COMM.OF INCOMETAX AP-I HYD V. M/S.CONTINENTAL EXPORTS LTD HYD

ITTA/96/2001

AI Insights

The case involves an appeal by the Income Tax Department against the decision of the Income Tax Appellate Tribunal, which had allowed the appeal of an export company regarding a penalty imposed for alleged concealment of income. The Tribunal found that the company did not have any intention to suppress or conceal income, and accidental failure to mention some items did not warrant a penalty under Section 271(1)(c) of the Income Tax Act. The Department argued that the mere fact of non-disclosure justified the penalty, but the Tribunal's decision was based on the absence of intentional concealment and the quasi-criminal nature of penalty proceedings under tax law.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 679746 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 01-07-2014
• Assessment Year: misc
• Other Referred Cases: Hindusthan Steel Limited Vs. State of Orissa
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A V KOUNDINYA
• Assessee Lawyers: S R ASHOK
• Keywords: Income concealment; Penalty; Quasi-criminal; Assessment year 1991-1992; Export company
• Section: 271(1)(c); 40(A)(2); 260-A

Judgement Text

"HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. No.96 of 2001 JUDGMENT:- (per LNR,J) This appeal is filed by the Income Tax Department feeling aggrieved by the Order dated 23.02.2001 passed by the Hyderabad Bench-B of the Income Tax Appellate Tribunal (in short “the Tribunal”). The subject matter is the returns filed by the respondent for the assessment year 1991-1992. The respondent is an export company. In its return filed for the assessment year 1991-1992, it reflected not only the losses that accrued in the previous assessment year, but also the loss carried forward from the previous year. In the course of verification of the return, the Income Tax Officer found that certain items of income were concealed. Apart from bringing those items within the purview of assessment, he initiated proceedings under Section 271 (1) (c) of the Income Tax Act (in short “the Act”). A penalty of about Rs.30,00,000/- was imposed in the order of assessment dated 27.09.1994. Aggrieved by that, the respondent filed an appeal before the Commissioner of Income Tax. The same was dismissed on 13.10.1994. There upon the respondent filed I.T.A.No.229/Hyd/95 before the Tribunal. The Appeal was allowed by the Tribunal following certain precedents. Hence, this Appeal under Section 260 (A) of the Act, by the revenue. Sri S.R. Ashok, learned Standing Counsel for the Department submits that once the Income Tax Officer found that the assessee concealed certain amounts of income, the penalty must follow as a matter of course irrespective of the reasons for nondisclosure or the effect of the unearthing of the same. He contends that the respondent did not even dispute the fact that he failed to explain the cash advances, and infact, came forward with a plan to include the amounts in the assessment. The learned counsel further submits that the view taken by the Tribunal cannot be sustained in law. Sri A.V.Krishna Koundinya, learned counsel for the respondent, on the other hand submits that the Tribunal recorded a clear finding to the effect that the respondent’s did not have any intention to suppress or conceal any items of income or advances and that accidental failure to mention some of the items, cannot be a ground for levying of penalty. He submits that the Supreme Court categorically held that the proceedings under Section 271 of the Act are quasi criminal in nature and unless the Department establishes the intention on the part of the assessee to conceal, the penalty cannot be levied. A perusal of the order of assessment based on the return filed by the respondent for the assessment year 1991-1992 discloses that loss of Rs.1,90,16,148/- was shown. After allowing part of the loss to be set off against the profit, there remained unabsorbed depreciation of about Rs.2,40,00,000/-. Obviously, because the loss was phenomenal there was some laxity on the part of the respondent in furnishing accurate figures. In the course of processing the return, the Income Tax Officer disallowed all amounts aggregating about Rs.35,00,000/-. The respondent did not seriously object to that, and in a way agreed for the amount being treated as income. However, the factum of respondent agreeing for inclusion of the said amount in the assessment was treated as a proof of concealment. I n Hindusthan Steel Limited Vs. State of Orissa[1] the Supreme Court observed that the penalty proceedings under a tax enactment cannot be initiated as a matter of course as they are quasi criminal in nature and they may not be ordinarily initiated unless the concerned assessee is shown to have acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in a conscious disregard of its obligation. The said principle was applied by the Tribunal. It was held that the alleged concealment on the part of the respondent did not attract under Section 271(1)(c) of the Act. Discussion was also undertaken on merits, with reference to Section 40(A)(2) of the Act. Though certain questions have been framed while admitting the appeal, we do not find them to be of much relevance particularly in view of the conclusions arrived by the Tribunal on facts. On appreciation of material before it, the Tribunal took the view that there was no deliberate and wilful act of concealment on the part of the respondent. The department is not able to demonstrate that the view taken by the Tribunal was contrary to specific provisions of the law or binding precedent. We, therefore, dismiss the appeal. No order as to costs. __________________________ L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J Date:01.07.2014 Ssv/Gk HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.No.96 of 2001 Date: 01.07.2014 Ssv/Gk [1] 83 ITR 26 "