Commissioner Of Income Tax, Panchkula v. Haryana Warehousing Corporation

IN THE HIGH COURTOF PUNJAB AND HARYANA, CHANDIGARH. ITA No. 871 of 2008 Date of decision:1.7.2009 Commissioner of Income Tax, Panchkula. ....Appellant vs. Haryana Warehousing Corporation ...Respondent CORAM:HON'BLE MR.JUSTICE J.S.KHEHAR.HON'BLE MR.JUSTICE AJAY TEWARI. --- Present:Mr. Sanjay Bansal, Senior Advocate, with Mr.Prashat Bansal, Advocate, for the appellant. -- J.S.KHEHAR,J. 1.The respondent-assessee i.e. the Haryana WarehousingCorporation, is a State Government Undertaking created under theWarehousing Corporation Act, 1962. The creation of the respondent-assessee was with the aim of building warehouses all over the State ofHaryana, for storage of food grains on behalf of the Food Corporation ofIndia. 2.It would be pertinent to mention, that the respondent-assesseewas assessed to income tax for the assessment year 1993-94 atRs.1,04,61,330/- vide order dated 21.4.2006, as against a nil income taxreturn, submitted by the respondent-assessee on 31.12.1993. The AssessingOfficer, accordingly arrived at the conclusion, that by filing a nil income taxreturn for the assessment year 1993-94, the respondent-assessee had soughtto evade income tax to the tune of Rs.1,04,61,330/-. The minimum penalty imposable for the same being the quantum of tax evaded, the AssessingOfficer imposed the penalty of Rs.1,04,61,330/-. The aforesaiddetermination at the hands of the Assessing Officer was affirmed by theCommissioner of Income Tax (Appeals) vide his order dated 2.9.2006. 3.The instant appeal has been preferred against the order passedby the Income Tax Appellate Tribunal dated 4.10.2007 by which the orderspassed by the Assessing Officer, and the Commissioner of Income Tax(Appeals) dated 30.3.2006 and 2.9.2006 respectively, imposing a penalty onthe respondent-assessee under section 271(1)(c) of the Act, has been setaside. 4.Before proceeding to determine the merits of the claim raisedby the revenue in the instant appeal, it would be essential to narrate thebackground on the basis of which proceedings under section 271(1)((c) ofthe Act, were initiated against the respondent-assessee. In this behalf, itwould be pertinent to mention, that the respondent-assessee had beenclaiming exemption of its entire income under section 10(29) of the Act.Section 10(29) of the Act, is being extracted hereunder:- “10. Incomes not included in total income- In computing thetotal income of a previous year of any person, any incomefalling within any of the following clauses shall not beincluded-(1) to (28)xxxx (29) in the case of an authority constituted under any law forthe time being in force for the marketing of commodities, anyincome derived from the letting out of godown or warehousesfor storage, processing or facilitating the marketing ofcommodities”. It is not a matter of dispute that upto the assessment year 1991-92 the respondent-assessee i.e., the Haryana Warehousing Corporation claimed thebenefit of tax exemption under section 10(29) of the Act, in respect of itsentire income. This claim made by the respondent-assessee was accepted bythe revenue. Accordingly, it would not be incorrect to record, that therespondent-assessee was allowed the benefit of deduction under section 10(29) of the Act uninterruptedly till the assessment year 1991-92. 5.It would also be pertinent to notice that the claim of the It is not a matter of dispute that upto the assessment year 1991-92 the respondent-assessee i.e., the Haryana Warehousing Corporation claimed thebenefit of tax exemption under section 10(29) of the Act, in respect of itsentire income. This claim made by the respondent-assessee was accepted bythe revenue. Accordingly, it would not be incorrect to record, that therespondent-assessee was allowed the benefit of deduction under section 10(29) of the Act uninterruptedly till the assessment year 1991-92. 5.It would also be pertinent to notice that the claim of the 5.It would also be pertinent to notice that the claim of therespondent-assessee was based on a decision rendered by a Division Benchof Allahabd High Court in CIT v. U.P. State Warehousing Corporation,(1992) 195 ITR 273, which had held that the entire income of warehousingincluding the income derived from procurement of wheat, as an agent of thegovernment, was exempt from the liability of tax. The High Court hadupheld the determination rendered by the Income Tax Appellate Tribunalthat income received by the Warehousing Corporation, though described asmiscellaneous receipts, was in-truthincome derived from lettingwarehouses for storage, processing and fecilitating the marketing ofcommodities. And as such, the decision rendered by the Income TaxAppellate Tribunal that the warehousing Corporation receipts andcommission was entitled to exemption under section 10(29) of the Act, wasalso upheld by the High Court. The revenue had preferred an appeal againstthe aforesaid decision of the Allahabad High Court before the Apex Court.The Supreme Court while disposing of Civil Appeal Nos.1240 and 1241 of1979 (filed against the aforesaid order passed by the Allahabad High Court)passed the following order on 9.4.1996:- “In view of the decision of this Court, in the case of the Unionof India & Another, U.P.State Warehousing Corporation, 187 ITR 54 which affirms the view taken in the impugnedjudgment. These appeals are dismissed. No costs”. It is,therefore, apparent that the Supreme Court did not find any justificationto interfere with the order passed by the Allahabd High Court in thejudgment referred to hereinabove. 