under the Warehousing Corporation Act, 1962.

For the assessment year 1993-94, it filed a NIL return.

AO assessed the income  at Rs.1,04,61,330/- vide order dated 21.4.2006, as against a nil.

AO proposed to levy penalty as:

The Assessing Officer, accordingly arrived at the conclusion, that by filing a nil income tax return for the assessment year 1993-94, the respondent-assessee had sought to evade income tax to the tune of Rs.1,04,61,330/-. The minimum penalty imposable for the same being the quantum of tax evaded, the Assessing Officer imposed the penalty of Rs.1,04,61,330/-.

Whiling deleting the penalty, ITAT observed 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. [Note: this observation is in addition to other pertinent observations of the case by the tribunal]

In favor of imposing penalty, revenue contended that:

When the assessee, the Haryana Warehousing Corporation filed its return of income , it was clear to it that it was not entitled to exemption of its entire income. It was submitted, that the respondent-assessee was aware that income earned under heads other than rental income earned by it by letting godowns and warehouses for storage, processing or fecilitating the marketing of commodities, was taxable. It was pointed out to us, that exemption under section 10(29) of the Act could be availed of only for purposes of income relating to its warehousing activity, and for no other income. It was therefore submitted, that the claim made by the respondent-assessee, even as per its note (extracted in paragraph 11 hereinabove) was not bona fide, and therefore, the initiation as well as imposition of penalty upon the respondent-assessee, under section 271(1)(c) of the Act, was not only valid but was also legitimate.

While confirming the decision of ITAT in setting aside the penalty, HC observed that:

The clear and categoric finding at the hands of the Income Tax Appellate Tribunal in the impugned order dated 4.10.2007,was that the respondent-assessee had disclosed the entire facts without having concealed any income. There is no allegation against the respondent-assessee that it had furnished inaccurate particulars of its income.

Commissioner of Income Tax, Panchkula Versus Haryana Warehousing Corporation [2009 -TMI - 34005 - PUNJAB AND HARYANA HIGH COURT]

The following decisions of the Supreme Court have been followed / analyzed:

Union of India & Another, U.P.State Warehousing Corporation, [2008 -TMI - 5310 - SUPREME Court]

CIT v. Gujarat State Warehousing Corporation [2008 -TMI - 5806 - SUPREME Court]

Union of India v.  Dharamendra Textile Processors and others [2008 -TMI - 31520 - SUPREME COURT]

Phool Chand Bajrang Lal v. ITO [2008 -TMI - 5423 - SUPREME Court]

 

 

Disclosure of income prevents penalty under 271(1)(c) where an incorrect exemption claim was fully transparent. Whether a penalty under 271(1)(c) may be imposed where an assessee claims exempt income but nonetheless discloses the full particulars of its receipts. The tribunal found that the assessee had disclosed all material facts and had not concealed or furnished inaccurate particulars of income, and the penalty was deleted. A bona fide but incorrect claim of exemption accompanied by transparent disclosure of income heads does not automatically attract the penal provision.