COMMR.INCOME TAX vs. MS VICKY FOODS

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ITA/6/2001HC Himachal PradeshHPHC01001183200131 July 2009Author: HONOURABLE THE CHIEF JUSTICE A.M. KHANWILKAR,HONOURABLE MR. JUSTICE RAJIV SHARMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the question raised in the appeal was no longer res integra (undecided) in view of the Supreme Court's affirmation of the Punjab and Haryana High Court's judgment in Commissioner of Income Tax versus Prithipal Singh and Company, 249 ITR 670. The reasoning was that the Supreme Court's decision directly addressed the issue of penalty under Section 271(1)(c) when there is no taxable income or tax assessed. The ratio decidendi is that penalty under Section 271(1)(c) cannot be imposed in the absence of taxable income or tax liability. Consequently, the substantial question of law was answered in favor of the assessee, and the appeal filed by the revenue was dismissed. No costs were awarded.

What were the facts?

The appeal was filed by the Commissioner of Income Tax (Appellant) against an order passed by an appellate authority on November 7, 2000. The appellate authority had quashed a penalty imposed by the Assessing Officer on M/s Vicky Foods (Private) Limited (Respondent) under Section 271(1)(c) of the Income Tax Act, 1961. The basis for quashing the penalty was that the assessee had no taxable income or tax assessed for payment during the relevant year, and therefore, the question of evasion of tax and imposition of penalty did not arise. The appellate authority relied on the Punjab and Haryana High Court's judgment in CIT vs. Prithipal Singh and Company, 183 ITR 69.

What were the issues?

1. Whether, when there was no taxable income or tax assessed for payment during a particular year, the question of evasion of tax and consequently penalty under Section 271(1)(c) of the Income Tax Act, 1961, arises? The Appellant argued that the penalty under Section 271(1)(c) was justified. The Respondent argued that no penalty could be imposed when there was no taxable income or tax due, relying on the principle that penalty for concealment of income or furnishing inaccurate particulars is predicated on the existence of tax liability. The judgment notes that the appellate authority quashed the penalty based on the judgment of the Punjab and Haryana High Court in CIT vs. Prithipal Singh and Company, 183 ITR 69, which was subsequently affirmed by the Hon'ble Supreme Court in CIT vs. Prithipal Singh and Company, 249 ITR 670.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.

ITA No.6 of 2001 Reserved on: 7.7.2009 Decided on:31.7. 2009

Commissioner of Income Tax

…Appellant.

Versus

M/s Vicky Foods (Private) Limited.

…Respondent.

Coram The Hon’ble Mr. Justice Jagdish Bhalla, C.J.

The Hon’ble Mr. Justice Rajiv Sharma, J.

Whether approved for reporting ?1. For the Appellant : Mr. Vinay Kuthiala, Advocate.

For the Respondent : Mr. M.M. Khanna, Sr. Advocate with Mr. Goverdhan

Sharma, Advocate.

The core question on which the arguments have been advanced by the learned counsel for the appellant is that: “whether when there was no taxable income or tax assessed for payment during a particular year, the question of evasion of tax and consequently penalty under section 271 (1) (c) does not arise?

The Department has sought to impose penalty upon the assessee under section 271 (1) (c) of the Income Tax Act, 1961. The appellate

1 Whether the reporters of Local Papers may be allowed to see the judgment?

2 authority on the basis of the judgment rendered by the Punjab and Haryana High Court in CIT versus Prithipal Singh and Company, 183 ITR 69 held that Assessing Officer was not justified in imposing the impugned penalty when returned/assessed income was in loss. The penalty imposed was quashed by the appellate authority on 7.11.2000. The judgment CIT versus Prithipal Singh and Company, 183 ITR 69 relied upon by the appellate authority was affirmed by the Hon’ble Supreme Court in Commissioner of Income Tax versus Prithipal Singh and Company, 249 ITR 670. Accordingly, we are of the considered opinion that the question raised by way of present appeal is no more res integra in view of the judgment of the Punjab and Haryana High Court being affirmed by the Hon’ble Supreme Court in Commissioner of Income Tax versus Prithipal Singh and Company, 249 ITR 670. Consequently, the substantial question is answered accordingly and the appeal is dismissed. No costs.

(Jagdish Bhalla), C.J.

31.7.

2009

(Rajiv Sharma ), J. *awasthi*

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