2009 (7) TMI 893 - HC - Income Tax

Concealment of Income penalty Assessee filed nil return claiming exemption u/s 10(29) on assessment AO found that certain income is not allowed for exemption and assessed the income at Rs.1,81,93,618/- and propose to levy penalty under section 271(1)(c) of the Income Tax Act, 1961 held that despite the fact that the respondent-assessee had filed a nil income tax return for the assessment year 1993-94, claiming exemption under section 10(29) of the Act, yet it had disclosed its entire income by, depicting clearly the various heads under which the said income had been earned. And as such, it was not as if the respondent assessee had concealed the particulars of his income or furnished inaccurate particulars of his income Penalty is not leviable.

Issues Involved:
1. Assessment of income tax liability for the assessment year 1993-94.
2. Imposition of penalty under section 271(1)(c) of the Income Tax Act.
3. Interpretation and application of section 10(29) of the Income Tax Act.
4. Validity of the Income Tax Appellate Tribunal's decision to set aside the penalty.
5. Relevance of conflicting High Court judgments and Supreme Court's stance on the matter.

Detailed Analysis:

1. Assessment of Income Tax Liability for the Assessment Year 1993-94:
The respondent-assessee, Haryana Warehousing Corporation, filed a nil income tax return for the assessment year 1993-94, claiming exemption under section 10(29) of the Income Tax Act. The Assessing Officer assessed the income at Rs.1,04,61,330/- and imposed a penalty for evasion of tax. This determination was affirmed by the Commissioner of Income Tax (Appeals).

2. Imposition of Penalty Under Section 271(1)(c) of the Income Tax Act:
The Assessing Officer imposed a penalty of Rs.1,04,61,330/- on the respondent-assessee for allegedly concealing income. This penalty was upheld by the Commissioner of Income Tax (Appeals), who noted that the assessee had wrongly and deliberately claimed the entire income as exempt. However, the Income Tax Appellate Tribunal set aside this penalty, stating that the respondent-assessee had disclosed all income particulars and had not concealed any income.

3. Interpretation and Application of Section 10(29) of the Income Tax Act:
Section 10(29) exempts income derived from letting out godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The respondent-assessee claimed exemption based on this section. The Tribunal noted that the respondent-assessee had relied on a favorable judgment from the Allahabad High Court, which was upheld by the Supreme Court, and that the legal position was still in flux due to conflicting judgments from other High Courts.

4. Validity of the Income Tax Appellate Tribunal's Decision to Set Aside the Penalty:
The Tribunal concluded that the respondent-assessee could not be penalized for filing a false or inaccurate return as it had disclosed its entire income and relied on prevailing legal interpretations. The Tribunal's decision was challenged by the revenue, but the High Court upheld the Tribunal's findings, noting that the revenue had not controverted the factual position that the respondent-assessee had not furnished inaccurate particulars nor concealed any income.

5. Relevance of Conflicting High Court Judgments and Supreme Court's Stance on the Matter:
The High Court acknowledged the conflicting judgments from different High Courts and noted that the Supreme Court had referred the issue to a larger Bench. The High Court emphasized that the respondent-assessee's claim was bona fide given the legal uncertainty and the pending appeals before the Supreme Court.

Conclusion:
The High Court dismissed the revenue's appeal, finding no merit in the contentions advanced. The Court noted that the respondent-assessee had disclosed all income particulars and relied on a bona fide interpretation of the law. The Court also criticized the revenue for filing a frivolous appeal without proper application of mind and cautioned against such practices in the future. The appeal was dismissed without imposing costs on the appellant-revenue.

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