6.It would also be pertinent to mention that on the same issue,the opinion expressed by a Division Bench of the Madhya Pradesh HighCourt in M.P.Warehousing Corporation v. (1982) CIT, 133 ITR 158, was atvariance with the one rendered by the Allahabad High Court. In theaforecited judgment, the Madhya Pradesh High Court had concluded, thatonly such income, as was earned by the Warehousing Corporation by lettingout godowns and warehouses for storage, processing or fecilitatingmarketing of commodities was exempt from income tax. Income derived bythe Warehousing Corporation by letting of godowns or warehouses for anyother purpose, was not emanable to such exemption. In the instantjudgment, the Madhya Pradesh High Court expressly arrived at theconclusion, that income derived from commission earned from handlingagricultural commodities, as well as, income derived on account of interestearned on fixed deposits with banks, were not exempt from income taxunder section 10(29) of the Act. 7.Likewise a Division Bench of Karnataka High Court inKarnataka State Warehousing Corporation v. CIT (1990) 185 ITR 25arrived at the conclusion, that income earned out of fumigation charges, aswell as, income derived from laboratory installation fee were not exemptfrom income tax under section 10(29) of the Act. The High Court in clearand categoric terms concluded that income received by the Warehousing Corporation for services rendered in respect of goods not stored in theassessee's godowns was not exempt under section 10(29) of the Act. Corporation for services rendered in respect of goods not stored in theassessee's godowns was not exempt under section 10(29) of the Act. 8.Even the Rajasthan High Court in the case of CIT v. RajasthanState Warehousing Corporation,( 1994) 210 ITR 906, held that only rentalincome earned by the Warehousing Corporation qualifies for exemptionunder section 10(29) of the Act. The High Court expressly held the incomederived from procurement of grains, from administrative overheads, interestreceived from banks, and the like, were not relatable to letting of godownsand warehouses for fecilitating marketing of commodities and as such werenot exempt under section 10(29) of the Act. The High Court, however held,that fumigation charges were in respect of service charges collected duringthe course of storage of goods in godowns, and as such, were exempt fromthe liability of tax. The Rajasthan Warehousing Corporation preferred anappeal against the judgment rendered by the Division Bench of theRajasthan High Court in the case cited hereinabove, before the Apex Court.The aforesaid appeal was however, dismissed by the Supreme Court on1.4.1999. 9.In view of the conflicting legal position rendered by theAllahabad High Court (paragraph 5 above) on the one hand, and by theHigh Courts of Madhya Pradesh (paragraph 6 above), Karnataka(paragraph 7 above) and Rajasthan (paragraph 8 above), it is apparent thatthe matter needed to be settled by the Apex Court. The Supreme Courtreferred the issue,namely, whether the entire income of a WarehousingCorporation, was exempt under section 10(29) of the Act, or whether rentalincome charged for storage, processing or fecilitating the marketing ofcommodities in godowns and warehouses alone, was exempt from the liability of tax, to a larger Bench in CIT v. Gujarat State WarehousingCorporation (2000) 245 ITR 1. 10. In so far as the present appeal is concerned, as already noticedhereinabove, the entire income of the respondent-assessee, was accepted bythe revenue as exempt from the liability of tax, upto the assessment year1991-92. However, based on the judgments rendered by different HighCourts (other than Allahabad High Court), referred to in the foregoingparagraphs, the revenue concluded, that income drawn by the respondent-assessee from all heads other than rental income earned by it from lettingout godowns and warehouses, was taxable. The aforesaid determination bythe revenue against the respondent-assessee, was assailed by therespondent-assessee in respect of the assessment years 1992-93 and 1993-94before the Supreme Court, wherein, the Apex Court admitted the petitionsfor Special Leave to Appeal, preferred by the respondent-assessee i.e., theHaryana Warehousing Corporation. 11. In view of the above, the respondent-assessee i.e., the HaryanaWarehousing Corporation filed a nil income tax return for the assessment1993-94 on 31.12.1993 claiming that its entire income was exempt from theliability of tax under section 10(29) of the Act. Along with the aforesaidreturn, a computation chart depicting the total income of the respondent-assessee was also filed. The respondent-assessee also attached with itsreturn the audit report of its Chartered Accountant. A notice under section143(2) of the Act, was issued to the respondent-assessee for initiation ofproceedings under section 143(3) of the Act, i.e., for framing regularassessment. The aforesaid notice was issued on 10.1.2005. In reply to theaforesaid notice, the respondent-assessee submitted a revised computation of its income wherein it incorporated the following note:- “Note 1.Entire income of the warehousing is claimed exempt including from procurement of wheat as an agement of theGovt. reliance for this is placed on the judgment of Hon'bleAllahabd High Court reported in 195 ITR 273 in the case ofCIT Vs. U.P. Warehousing Corporation. The High Court whiledelivering the judgment relied upon the Supreme Courtjudgment 187 ITR 54. of its income wherein it incorporated the following note:- “Note 1.Entire income of the warehousing is claimed exempt including from procurement of wheat as an agement of theGovt. reliance for this is placed on the judgment of Hon'bleAllahabd High Court reported in 195 ITR 273 in the case ofCIT Vs. U.P. Warehousing Corporation. The High Court whiledelivering the judgment relied upon the Supreme Courtjudgment 187 ITR 54. 