COMMISSIONER OF INCOME-TAX vs. UNION ELECTRIC CORPORATION

ITR/212/1994HC GujaratGJHC24020288199413 October 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI5 pages
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What were the facts?

The assessee, Union Electric Corporation, filed a return of income for assessment year 1981-82 showing a total income of Rs. 2,31,020/-. The Assessing Officer (AO) noted a debit of Rs. 34,892/- under 'consumable stores'. Upon scrutiny, Rs. 26,853/- was identified as the cost of aluminum wires purchased from M/s Zodiac Electrical (P) Ltd. The assessee performed job work on wires supplied by its sister concern, M/s Johnson Electric Co., from the same premises. The AO concluded that the wire cost was not allowable as consumable stores. The assessee accepted this addition. The AO then levied a penalty of Rs. 26,853/- under Section 271(1)(c) for furnishing inaccurate particulars and concealment of income. The CIT(Appeals) confirmed the penalty. The assessee appealed to the Tribunal.

What did the High Court hold?

The Tribunal held that the debit entry was a solitary instance where the cost of wires was incorrectly classified as consumable stores, and the assessee failed to recover the cost from its sister concern. Crucially, the assessee proactively requested the disallowance during the assessment proceedings, even before the AO identified the issue. This demonstrated the assessee's bonafides. The Tribunal found that the assessee's actions were bonafide and that the imposition of penalty was not warranted in such circumstances. The High Court, in reference, noted that the Tribunal had recorded findings of fact regarding the admission and bonafides of the assessee, which were not disputed by the revenue. Consequently, the Tribunal was justified in deleting the penalty of Rs. 26,853/-. The question was answered in the affirmative, in favour of the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the penalty levied under section 271(1)(c) on the concealed income of Rs. 26,853/- to which the assessee had agreed for disallowance? Assessee's contention: The assessee argued that the debit entry was a solitary instance of mistake where the cost of wires was wrongly shown as consumable stores. The assessee voluntarily requested the disallowance during assessment proceedings before the AO detected it, demonstrating bonafides. Therefore, penalty was not warranted. Revenue's contention: The revenue contended that by debiting the amount as consumable stores, the assessee attempted to reduce its income, constituting furnishing of inaccurate particulars and concealment of income, thus justifying the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 256(1)

AI-generated summary — verify with the full judgment below

ITR/212/1994 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 212 of 1994 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ============================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ============================================================== COMMISSIONER OF INCOME-TAX - Applicant(s) Versus UNION ELECTRIC CORPORATION - Respondent(s) ============================================================== Appearance : MR T.U. BHATT for Applicant NOTICE SERVED for Respondent(s) : 1, ================================================================== CORAM :  HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 13/10/2005 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

ITR/212/1994 2/5 JUD

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