COMMISSIONER vs. HPSIDC.

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ITA/28/2003HC Himachal PradeshHPHC01003908200331 July 2009Bench: 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 of evasion of tax and consequently the imposition of penalty under Section 271(1)(c) does not arise when there is no taxable income or tax assessed for payment during a particular year. The Court relied on the judgment of the Punjab and Haryana High Court in CIT versus Prithipal Singh and Company, 183 ITR 69, which was affirmed by the Hon'ble Supreme Court in Commissioner of Income Tax versus Prithipal Singh and Company, 249 ITR 670. The reasoning is that penalty for concealment of income or furnishing inaccurate particulars is predicated on the existence of taxable income or tax liability. Since the net result was a loss, there was no tax to evade. The appeal was dismissed, and no costs were awarded.

What were the facts?

The appeal was filed by the Commissioner of Income Tax (Appellant) against the order of the appellate authority. The appellate authority, after making an addition of Rs. 4,07,256/-, determined that the net result for the assessee, M/s H.P. State Industries Development Corporation Ltd. (Respondent), remained a loss of Rs. 65,68,810.00. Based on this, the appellate authority concluded that no penalty was leviable under Section 271(1)(c) of the Income Tax Act, 1961. The core issue revolved around whether penalty under Section 271(1)(c) could be imposed when there was no taxable income or tax assessed for payment in a particular year.

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) arises? (Question of law) Assessee's Contention: The judgment does not record any specific contentions made by the assessee. The decision appears to be based on the findings of the appellate authority and reliance on a Supreme Court judgment. Revenue's Contention: The revenue, through the Commissioner of Income Tax, argued that penalty under Section 271(1)(c) is leviable. The core of the dispute is whether the absence of taxable income negates the possibility of tax evasion and thus penalty imposition.

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.28 of 2003 Reserved on: 7.7.2009 Decided on:31.7.2009

Commissioner of Income Tax

…Appellant.

Versus M/s H.P. State Industries Development Corporation Ltd.

…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. Raman Sethi, 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 appellate authority has ordered that after making an addition of Rs. 4,07,256/- the net result still remained a loss of Rs. 65,68,810.00. The appellate authority thus came to the conclusion that no penalty was

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

2 leviable under section 271 (1) (c) of the Income Tax Act, 1961. The Punjab and Haryana High Court in CIT versus Prithipal Singh and Company, 183 ITR 69 on the same and similar facts has come to the conclusion that when there was no taxable income or tax assessed for payment during a particular year, the question of evasion and consequently imposition of penalty did not arise. This judgment has been affirmed by their Lordships of 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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