COMMISSIONER OF INCOME TAX, BHOPAL vs. HINDUSTAN ELECTOR GRAPHITES LTD., INDORE

CIVIL APPEAL No. 2454/1998Supreme Court[2000] 2 S.C.R. 50627 March 2000Bench: 2 JudgesAuthor: D.P. WADHWA, RUMA PAL B9 pages
AI SummaryDismissed

What were the facts?

The assessee, Hindustan Electorgraphites Ltd., filed its return of income for assessment year 1989-90 on December 29, 1989. At that time, cash compensatory support received against exports was not taxable under "profits and gains of business or profession" as per Section 28 of the Income Tax Act, 1961. Consequently, the assessee did not offer Rs. 1,31,41,030 received as cash compensatory support to tax. The Finance Act, 1990, introduced clause (iii)(b) to Section 28 with retrospective effect from April 1, 1967, making such assistance taxable. The Assessing Officer, invoking Section 143(1A), added this amount as additional income, levied tax at a higher rate, and charged interest under Section 234. The assessee's appeal to the CIT failed, but the ITAT allowed it. The Revenue's reference to the High Court was in favour of the assessee, leading to the present appeal by the Revenue.

What did the Supreme Court hold?

The Supreme Court held that the levy of additional tax, taking into account the income by way of cash compensatory support, was not warranted in the circumstances. The obligation of the assessee is to file a correct return according to the law in force when it is required to be filed. The return filed by the assessee was not incorrect on the date of filing. The Court observed that the levy of additional tax under Section 143(1A) bears the characteristics of a penalty. To attract penal provisions, there must be an element of lack of bona fides, unless the law specifically provides otherwise. The present case was not even a bona fide mistake; it was not a situation where the assessee, under a mistaken belief, failed to disclose income that was then taxable. The cash compensatory support became taxable only after the assessee had filed its return, due to the retrospective amendment. Punishing the assessee for no fault of his, by invoking Section 143(1A) in such circumstances, would be against legislative intent and shock the conscience. The Court upheld the view of the Calcutta High Court in Modern Fibotex India Ltd. and Another, and dismissed the appeal. No issue was expressly left undecided.

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 clear cut provisions of Section 143(1A) and 234? Assessee's contentions: The assessee argued that the return filed was correct according to the law in force at the time of filing. The retrospective amendment to Section 28 by the Finance Act, 1990, could not be known before it came into force. The levy of additional tax under Section 143(1A) has the characteristics of a penalty, and penal provisions should not be invoked without an element of lack of bona fides. The assessee relied on decisions in Modern Fibotex India Ltd. and Another v. Deputy Commissioner of Income-tax and Others, Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore, and Commissioner of Income-tax v. Onkar Saran and Sons. Revenue's contentions: The Revenue contended that the addition was justified under the clear provisions of Section 143(1A) and 234, given the retrospective amendment to Section 28. The judgment does not explicitly record the Revenue's specific arguments beyond what is implied by their appeal.

Which sections of the Income-tax Act were involved?

Section 28(iii)(b),Section 143(1A),Section 234,Section 139,Section 143(1)(a),Section 156,Section 271(1)(c),Section 148

AI-generated summary — verify with the full judgment below

A B c D E F G COMMISSIONER OF INCOME TAX, BHOPAL v. HINDUSTAN ELECTOR GRAPHITES LTD., INDORE MARCH 27, 2000 [D.P. WADHWA AND MRS. RUMA PAL, JJ.] Income Tax Act, 1961 : S.28(iii)(b) (as inserted by Finance Act, 1990) and ss.143(1A) and 234-Additional tax-Cash compensatory suppo.rt received against exports- Included under the head "profits aiul gains of business or profession" after the assessee had filed the return-Amendment made with retrospective effect- Assessee could not offer to tax the. amount of cash compensatory support received by it in the previous year-Revenue treating the amount as additional income and levied income tax thereon at higher rate and also charged interest-Held, levy of additional tax not warranted-Jn the circumstances, provisions.of s.143(1A) could not be invoked.

Respondent-assessee, a public limited company, filed its return of income for assessment year 1989-90 on 29.12.1989. The last date for filing of return was 31.12.1989. Cash assistance received by any person against exports under any scheme of the Government was not chargeable under the heads "profits and gains of business or profession" under s.28 of the Income Tax Act, 19

The order continues below.

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