Commissioner of Income Tax, Bhopal Vs. Hindustan Elector Graphites Ltd., Indore
EmailAppeal: Civil Appeal No. 2454 of 1998
(From the Judgment and Order dated 11.9.97 of the Madhya Pradesh High Court in I.T.R. No. 52 of 1994)
(From the Judgment and Order dated 11.9.97 of the Madhya Pradesh High Court in I.T.R. No. 52 of 1994)
Petitioner: Commissioner of Income Tax, Bhopal
Respondent: Hindustan Elector Graphites Ltd., Indore
Apeal: Civil Appeal No. 2454 of 1998
(From the Judgment and Order dated 11.9.97 of the Madhya Pradesh High Court in I.T.R. No. 52 of 1994)
(From the Judgment and Order dated 11.9.97 of the Madhya Pradesh High Court in I.T.R. No. 52 of 1994)
Judges: D.P. WADHWA & RUMA PAL, JJ.
Date of Judgment: Mar 27, 2000
Appearances:
Mr. Soli J. Sorabjee, Attorney General, Mr.V. Gauri Shankar, Mr. M.L. Verma, Senior Advocates, Mr. A.D.N. Rao, Ms. Neera Gupta, Mr. Arvind K. Sharma, Ms. Kanupriya Mittal, Mr. B.K. Prasad, Ms. Sushma Suri, Advocates with them for the Appellant.
Mr. Joseph Vellapally, Senior Advocate, Mr. Tarun Gulati, Mr. Manoj Sharma, Mr. Rakesh K. Sharma, Advocates with him for the Respondent.
Head Note:
INCOME TAX LAW
Income Tax Act, 1961
Sections 28(iii)(b), 143(1)(a), 143(1A) and 234 – Assessment – Prima facie adjustments – Levy of additional tax – Nature and scope of – Cash compensatory support made tax-able by Finance Act, 1990 (assented on 31 May 1990) with retro-spective effect from 1 April 1967 – Cash assistance received by assessee public company in the previous year 1988-89 not included in the return for the assessment year 1989-90 – AO adding the same as income and levying additional tax – Tribunal however, holding that no additional tax leviable and accordingly deleting the addition made by AO – High Court also concurring with Tribun-al’s findings – Whether deletion of the addition justified. Held addition tax had all the characteristics of penalty. Cash com-pensatory support came within the tax net of Section 28 after the filing of the return by the assessee. Charging of additional tax in the facts and circumstances amounted to punishing the assessee for no fault of his. Tribunal therefore justified in deleting the addition. Views expressed in Modern Fibotex India Ltd. and Anoth-er v. Dy. CIT and Others (1995) 212 ITR 496 (Cal.) upheld.
Held:
It is true that income by way of cash compensatory support became taxable retro-spectively with effect from April 1, 1967 but that was by amend-ment of Section 28 by the Finance Act of 1990 which amendment could not have been known before the Finance Act came into force. Levy of additional tax bears all the characteristics of penalty. Additional tax was levied as the assessee did not in his return show the income by way of cash compensatory support. Assessing Officer on that account levied additional income tax. No addi-tional tax would have been leviable on the cash compensatory support if the Finance Act, 1990 had not so provided even though retrospectively. Assessee could not have suffered additional tax but for the Finance Act, 1990. After he had filed his return of income, which was correct as per law on the date of filing of the return, it was thereafter that the cash compensatory support also came within the sway of Section 28. When additional tax has imprint of penalty Revenue cannot be heard saying that levy of additional tax is automatic under Section 143(1A) of the Act. If additional tax could be levied in such circumstances it will be punishing the assessee for no fault of his. That cannot ever be the legislative intent. It shocks the very conscious if in the circumstances Section 143(1A) could be invoked to levy the addi-tional tax. (Para 12)
We uphold the view expressed by the Calcutta High Court. Keeping in view the principles laid by this Court it has to be held that in the circumstances of the present case levy of addi-tional tax taking into account the income by way of cash compen-satory support is not warranted. The question is answered in affirmative, i.e., in favour of the assessee and against the Revenue. The appeal is accordingly dismissed with costs. (Para 13)
Cases Reffered:
1. Modern Fibotex India Ltd. and another v. Deputy Commission-er of Income-tax and Others ((1995) 212 ITR 496 (Cal.))
2. Commissioner of Income-tax v. Onkar Saran and Sons (JT 1992 (2) SC 567)
3. Cement Marketing Co. of India Ltd. v. Assistant Commission-er of Sales Tax, Indore ((1980) 124 ITR 15 (SC))
4. Pannalal Binjraj and another v. The Union of India and Others ((1957) 31 ITR 565 (SC))
2. Commissioner of Income-tax v. Onkar Saran and Sons (JT 1992 (2) SC 567)
3. Cement Marketing Co. of India Ltd. v. Assistant Commission-er of Sales Tax, Indore ((1980) 124 ITR 15 (SC))
4. Pannalal Binjraj and another v. The Union of India and Others ((1957) 31 ITR 565 (SC))
JUDGEMENT:
D.P. Wadhwa, J.
1. The question of law which falls for consideration is :
Whether on the facts and in the circumstances of the case, Trib-unal was justified in deleting the addition made by the Assessing Officer under Section 143(1)(a) in view of the clear cut provi-sions of Sections 143(1)(a), 143 (1A) and 234?
2. Respondent, the assessee, filed its return of income for the assessment year 1989-90. The return was filed on December 29, 1989. It was filed under Section 139 of the Income Tax Act, 1961 (for short, the ‘Act’).
3. Under Section 28 of the Act, income mentioned therein is chargeable to income tax under the head “profits and gains of business or profession”. Clause (iii)(b) in Section 28 was in-serted by the Finance Act of 1990. Finance Bill which ultimately became the Finance Act received assent of the President of India on May 31, 1990. Clause (iii)(b) was given retrospective opera-tion w.e.f. April 1, 1967. Clause (iii)(b) is as under :
“(iii)(b) – Cash assistance (by whatever named called) received or receivable by any person against exports under any scheme of the Government of India.”
4. Before the insertion of clause (iii)(b), cash assistance received by any person against exports under any scheme of the Government could not be chargeable to income tax under the head “profits and gains of business or profession”. The assessee had received in the previous year relevant to the assessment year 1988-89 a sum of Rs.1,31,41,030/- by way of cash assistance. Since clause (iii)(b) was inserted in Section 28, though having retrospective operation by the Finance Act, 1990, the assessee did not include this income in his return which, as noted above, was filed on December 29, 1989. The assessee is a public limited company and for the assessment year 1989-90 last date of filing of return of income was December 31, 1989.
5. Deputy Commissioner Income Tax (Assessment) Special Range, Bhopal was the assessing officer. He by his order dated May 5, 1990 passed under Section 143(1)(a)1 of the Act added the afore-said amount of Rs.1,31,41,030/- representing the cash compensa-tory support and received by the assessee. The assessee had not offered this amount to tax. The assessing officer treated this as additional income under Section 143(1A)2 of the Act and levy the amount of tax at higher rate on this additional income and also charge interest under Section 234 3 of the Act.
6. The assessee filed an appeal against the order of the assess-ing officer before the Commissioner of Income-Tax (Appeal), Bhopal who partly allowed the appeal on that part with which we are not concerned. The assessee then took the matter in appeal to the Income Tax Appellate Tribunal, Indore Bench, Indore (for short, the ‘Tribunal’). The Tribunal by its order dated August 11, 1992 allowed the appeal holding that no additional tax could be levied in respect of the amount of cash compensatory support and no interest under Section 234 could be charged on the said amount. Now, it was the Revenue which was aggrieved. At the instance of the Revenue, the Tribunal referred the question to the High Court of Madhya Pradesh under Section 256(1) of the Act for its opinion. High Court by its impugned judgment dated Sep-tember 11, 1997 answered the question in affirmative, i.e., in favour of the assessee and against the Revenue. Against the judgment of the High Court, Revenue sought leave to appeal to this Court which was granted and that is how the matter is now before us.
