C.I.T., BHOPAL vs. HINDUSTAN ELECTOR GRAPHITES LTD

C.A. No.-002454-002454 - 1998Supreme Court27 March 20005 pages
For Petitioner: ARVIND KUMAR SHARMAFor Respondent: RAKESH K. SHARMA
AI SummaryDismissed

What were the facts?

The assessee, Hindustan Electrographics Ltd., filed its return of income for assessment year 1989-90 on December 29, 1989. The assessee had received Rs. 1,31,41,030 as cash assistance against exports in the previous year relevant to assessment year 1988-89. Section 28(iii)(b) of the Income Tax Act, 1961, which made such cash assistance taxable as business income, was inserted retrospectively from April 1, 1967, by the Finance Act, 1990, assented to on May 31, 1990. The Assessing Officer, by order dated May 5, 1990, added this amount to the assessee's income under Section 143(1)(a), treated it as additional income under Section 143(1A), and levied higher tax and interest under Section 234. The Commissioner (Appeals) partly allowed the assessee's appeal. The Tribunal allowed the assessee's further appeal, holding no additional tax or interest was leviable. The Revenue appealed to the High Court, which answered the reference in favour of the assessee. The Revenue then appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the Tribunal was justified in deleting the addition made by the Assessing Officer. The Court reasoned that the levy of additional tax under Section 143(1A) bears the characteristics of a penalty. The assessee could not have known about the retrospective amendment to Section 28(iii)(b) by the Finance Act, 1990, at the time of filing its return on December 29, 1989. The cash compensatory support only became taxable after the Finance Act, 1990, came into force. Levying additional tax in such circumstances would be punishing the assessee for no fault, which could not be the legislative intent. The Court found the decision of the Calcutta High Court in Modern Fibotex India Ltd. and Another squarely covered the issue. The Court emphasized that to attract penal provisions, there must be an element of lack of bona fides, unless the law specifically provides otherwise. The Court upheld the view that in the circumstances, the levy of additional tax was not warranted. The question was answered in the affirmative, in favour of the assessee. The appeal was dismissed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition made by the Assessing Officer under Section 143(1)(a) in view of the provisions of Sections 143(1)(a), 143(1A), and 234 of the Income Tax Act, 1961? Assessee's contentions: The assessee contended that it could not have known about the retrospective amendment to Section 28(iii)(b) when filing its return on December 29, 1989, as the Finance Act, 1990, received assent on May 31, 1990. Therefore, levying additional tax under Section 143(1A) was improper and against settled principles, as it would punish the assessee for no fault of its own. The assessee relied on the decision in Modern Fibotex India Ltd. and Another v. Deputy Commissioner of Income-tax and Others (1995) 212 ITR 496 (Cal.) and the principle that penal provisions require a guilty mind or deliberateness, which was absent here. Revenue's contentions: The Revenue argued that under Section 143(1A), the Assessing Officer had no choice but to levy additional tax once it was found that the assessee had not shown the cash compensatory support in its return, irrespective of the reason.

Which sections of the Income-tax Act were involved?

Section 28,Section 139,Section 143(1)(a),Section 143(1A),Section 234,Section 256(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5 CASE NO.: Appeal (civil) 2454 of 1998 PETITIONER: COMMISSIONER OF INCOME TAX, BHOPAL RESPONDENT: HINDUSTAN ELECTOR GRAPHITES LTD. INDORE DATE OF JUDGMENT: 27/03/2000 BENCH: D.P. WADHWA & MRS. RUMA PAL

JUDGMENT: JUDGMENT 2000 (2) SCR 506 The Judgment of the Court was delivered by D.P. WADHWA, J. The question of law which falls for consideration is : whether on the facts and in the circumstances of the case, Tribunal was justified in deleting the addition made by the Assessing Officer under Section 143(l)(a) in view of the clear cut provisions of Section 143(l)(a), 143(1A) and 234? Respondent, the assessee, filed its return of income for the assessment year 1989-90. The return was filed on December 29, 1989. It was filed under Section 139 of the Income Tax Act, 1961 (for short, the ’Act’).

Under Section 28 of the Act, income mentioned therein is chargeable to income tax under the head "profits and gains of business or profession".

Clause (iii)(b) in Section 28 was inserted by the Finance Act of 1990.

Finance Bill which ultimately became the Finance Act received assent of the President of India on May 31, 1990. Clause (iii)(b)

The order continues below.

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