2. Rebate on C.M. Relief Fund of Rs.5 lacs, be allowed undersection 80-G. 3. In case any income is held to be taxable then indivisibleexpenses be apportioned between taxable and non-taxableincome.” 12.After taking into consideration the revised computationsubmitted by the respondent-assessee the Assessing Officer passed anassessment order on 2.2.1996 under section 143(3) of the Act. By theaforesaid order, the respondent-assessee was denied exemption undersection 10(29) of the Act, on income earned by it from all other sourcesexcept income derived by it on account of letting out godowns andwarehouses for storage, processing or fecilitating the marketing ofcommodities. A perusal of the aforesaid assessment order reveals, that theAssessing Officer was of the view, that the respondent-assessee had earnedincome from fumigation charges (Rs.12,85,543/-), as well as, from way-bridge charges (Rs.1,23,731/-). Although, it was submitted on behalf of therespondent-assessee, that it had incurred losses under both the aforesaidheads, yet the income of the respondent-assessee under the aforesaid heads, was assessed as Rs.1,10,000/-. The Assessing Officer also arrived at theconclusion, that the respondent-assessee had earned income ofRs.17,27,481/- by way of interest on loans advanced to the Haryana StateFederation of Cooperative Sugar Mills (Sugar Federation). It was also held,that the Haryana Warehousing Corporation had earned income ofRs.2,24,34,767/- by way of trading in wheat. Additionally, the respondent-assessee was found to have earned income of Rs.80,831/- on account offorfeiture of earnest money from contractors who had been given contractsfor constructing godowns. The Haryana Warehousing Corporation wasadditionally found to have earned incomes of Rs.14,510/- (for receipt oftender fee) Rs.10,652/- (on account of stitching charges), Rs.7,29,360/- (byway of sale of covers), and lastly, a sum of Rs.12,22,035/- (described assupervision charges, which were earned by way of handling charges, frompersons who had availed of storage facilities). Eventually, the total incomeof the respondent-assessee after allowing permissible deductions wasassessed at Rs.2,99,14,358/-. 13. The respondent-assessee preferred an appeal against theaforesaid assessment order. The assessee's appeal insofar as, the reliefclaimed by it under section 10(29) of the Act, was dismissed by the IncomeTax Appellate Tribunal vide an order dated 18.5.2004. However, certainclaims raised by the respondent-assessee before the Income Tax AppellateTribunal were accepted, as a consequence whereof, the matter wasremanded to the Assessing Officer. Thereupon, the Assessing Officer,worked out the taxable income of the respondent-assessee atRs.1,81,93,618/-. And on the basis thereof, the respondent-assessee wasassessed to income tax of Rs.1,04,61,330/- for the assessment year 1993-94. 13. The respondent-assessee preferred an appeal against theaforesaid assessment order. The assessee's appeal insofar as, the reliefclaimed by it under section 10(29) of the Act, was dismissed by the IncomeTax Appellate Tribunal vide an order dated 18.5.2004. However, certainclaims raised by the respondent-assessee before the Income Tax AppellateTribunal were accepted, as a consequence whereof, the matter wasremanded to the Assessing Officer. Thereupon, the Assessing Officer,worked out the taxable income of the respondent-assessee atRs.1,81,93,618/-. And on the basis thereof, the respondent-assessee wasassessed to income tax of Rs.1,04,61,330/- for the assessment year 1993-94. 14.After passing of the aforesaid assessment order, a notice undersection 271(1)(c) of the Act was issued to the respondent-assessee on20.12.2005. The Haryana Warehousing Corporation responded to theaforesaid notice vide its letter dated 27.3.2006. The Assessing Officerwhile considering the reply furnished by the respondent-assessee held, thatthe Haryana Warehousing Corporation, by filing a nil income tax return forthe assessment year 1993-94, had concealed its taxable income ofRs.1,81,93,618/-(which was finally assessed to tax at Rs.1,04,61,330/-afterre-assessment was computed under section 254 of the Act). On account ofthe fact that the liability of income tax of the respondent-assessee wasRs.1,04,61,330/-, and the Assessing Officer could have imposed themaximum penalty of Rs.3,13,83,990/-, the Assistant Commissioner ofIncome Tax ,Panchkula, vide his order dated 30.3.2006,however, imposedthe minimum permissible penalty of Rs.1,04,61,330/-. 