7. We have to consider if the stand of the Revenue is valid or will it not lead to unjust results for the assessee. Revenue says under Section 143(1A), the Assessing Officer has no choice and he has to levy additional tax once he finds that the assessee has not shown the amount of the cash compensatory support in his return, whatever the reason be. Assessee contends it is something which is most improper and against the settled principles.
8. In Modern Fibotex India Ltd. and Another v. Deputy Commission-er of Income-tax and Others ((1995) 212 ITR 496 (Cal.)) one of the two issues before the Court related to the validity of an intimation under Section 143(1)(a) of the Act. For the Assessment Year 1989-90 the assessee company received cash compensatory support from the Central Government amounting to about Rs.8.00 lakhs. In its return of income the company claimed the amount received by it on account of cash compensatory support as not taxable. The Assessing Officer assessed the company applying the amended provision of Section 28 of the Act thus levying addition-al tax under Section 143(1A) of the Act. The company filed a writ petition in the High Court challenging the very constitutionality of Section 143(1)(a) read with Section 143(1A) and Section 4 and also the intimation sent by the Assessing Officer levying addi-tional tax. High Court speaking through one of us (Ruma Pal,J.) noticed that Section 28 of the Act was amended with retrospective effect from April 1, 1967. It said: –
“An assessee cannot be imputed with clairvoyance. When the return was filed, the assessee could not possibly have known that the decision on the basis of which cash compensatory support had been claimed as not amounting to the assessee’s income ceased to be operative by reason of retrospective legislation.”
High Court was further of the view that there was limitation on the power under Section 143(1)(a) and that the Assessing Officer must determine the questions of assessment thereunder by applying the law prevailing when the return was filed. One has to see the nature of the obligation to which an assessee is subjected in filing his return and the object sought to be achieved by the introduction of Section 143(1A) and Section 143(1)(a) which direct levy of additional tax. The obligation is to file a cor-rect return within the time specified, that is to say, a return, which is correct according to law in force, when it is required to be filed. It was not disputed that the return when filed by the assessee could not be termed out of hand as an incorrect return on the date of filing of the return. This is how the High Court dealt the matter: –
“Without going into the question as to whether the provi-sions are penal in nature, but keeping in mind the consequences of an adjustment made and the insistence upon the assessee filing a correct return, it would follow that the date for judging the question of adjustment must be the actual date of the return in the light of the law then prevailing. To hold otherwise, mani-festly shocks one’s sense of justice that an act, correct at the time of doing it, should become incorrect by some new enactment (see Midland Railway Company v. Pyre (1861) 142 ER 419, 424). The injustice in my view is more shocking in this case having regard to the fact that the assessee had itself, in its return, drawn the attention of the income tax authorities to the basis upon which the cash compensatory support had been included as income and had clearly offered to include the same in any assess-ment if the basis is shown to exist.
Additionally, the change in the law by amendment of Section 28 took place several months after the return was filed by the assessee. This court is not determining the validity of the amendment of Section 28, but is merely determining the scope of the power under Section 143(1)(a). The assessee’s return could have been taken up by the Assessing Officer under Section 143 prior to the amendment. In that event, no adjustment would have been made and no intimation would have been sent. An assessee’s liability cannot be made to depend upon such a fortuitous circum-stance.”
High Court allowed the writ petition to the extent that the impugned intimation and adjustment under Section 143(1)(a) were set aside and quashed.
