DAHOD SAHAKARI KHARID VECHAN SANGH LTD vs. COMMISSIONER OF INCOME TAX

ITR/265/1993HC GujaratGJHC24021292199312 July 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI25 pages
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What were the facts?

The assessee, Dahod Sahakari Kharid Vechan Sangh Ltd., a cooperative society, filed its return for assessment year 1984-85. During assessment, the Assessing Officer (AO) questioned the non-reflection of insurance premium payments in the accounts. The assessee explained that they had withdrawn from a Group Gratuity Insurance Scheme as it was not beneficial, and subsequently received Rs. 68,332/- from the Insurance Company, which was the total premium paid in earlier years. The AO treated this receipt as profits under Section 41(1) and initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars. The Commissioner (Appeals) dismissed the assessee's appeal against the addition. The AO levied a penalty of Rs. 30,770/-. The Commissioner (Appeals) cancelled the penalty, holding it was not a fit case for concealment penalty due to the nature of a cooperative society and lack of individual benefit.

What did the High Court hold?

The High Court answered Question No. 1 in the negative, in favour of the assessee and against the revenue. The Court held that the Tribunal was not correct in upholding the penalty under Section 271(1)(c). The Court found that the assessee's contention of absence of mens rea or malafide intention had not been found to be untrue. The Court noted that the Tribunal's finding that the assessee had made a separate claim for gratuity deduction on an actual payment basis was based on a misconception of facts and law, as the assessee had never claimed any deduction for the Rs. 68,332/-. The Court reiterated the principle that mere omission from the return of an item of receipt does not amount to concealment or deliberate furnishing of inaccurate particulars unless there is evidence or circumstances showing an intention to hide income to avoid tax. Given that the assessee is a cooperative society with no personal interest involved, and the omission occurred due to oversight, the penalty was not exigible. The Court also noted that the Tribunal failed to consider the Commissioner (Appeals)'s finding that it was not a fit case for penalty due to the nature of the cooperative society. The judgment does not explicitly address Question No. 2, but the disposal of the reference implies that the findings on the penalty issue are dispositive.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the penalty under section 271(1)(c)? (Question of law) Assessee's contention: The assessee argued that there was no mens rea or malafide intention in not adding the amount received from the insurance company to its income, as it was credited to the gratuity fund account. They contended that as a cooperative society, there was no personal benefit to any individual from such an omission, and it was an oversight. They relied on the principle that absence of proof acceptable to the department cannot be equated with fraud or willful default, and that concealment inherently requires a deliberate act. Revenue's contention: The revenue, through the AO and the Tribunal, contended that the assessee had concealed particulars of income or furnished inaccurate particulars by not offering the Rs. 68,332/- for taxation, which was treated as income under Section 41(1). The AO rejected the assessee's explanation that the amount was credited to the gratuity fund and would be utilized for gratuity payments, and that the assessee could not claim it as a deduction on a due basis. 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that it was necessary for assessee to file cross objection inspite of fully succeeding in appeal and therefore, it cannot challenge the finding by the CIT (A) of assessee being guilty of concealment of income and / or furnishing inaccurate particulars? (Question of law) Assessee's contention: The assessee argued that they fully succeeded before the Commissioner (Appeals) on the issue of penalty, and therefore, no cross-objection was necessary. They asserted their right to challenge the finding of concealment by the CIT(A). Revenue's contention: The revenue's contention is not explicitly recorded in the provided text regarding this specific issue, other than the fact that the Tribunal upheld the penalty, which the assessee is challenging.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 41(1),Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

O­ITR­265­1993­Y­1 1 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 265 of 1993 For Approval and Signature: HON'BLE MR.JUSTICE D.A.MEHTA HON'BLE 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 ? ============================================================= = DAHOD SAHAKARI KHARID VECHAN SANGH LTD - Applicant(s) Versus COMMISSIONER OF INCOME TAX - Respondent(s) ============================================================= = Appearance : MR MANISH J. SHAH FOR MR.JP SHAH for Applicant MR MANISH R BHATT for Respondent ============================================================== CORAM :HON'BLE MR.JUSTICE D.A.MEHTA HON'BLE MS.JUSTICE H.N.DEVANI Date : 12/07/2005 ORAL JUDGMENT

O­ITR­265­1993­Y­1 2

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