15.The Haryana Warehousing Corporation preferred an appealagainst the order dated 30.3.2006 before the Commissioner of Income Tax(Appeals) Panchkula. While disposing of the aforesaid appeal, the AppellateAuthority, inter alia, noticed as under:- “...Firstly, the assessee wrongly and deliberately claimed theentire income as exempt u/s 10(29). the assessee was fullyaware of the fact that this was not the deduction eligible to it. Inaddition, the assessee was aware that the eligible deduction wasactually less than what was claimed. Once the assessee hadclaimed a deduction, that particular part of income was exempt,the assessee was under a legal obligation to realize that theexpenses related to this income were not to be set off againstthe taxable income”. Based on the aforesaid determination, the Appellate Authority upheld the imposition of the minimum penalty of Rs.1,04,61,330/- for concealment ofincome under section 271(1)(c) of the Act, vide its order dated 2.9.2006. 16.Dissatisfied with the orders passed by the Assessing Officerdated 30.3.2006, as also by the Appellate Authority dated 2.9.2006, therespondent-assessee preferred an appeal before the Income Tax AppellateTribunal. 17. The Income Tax Apepllate Tribunal, inter alia, took intoconsideration the following issues canvassed on behalf of the respondent-assessee:- Firstly, that the respondent-assessee had relied on the judgmentrendered by the Allahabad High Court in CIT v. U.P. WarehousingCorporation 195 ITR 273, as against which a petition for SpecialLeave to Appeal preferred by the revenue has been dismissed by theSupreme Court. Relying on the aforesaid judgment the respondent-assessee had also incorporated a note in its reply to the notice undersection 148 of the Act, issued to the respondent-assessee. Secondly, at the time of filing of the return by the respondent-assessee a petition for Special Leave to Appeal was pending beforethe Supreme Court against the order passed by the Rajasthan HighCourt in CIT v. Rajasthan Warehousing Corporation 210 ITR 906,wherein, the Rajasthan Warehousing Corporation had raised thesame claims under section 10(29) of the Act, as was being canvassedby the respondent-assessee. Secondly, at the time of filing of the return by the respondent-assessee a petition for Special Leave to Appeal was pending beforethe Supreme Court against the order passed by the Rajasthan HighCourt in CIT v. Rajasthan Warehousing Corporation 210 ITR 906,wherein, the Rajasthan Warehousing Corporation had raised thesame claims under section 10(29) of the Act, as was being canvassedby the respondent-assessee. Thirdly, petitions for Special Leave to Appeal, filed by therespondent-assessee i.e., the Haryana Warehousing Corporation,before the Supreme Court, where the respondent-assessee had raised the same plea as it had raised in the return under reference seekingexemption of its entire income from tax liability under setion 10(29)of the Act for the assessment years 1992-93(had been granted) and1993-94 (was pending) were still under consideration. Fourthly, the Assessing Officer had passed an order under section143(3) of the Act, in respect of the assessment year 1991-92 justbefore the return under reference had been filed, wherein theAssessing Officer had allowed the exemption sought by therespondent-assessee under section 10(29) of the Act in respect of itsentire income, by an order dated 15.12.1993. The Assessing Officerhad merely 15 days before the return for the assessment year (1993-94) was filed by the respondent- assessee on 31.12.1993 allowed theexemption claimed by the assessee to it. Fifthly, despite the fact that the respondent-assessee had filed a nilincome tax return for the assessment year 1993-94, claimingexemption under section 10(29) of the Act, yet it had disclosed itsentire income by, depicting clearly the various heads under which thesaid income had been earned. And as such, it was not as if therespondent assessee had “concealed the particulars of his income” or“furnished inaccurate particulars of his income”. Based on the aforesaid considerations, the Income Tax Appellate Tribunalarrived at the conclusion that the respondent-assessee could not have beenpenalised for filing a false or inaccurate return, so as to impose upon it anypenalty under section 271(1)(c) of the Act.18.The aforesaid findings recorded by the Income Tax AppellateTribunal are subject matter of challenge at the hands of the revenue through the instant appeal. When the instant appeal came up for hearing for the firsttime on 11.2.2009, keeping in mind the fact that the Income Tax AppellateTribunal had clearly and unambiguously recorded that the respondent-assessee i.e., the Haryana Warehousing Corporation had not furnished anyinaccurate particulars, nor concealed its income. And also because theappellant revenue had not controverted the aforesaid factual position in thegrounds of appeal raised by it. Learned counsel for the appellant-revenuewas confronted with the aforesaid factual position. Learned counsel sought,and was afforded an an adjournment, to obtain instructions on the matter.While allowing the aforesaid adjournment, this Court passed the followingorder on 11.2.2009:- “ The issue under consideration in the present appeal is,whether the respondent-assessee is guilty of having furnishedinaccurate particulars. In this behalf, it would be pertinent tomention, that the respondent-assessee in its return claimedexemption under section 10(29) of the Income Tax Act, 1961.It is the vehement contention of the learned counsel for theappellant, that the respondent-assessee was not entitled toexemption under section 10(29) of the Income Tax Act, 1961,as