9. In Cement Marketing Co. of India Ltd. v. Assistant Commission-er of Sales Tax, Indore ((1980) 124 ITR 15 (SC)) the assessee did not include in its return of turnover the amount of freight included in the price of sugar in the bona fide belief that it was not liable to be included in the taxable turnover. The asses-see was imposed with a penalty in view of Section 43 of the Madhya Pradesh General Sales Tax Act, 1958 and Section 9 of the Central Sales Tax, 1956 on the ground that it had furnished false return by not including the amount of freight in the taxable turnover disclosed in the returns. This Court said that it was difficult to see how the assessee could be said to have filed “false” return, when what the assessee did, namely, not including the amount of freight in the taxable turnover, was under bona fide belief that the amount of freight did not form part of the sale price and was not includible in the taxable turnover. A return cannot be said to be “false” unless there is an element of deliberateness in it. It is possible that even where the incor-rectness of the return is claimed to be due to want of care on the part of assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the court may, in a given case, infer deliberateness and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a “false” return inviting imposition of penalty. This Court said that Section 43 of the Madhya Pradesh General Sales Tax Act, 1958 providing for imposition of penalty was a penal in character and unless the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for imposing penalty. This Court further said that if the view canvassed on behalf of the Revenue were accepted, the result would be that even if the assessee raises a bona fide contention that a particular item is not liable to be included in the taxable turnover, he would have to show it as forming part of the taxable turnover in his return and pay tax upon it on pain of being held liable for penalty in case his contention is ultimately found by the court to be not accept-able. That surely could never have been intended by the Legisla-ture, this Court so observed.
10. In Commissioner of Income-tax v. Onkar Saran and Sons (JT 1992 (2) SC 567) = ((1992) 195 ITR 1 (SC)) the assessee filed re-turns for the Assessment Years 1961-62 and 1962-63 disclosing incomes of Rs,18,935 and Rs.24,943 respectively. The assessments were completed in the total income of Rs.28,513 and Rs.28,463 respectively. Income-tax Officer having come to know subsequently that the assessee had failed to disclose its profits from sale of certain lands, issued notices under Section 148 for both the years. The assessee, however, disclosed the same incomes as in the original returns. Income-tax Officer made additions and after completing the re-assessments on March 6, 1969 initiated proceed-ings under Section 271(1)(c) and the Inspecting Assistant Commis-sioner imposed penalty on the assessee on the basis of the amend-ed Section 271(1)(c) w.e.f. April 1, 1968. This Court said that even in a case where a return is filed in response to a notice under Section 148 involving an element of concealment, the law applicable would be the law as it stood at the time when the original return was filed for the Assessment Year in question and not the law as it stood on the date on which the return was filed in response to notice under Section 148.
11. Decision of the Calcutta High Court in Modern Fibotex India Ltd. and Another (212 ITR 496) squarely covers the issue involved in the present appeal. Then we have to see the law on the date of filing of the return. To attract penal provisions there has been same element of lack of bonafides unless the law specifically provides otherwise.
12. The case before us does not represent even a bona fide mis-take. In fact it is not a case where under some mistaken belief the assessee did not disclose the cash compensatory support received by it which he could offer to tax. It is true that income by way of cash compensatory support became taxable retro-spectively with effect from April 1, 1967 but that was by amend-ment of Section 28 by the Finance Act of 1990 which amendment could not have been known before the Finance Act came into force. Levy of additional tax bears all the characteristics of penalty. Additional tax was levied as the assessee did not in his return show the income by way of cash compensatory support. Assessing Officer on that account levied additional income tax. No addi-tional tax would have been leviable on the cash compensatory support if the Finance Act, 1990 had not so provided even though retrospectively. Assessee could not have suffered additional tax but for the Finance Act, 1990. After he had filed his return of income, which was correct as per law on the date of filing of the return, it was thereafter that the cash compensatory support also came within the sway of Section 28. When additional tax has imprint of penalty Revenue cannot be heard saying that levy of additional tax is automatic under Section 143(1A) of the Act. If additional tax could be levied in such circumstances it will be punishing the assessee for no fault of his. That cannot ever be the legislative intent. It shocks the very conscious if in the circumstances Section 143(1A) could be invoked to levy the addi-tional tax. Following observations by the Constitution Bench of this Court in Pannalal Binjraj and Another v. The Union of India and Others ((1957) 31 ITR 565 (SC)) are apt: –
“A humane and considerate administration of the relevant provi-sions of the Income-tax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the Revenue with administering the provisions of the Act with “an evil eye and unequal hand”.”