the activity in question in furtherance whereof, therespondent-assessee was deriving income, was not in respect ofletting out godown but on account of trading activity. Learned counsel for the appellant seeks an adjournment,so as to enable him to obtain instructions whether or not therespondent- assessee had disclosed the income earned by it inrespect whereof, penalty proceedings under section 271(c) ofthe Income Tax Act, 1961 were initiated against him.Adjourned to 25.2.2009.” Learned counsel for the appellant seeks an adjournment,so as to enable him to obtain instructions whether or not therespondent- assessee had disclosed the income earned by it inrespect whereof, penalty proceedings under section 271(c) ofthe Income Tax Act, 1961 were initiated against him.Adjourned to 25.2.2009.” Despite various adjournments the appellant-revenue could not controvert the factual position depicted in the impugned order passed by the Income Tax Appellate Tribunal. It shall, therefore, be taken that the factual positiondepicted in the order of the Income Tax Appellate Tribunal dated 4.10.2007,that the respondent-assessee had not furnished any inaccurate particulars norhad concealed any particulars of its income, must be deemed to beuncontroverted. 19.Despite the aforesaid factual position, learned counsel for theappellant-revenue on two occasions advanced submissions on merits. Onboth occasions, we were of the view that the instant appeal had been filedwithout application of mind, and as such, was liable to be dismissed withcosts. On both occasions when our impressions were conveyed to thelearned counsel for the appellant-revenue, he sought time to obtain furtherinstructions. We were informed by him, that he had addressedcommunications to the concerned authorities informing them the intentionof this Court to impose costs, in case the revenue pressed the present appeal.In the background of our view, that there was nothing for the revenue tocanvass, so as to controvert the conclusions drawn by the Income TaxAppellate Tribunal, based on five submissions advanced on behalf of therespondent-assessee (reproduced in paragraph 17 hereinabove) which primafacie individually (and certainly collectively), were sufficient for upholdingthe impugned order passed by the Income Tax Appellate Tribunal. 20.It seems to us that the revenue functions in the same manner asother departments of administration, wherein the accepted norm is, to shiftthe responsibility of decision making to the judiciary. In sum and substance,the judiciary not only adjudicates upon legitimate controversies betweenquarreling parties, but also discharges the executive function of decisionmaking. In furtherance of the intention expressed by this Court the revenue took two steps. Firstly, it moved civil miscellaneou application No.12383-CII-of 2009, so as to place on the record of this case an affidavit of theCommissioner of Income,Panchkula, dated 19.5.2009. And secondly, itengaged services of a senior counsel to represent the revenue in the instantappeal before this Court, so as to require this Court to discharge itsexecutive function of decision making.21. Before learned senior counsel commenced to address took two steps. Firstly, it moved civil miscellaneou application No.12383-CII-of 2009, so as to place on the record of this case an affidavit of theCommissioner of Income,Panchkula, dated 19.5.2009. And secondly, itengaged services of a senior counsel to represent the revenue in the instantappeal before this Court, so as to require this Court to discharge itsexecutive function of decision making.21. Before learned senior counsel commenced to address 21. Before learned senior counsel commenced to addressarguments, we invited his attention to the factual position noticed in thepreceding paragraph. Learned senior counsel expressed his helplessness, hewas professionally duty bound to canvass the appeal on behalf of therevenue. We granted him the liberty to raise submissions without anyinterference during the course of hearing, so as to enable him to dischargehis professional responsibility. The few submissions raised by him haveindividually been dealt with in the succeeding paragraphs.22.The first submission advanced by the learned counsel for theappellant-revenue was, that when the respondent-assessee i.e., the HaryanaWarehousing Corporation filed its return of income , it was clear to it that itwas not entitled to exemption of its entire income. It was submitted, thatthe respondent-assessee was aware that income earned under heads otherthan rental income earned by it by letting godowns and warehouses forstorage,processing or fecilitating the marketing of commodities, wastaxable. It was pointed out to us, that exemption under section 10(29) of theAct could be availed of only for purposes of income relating to itswarehousing activity, and for no other income. It was therefore submitted,that the claim made by the respondent-assessee, even as per its note(extracted in paragraph 11 hereinabove) was not bona fide, and therefore, the initiation as well as imposition of penalty upon the respondent-assessee,under section 271(1)(c) of the Act, was not only valid but was alsolegitimate. 23.It is not possible for us to accept the first contention advancedby the learned counsel for the appellant-revenue. Undisputedly,in thejudgment rendered by the Allahabad High Court in CIT v. U.P. StateWarehousing Corporation, 195 ITR 273, it had been held that incomebesides rental from warehousing activity was also exempt from income taxunder section 10(29) of the Act. A petition for Special Leave to Appealpreferred by the revenue against the aforesaid judgment had been dismissedby the Supreme Court on 9.4.1996 (for details refer to paragraph 5 above),whereas, the nil return under reference was filed on 31.12.1993. Although,the opinion expressed by the High Courts of Madhya Pradesh, Karnataka,and Rajasthan were to the contrary, yet at the time of filing of the returnunder reference, a petition for Special Leave to Appeal preferred by theRajasthan Warehousing Corporation was pending consideration before theSupreme Court. On the same proposition of law the respondent-assesseehad itself assailed the action of the respondent in respect of assessmentyears 1992-93 and 1993-1994 before the Supreme Court, and petition forSpecial Leave to Appeal preferred by the respondent-assessee for theassessment year 1992-93 had been granted, thereby, allowing therespondent-assessee leave to appeal, and for the assessment year 1993-94was pending. Later on, the issue under reference arising out of the judgmentrendered by the Gujarat High Court came to be referred to a larger Benchby the Supreme Court itself in CIT v. Gujarat Warehousing Corporation,(2000)245 ITR 1. It is, therefore, apparent that the legal position, which was subject matter of consideration was still in flux and had not attainedfinality. It would not therefore be correct to state that the filing of thereturn by the respondent-assessee in any way lacked bona fide. In view ofthe above, in our view, the first contention advanced on behalf of theappellant-revenue is wholly misconceived. We may also add herein, that theacceptance of the instant plea would lead to the inference, that an assesseewho canvasses a claim on the basis of its (assessee's) interpretation of thelaw, would be liable to penal action in case the revenue finds that the claimraised by the assessee is not acceptable. Such a determination would placecurbs on the rights of an assessee, to raise claims it believes to be genuine,under the law. We are satisfied, that no such fetters can be placed on therights of the assessee to raise genuine claims in its return. In the facts andcircumstances disclosed hereinabove, we are satisfied, that the deductionclaimed by the respondent-assessee was legitimate and bona fide, in terms ofthe conflicting determination of law on the proposition in question at thesaid juncture. We, therefore, find no merit in the first submission advancedby the learned counsel for the appellant-revenue.24.The second contention advanced by the learned counsel for theappellant-revenue was, that the impugned order passed by the Income TaxAppellate Tribunal deleting the penalty imposed on the respondent-assesseeunder section 271(1)(c) of the Act, was not sustainable in law because ofthe clear judgment rendered by the Supreme Court in Union of India v.Dharamendra Textile Processors and others, 306 ITR 277. According to thelearned counsel for the appellant-revenue the entire income which remainedundisclosed, “with or without” any conscious act of the assessee, was liableto penal action. It is submitted by the learned counsel for the appellant- revenue, that the concept of law, with regard to levy of penalty hasdrastically changed in view of the said judgment, inasmuch as, now penaltycan be levied even when an assessee claims deduction or exemption bydisclosing the correct particulars of its income. According to the learnedcounsel, if an addition is made in quantum proceedings by the revenue-authorities, which addition attains finality, an assessee per se becomesliable for penal action under section 271(1)(c) of the Act. It is the vehementcontention of the learned counsel for the appellant-revenue, that a penaltyautomatically became leviable against the respondent-assessee undersection 271(1)(c) of the Act, after the finalisation of quantum proceedings.In this behalf, it is also pointed out, that in view of the judgment of theSupreme Court referred to above, the dichotomy between penaltyproceedings and assessment proceedings stands completely obliterated.25.We have considered the second contention advanced by thelearned counsel for the appellant revenue. To state the least, the instantsubmission is absolutely absurd. The parameters of imposition of penaltyunder section 271(1)(c) of the Act, have been incorporated in the provisionitself. Section 271(1)(c) of the Act ,is being extracted hereunder:- “Failure to furnish returns, comply with notices,concealment of income, etc.concealment of income, etc. 271. (1) If the Assessing Officer or the Commissioner(Appeals) orthe Commissioner in the course of anyproceedings under this Act, is satisfied that any person- (a) to (b) xx xx (c ) has concealed the particulars of his house or furnishedinaccurate particulars of such income, or (d) xx xx he may direct that such person shall pay by way of penalty- (i) to (iii) xx xx Explanation 1- Where in respect of any facts material to thecomputation of the total income of any person under this Act(A) such person fails to offer an explanation or offers anexplanation which is found by the Assessing Officer or theCommissioner (Appeals) or the Commissioner to be false, or 271. (1) If the Assessing Officer or the Commissioner(Appeals) orthe Commissioner in the