13. We uphold the view expressed by the Calcutta High Court. Keeping in view the principles laid by this Court it has to be held that in the circumstances of the present case levy of addi-tional tax taking into account the income by way of cash compen-satory support is not warranted. The question is answered in affirmative, i.e., in favour of the assessee and against the Revenue. The appeal is accordingly dismissed with costs.
1. The question of law which falls for consideration is :
Whether on the facts and in the circumstances of the case, Trib-unal was justified in deleting the addition made by the Assessing Officer under Section 143(1)(a) in view of the clear cut provi-sions of Sections 143(1)(a), 143 (1A) and 234?
2. Respondent, the assessee, filed its return of income for the assessment year 1989-90. The return was filed on December 29, 1989. It was filed under Section 139 of the Income Tax Act, 1961 (for short, the ‘Act’).
3. Under Section 28 of the Act, income mentioned therein is chargeable to income tax under the head “profits and gains of business or profession”. Clause (iii)(b) in Section 28 was in-serted by the Finance Act of 1990. Finance Bill which ultimately became the Finance Act received assent of the President of India on May 31, 1990. Clause (iii)(b) was given retrospective opera-tion w.e.f. April 1, 1967. Clause (iii)(b) is as under :
“(iii)(b) – Cash assistance (by whatever named called) received or receivable by any person against exports under any scheme of the Government of India.”
4. Before the insertion of clause (iii)(b), cash assistance received by any person against exports under any scheme of the Government could not be chargeable to income tax under the head “profits and gains of business or profession”. The assessee had received in the previous year relevant to the assessment year 1988-89 a sum of Rs.1,31,41,030/- by way of cash assistance. Since clause (iii)(b) was inserted in Section 28, though having retrospective operation by the Finance Act, 1990, the assessee did not include this income in his return which, as noted above, was filed on December 29, 1989. The assessee is a public limited company and for the assessment year 1989-90 last date of filing of return of income was December 31, 1989.
5. Deputy Commissioner Income Tax (Assessment) Special Range, Bhopal was the assessing officer. He by his order dated May 5, 1990 passed under Section 143(1)(a)1 of the Act added the afore-said amount of Rs.1,31,41,030/- representing the cash compensa-tory support and received by the assessee. The assessee had not offered this amount to tax. The assessing officer treated this as additional income under Section 143(1A)2 of the Act and levy the amount of tax at higher rate on this additional income and also charge interest under Section 234 3 of the Act.
6. The assessee filed an appeal against the order of the assess-ing officer before the Commissioner of Income-Tax (Appeal), Bhopal who partly allowed the appeal on that part with which we are not concerned. The assessee then took the matter in appeal to the Income Tax Appellate Tribunal, Indore Bench, Indore (for short, the ‘Tribunal’). The Tribunal by its order dated August 11, 1992 allowed the appeal holding that no additional tax could be levied in respect of the amount of cash compensatory support and no interest under Section 234 could be charged on the said amount. Now, it was the Revenue which was aggrieved. At the instance of the Revenue, the Tribunal referred the question to the High Court of Madhya Pradesh under Section 256(1) of the Act for its opinion. High Court by its impugned judgment dated Sep-tember 11, 1997 answered the question in affirmative, i.e., in favour of the assessee and against the Revenue. Against the judgment of the High Court, Revenue sought leave to appeal to this Court which was granted and that is how the matter is now before us.
7. We have to consider if the stand of the Revenue is valid or will it not lead to unjust results for the assessee. Revenue says under Section 143(1A), the Assessing Officer has no choice and he has to levy additional tax once he finds that the assessee has not shown the amount of the cash compensatory support in his return, whatever the reason be. Assessee contends it is something which is most improper and against the settled principles.