course of anyproceedings under this Act, is satisfied that any person- (a) to (b) xx xx (c ) has concealed the particulars of his house or furnishedinaccurate particulars of such income, or (d) xx xx he may direct that such person shall pay by way of penalty- (i) to (iii) xx xx Explanation 1- Where in respect of any facts material to thecomputation of the total income of any person under this Act(A) such person fails to offer an explanation or offers anexplanation which is found by the Assessing Officer or theCommissioner (Appeals) or the Commissioner to be false, or (B) such peron offers an explanation which he is not able tosubstantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material tothe computation of his total income have been disclosed byhim, then, the amout added ordisallowed in computing the totalincome of such person as a result thereof shall, for the purposesof clause (c) of this sub-section, be deemed to represent theincome in respect of which particulars have been concealed.Explanation-2 to 5-A xx xx”. The essential pre-requisites section 271(1)(c) of the Act before a penaltycan be imposed are; the assessee should have either “concealed theparticulars of his income”, or alternatively the assessee should have“furnished inaccurate particulars” of his income. Therefore, beforedetermining the liability of the respondent-assessee in the present case, itwould first have to be ascertained, whether or not, the respondent-assesseehad “concealed the particulars of his income”, or had furnished “inaccurateparticulars of his income”. The clear and categoric finding at the hands ofthe Income Tax Appellate Tribunal in the impugned order dated4.10.2007,was that the respondent-assessee had disclosed the entire factswithout having concealed any income. There is no allegation against therespondent-assessee that it had furnished inaccurate particulars of itsincome. The aforesaid determination at the hands of the Income Tax Appellate Tribunal have not been controverted even in the grounds raised inthe instant appeal. Additionally, in spite of our order dated 11.2.2009(extracted in paragraph 18 above) the appellant revenue has not been ableto controvert the aforesaid finding of fact. Concealment of particulars ofincome, or furnishing incorrect particulars of income, have in our view, beenconfused by the appellant-revenue, with, an unacceptable plea for exemptionof tax-liability. Section 271(1)(c) of the Act can be invoked for imposing apenalty on an assessee, only if there is a “concealment of particulars ofincome” or alternatively if an assessee furnishes “incorrect particulars ofincome”. The respondent-assessee in the present controversy is guilty ofneither of the above. Accordingly, we are satisfied that in the absence ofthe two pre-requisites postulated under section 271(1)(c) of the Act, it wasnot open to the appellant-revenue to inflict any penalty on the respondent-assessee. 26. It is also essential for us to notice, while dealing with thesecond submission advanced by the learned counsel for the appellant-revenue, that the issue which arose for determination before the SupremeCourt in Union of India v. Dharamendra Textiles Processors and others, 306ITR 277 was, whether under section 11AC inserted in the Central ExciseAct, 1944, by the Finance Act 1996, penalty for evasion of payment of taxhad to be mandatorily levied, in case of short of levy or non-levy of dutyunder the Central Excise Act, 1944, irrespective of the fact whether it wasan intentional or innocent ommission. In other words, the Apex Court wasexamining a proposition, whether mens-rea was an essential ingredientbefore penalty under section 11AC of the Central Excise Act, 1944 could belevied. In view of the factual position noticed hereiinabove, the issue of mens-rea does not arise in the present controversy because the ingredientsbefore any penalty can be imposed on an assessee under section 271 (1)(c)of the Act, were not made out in the instant case, as has been concluded inthe foregoing paragraph. Thus viewed, the judgment relied upon by thelearned counsel for the appellant-revenue is, besides being a judgment undera different legislative enactment, is totally inapplicable to the facts andcircumstances of this case. Accordingly, we find no merit even in thesecond contention advanced by the learned counsel for the appellant-revenue. 27.The third contention advanced on behalf of the appellant-revenue was, that the finding recorded by the Income Tax AppellateTribunal, that since the Assessing Officer vide his assessment order dated15.12.1993 had accepted the claim of the respondent-assessee under section10(29) of the Act, whereby, the revenue accepted the claim of therespondent-assessee that its entire income (including income from headsother than rental income from its warehousing activity) was exempt fromtax, was not sustainable in law for two reasons. Firstly, because the orderdated 15.12.1993 was revised by the Commissioner of Income Tax, Rohtak,under section 263 of the Act (vide order dated 7.2.1996), and speciallybecause, the respondent-assessee did not assail the same in appeal.According to the learned counsel for the respondent-assessee, the decision atthe hands of the assessee to accept the said assessment order, alsodemonstrates, that the respondent-assessee intentionally made a false claim.Secondly, it is submitted, that the mere fact that the assessment order dated15.12.1993 which had absolved the respondent-assessee from the liability oftax, for an earlier assessment year, could not be taken into consideration to absolve it from penal consequences, in view of the decision rendered by theSupreme Court in Phool Chand Bajrang Lal v. ITO, 203 ITR 456, whereinthe Apex Court held as under:- “We have to look to the purpose and intent of the provisions.One of the purposes of Section 147 appears to us to be to ensurethat a party cannot get away willfully making a false or untruestatement at the time of original assessment and when thatfalsity comes to notice, to turn and around and say “youaccepted my lie, and now your hands are tied and you can donothing”. It would be a travesty of justice to allow the assesseethat latitude.” (at page 478). The aforesaid observations aptly apply in the instant casein as much as the object behind the enactment of section 271(1)(c) and 147/148 of the Act is to provide for a remedy for loss ofrevenue”. “We have to look to the purpose and intent of the provisions.One of the purposes of Section 147 appears to us to be to ensurethat a party cannot get away willfully making a false or untruestatement at the time of original assessment and when thatfalsity comes to notice, to turn and around and say “youaccepted my lie, and now your hands are tied and you can donothing”. It would be a travesty of justice to allow the assesseethat latitude.” (at page 478). The aforesaid observations aptly apply in the instant casein as much as the object behind the enactment of section 271(1)(c) and 147/148 of the Act is to provide for a remedy for loss ofrevenue”. To our mind, the third contention advanced by the learned counsel for theappellant-revenue is wholly misconceived. What has to be taken intoconsideration is the factual position, as it prevailed on 31.12.1993, when therespondent-assessee filed a nil income tax return. At that juncture, the orderpassed by the Commissioner of Income Tax, Rohtak, under section 263 ofthe Act dated 7.2.1996, was not available to it. The prevailing factual/legalposition at the time offiling of the return dated 31.12.1993, was as has beensummarised in paragraph 17 hereinabove (in terms of the decision renderedby the Income Tax Appellate Tribunal). The aforesaid factual/legal positionhas neither been controverted in the grounds of appeal, nor in the affidavitfiled by the Commissioner of Income Tax, Panchkula, dated 19.5.2009. Assuch, we find no merit in the first plea. The second plea, noticed above, is infact ridiculous, on account of the fact that the claim of the respondent- assessee for exemption under section 10(29) of the Act was acceded toduring the course of assessment for the year 1991-92 (vide order dated15.12.1993). It was in fact, to our mind,wholly justified for the respondent-assessee to seek the same exemption when it filed return for the assessmentyear 1993-94 on 31.12.1993 i.e., a mere 15 days after the same plea raisedby the respondent-assessee had been acceded to. For the aforesaid reason,we find no merit even second plea advanced by the learned counsel for theappellant-revenue. 28.No other submission, besides those noticed above, was raisedon behalf of the respondent-assessee, during the course of hearing of theinstant appeal. 29.In fact, to our mind all the five issues taken into considerationby the Income Tax Appellate Tribunal, while passing the impugned orderdated 4.10.2007, were individually sufficient to accept the claim of therespondent-assessee. We are satisfied, that the instant appeal was not filedafter due application of mind. Even after the passing of the order dated11.2.2009 (extracted in paragraph 18 above), the appellant failed toexamine the controversy in its correct perspective. Without any justificationwhatsoever, the appellant has pressed the instant appeal. As noticedhereinabove, we were convinced that the instant appeal was frivolous andought not to have been filed. We had also made our intention clear that wewould impose costs on the appellant if a reasonable cause was not shown.Pressing the instant appeal despite the expression of our verbal opinionalso shows that the revenue shirked its responsibility of genuine decisionmaking. We, for the present, refrain ourselves from imposing any costs onthe appellant. This restraint is, because of our desire to awaken the revenue to its responsibility. Costs are generally imposed by Courts, not as ameasure of punishment, but as a matter of misuse of jurisdiction. A similarsituation in the future may prompt us to take the next undesired step ofimposing costs. We entertain the hope that in the future, the responsibilityof genuine decision making, will be taken seriously; not only for the purposeof avoiding frivolous litigation and/or wasting Court time, but also for,avoiding unnecessary expense and harassment to an innocent litigant. Hadwe issued notice in the instant appeal and thereby summoned therespondent, we would have had no re-course, but to compensate therespondent by awarding appropriate costs. Since however, notice had notbeen issued to the respondent-assessee in the instant appeal, we feel that ournote of caution and vigil, at the time of filing appeals, will suffice for thepresent. 30.For the reasons recorded hereinabove, the instant appeal isdismissed, without imposing any costs on the appellant-revenue. ( J.S.Khehar )Judge 1.7.2009rk ( Ajay Tewari ) Judge