8. In Modern Fibotex India Ltd. and Another v. Deputy Commission-er of Income-tax and Others ((1995) 212 ITR 496 (Cal.)) one of the two issues before the Court related to the validity of an intimation under Section 143(1)(a) of the Act. For the Assessment Year 1989-90 the assessee company received cash compensatory support from the Central Government amounting to about Rs.8.00 lakhs. In its return of income the company claimed the amount received by it on account of cash compensatory support as not taxable. The Assessing Officer assessed the company applying the amended provision of Section 28 of the Act thus levying addition-al tax under Section 143(1A) of the Act. The company filed a writ petition in the High Court challenging the very constitutionality of Section 143(1)(a) read with Section 143(1A) and Section 4 and also the intimation sent by the Assessing Officer levying addi-tional tax. High Court speaking through one of us (Ruma Pal,J.) noticed that Section 28 of the Act was amended with retrospective effect from April 1, 1967. It said: –
“An assessee cannot be imputed with clairvoyance. When the return was filed, the assessee could not possibly have known that the decision on the basis of which cash compensatory support had been claimed as not amounting to the assessee’s income ceased to be operative by reason of retrospective legislation.”
High Court was further of the view that there was limitation on the power under Section 143(1)(a) and that the Assessing Officer must determine the questions of assessment thereunder by applying the law prevailing when the return was filed. One has to see the nature of the obligation to which an assessee is subjected in filing his return and the object sought to be achieved by the introduction of Section 143(1A) and Section 143(1)(a) which direct levy of additional tax. The obligation is to file a cor-rect return within the time specified, that is to say, a return, which is correct according to law in force, when it is required to be filed. It was not disputed that the return when filed by the assessee could not be termed out of hand as an incorrect return on the date of filing of the return. This is how the High Court dealt the matter: –
“Without going into the question as to whether the provi-sions are penal in nature, but keeping in mind the consequences of an adjustment made and the insistence upon the assessee filing a correct return, it would follow that the date for judging the question of adjustment must be the actual date of the return in the light of the law then prevailing. To hold otherwise, mani-festly shocks one’s sense of justice that an act, correct at the time of doing it, should become incorrect by some new enactment (see Midland Railway Company v. Pyre (1861) 142 ER 419, 424). The injustice in my view is more shocking in this case having regard to the fact that the assessee had itself, in its return, drawn the attention of the income tax authorities to the basis upon which the cash compensatory support had been included as income and had clearly offered to include the same in any assess-ment if the basis is shown to exist.
Additionally, the change in the law by amendment of Section 28 took place several months after the return was filed by the assessee. This court is not determining the validity of the amendment of Section 28, but is merely determining the scope of the power under Section 143(1)(a). The assessee’s return could have been taken up by the Assessing Officer under Section 143 prior to the amendment. In that event, no adjustment would have been made and no intimation would have been sent. An assessee’s liability cannot be made to depend upon such a fortuitous circum-stance.”
High Court allowed the writ petition to the extent that the impugned intimation and adjustment under Section 143(1)(a) were set aside and quashed.
9. In Cement Marketing Co. of India Ltd. v. Assistant Commission-er of Sales Tax, Indore ((1980) 124 ITR 15 (SC)) the assessee did not include in its return of turnover the amount of freight included in the price of sugar in the bona fide belief that it was not liable to be included in the taxable turnover. The asses-see was imposed with a penalty in view of Section 43 of the Madhya Pradesh General Sales Tax Act, 1958 and Section 9 of the Central Sales Tax, 1956 on the ground that it had furnished false return by not including the amount of freight in the taxable turnover disclosed in the returns. This Court said that it was difficult to see how the assessee could be said to have filed “false” return, when what the assessee did, namely, not including the amount of freight in the taxable turnover, was under bona fide belief that the amount of freight did not form part of the sale price and was not includible in the taxable turnover. A return cannot be said to be “false” unless there is an element of deliberateness in it. It is possible that even where the incor-rectness of the return is claimed to be due to want of care on the part of assessee and there is no reasonable explanation forthcoming from the assessee for such want of care, the court may, in a given case, infer deliberateness and the return may be liable to be branded as a false return. But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a “false” return inviting imposition of penalty. This Court said that Section 43 of the Madhya Pradesh General Sales Tax Act, 1958 providing for imposition of penalty was a penal in character and unless the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for imposing penalty. This Court further said that if the view canvassed on behalf of the Revenue were accepted, the result would be that even if the assessee raises a bona fide contention that a particular item is not liable to be included in the taxable turnover, he would have to show it as forming part of the taxable turnover in his return and pay tax upon it on pain of being held liable for penalty in case his contention is ultimately found by the court to be not accept-able. That surely could never have been intended by the Legisla-ture, this Court so observed.
10. In Commissioner of Income-tax v. Onkar Saran and Sons (JT 1992 (2) SC 567) = ((1992) 195 ITR 1 (SC)) the assessee filed re-turns for the Assessment Years 1961-62 and 1962-63 disclosing incomes of Rs,18,935 and Rs.24,943 respectively. The assessments were completed in the total income of Rs.28,513 and Rs.28,463 respectively. Income-tax Officer having come to know subsequently that the assessee had failed to disclose its profits from sale of certain lands, issued notices under Section 148 for both the years. The assessee, however, disclosed the same incomes as in the original returns. Income-tax Officer made additions and after completing the re-assessments on March 6, 1969 initiated proceed-ings under Section 271(1)(c) and the Inspecting Assistant Commis-sioner imposed penalty on the assessee on the basis of the amend-ed Section 271(1)(c) w.e.f. April 1, 1968. This Court said that even in a case where a return is filed in response to a notice under Section 148 involving an element of concealment, the law applicable would be the law as it stood at the time when the original return was filed for the Assessment Year in question and not the law as it stood on the date on which the return was filed in response to notice under Section 148.
11. Decision of the Calcutta High Court in Modern Fibotex India Ltd. and Another (212 ITR 496) squarely covers the issue involved in the present appeal. Then we have to see the law on the date of filing of the return. To attract penal provisions there has been same element of lack of bonafides unless the law specifically provides otherwise.
12. The case before us does not represent even a bona fide mis-take. In fact it is not a case where under some mistaken belief the assessee did not disclose the cash compensatory support received by it which he could offer to tax. It is true that income by way of cash compensatory support became taxable retro-spectively with effect from April 1, 1967 but that was by amend-ment of Section 28 by the Finance Act of 1990 which amendment could not have been known before the Finance Act came into force. Levy of additional tax bears all the characteristics of penalty. Additional tax was levied as the assessee did not in his return show the income by way of cash compensatory support. Assessing Officer on that account levied additional income tax. No addi-tional tax would have been leviable on the cash compensatory support if the Finance Act, 1990 had not so provided even though retrospectively. Assessee could not have suffered additional tax but for the Finance Act, 1990. After he had filed his return of income, which was correct as per law on the date of filing of the return, it was thereafter that the cash compensatory support also came within the sway of Section 28. When additional tax has imprint of penalty Revenue cannot be heard saying that levy of additional tax is automatic under Section 143(1A) of the Act. If additional tax could be levied in such circumstances it will be punishing the assessee for no fault of his. That cannot ever be the legislative intent. It shocks the very conscious if in the circumstances Section 143(1A) could be invoked to levy the addi-tional tax. Following observations by the Constitution Bench of this Court in Pannalal Binjraj and Another v. The Union of India and Others ((1957) 31 ITR 565 (SC)) are apt: –
“A humane and considerate administration of the relevant provi-sions of the Income-tax Act would go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the Revenue with administering the provisions of the Act with “an evil eye and unequal hand”.”
13. We uphold the view expressed by the Calcutta High Court. Keeping in view the principles laid by this Court it has to be held that in the circumstances of the present case levy of addi-tional tax taking into account the income by way of cash compen-satory support is not warranted. The question is answered in affirmative, i.e., in favour of the assessee and against the Revenue. The appeal is accordingly dismissed with costs.
