I N Hindusthan Steel Limited v. State Of Orissa[[1]]The

HON’BLE SRI JUSTICE L. NARASIMHA REDDYANDHON’BLE SRI JUSTICE CHALLA KODANDA RAMI.T.T.A. No.96 of 2001 JUDGMENT:- (per LNR,J) This appeal is filed by the Income Tax Department feelingaggrieved by the Order dated 23.02.2001 passed by the HyderabadBench-B of the Income Tax Appellate Tribunal (in short “theTribunal”). The subject matter is the returns filed by the respondentfor the assessment year 1991-1992. The respondent is an export company. In its return filed for theassessment year 1991-1992, it reflected not only the losses thataccrued in the previous assessment year, but also the loss carriedforward from the previous year. In the course of verification of thereturn, the Income Tax Officer found that certain items of income wereconcealed. Apart from bringing those items within the purview ofassessment, he initiated proceedings under Section 271 (1) (c) of theIncome 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. Aggrievedby that, the respondent filed an appeal before the Commissioner ofIncome Tax. The same was dismissed on 13.10.1994. There uponthe respondent filed I.T.A.No.229/Hyd/95 before the Tribunal. TheAppeal 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 Departmentsubmits that once the Income Tax Officer found that the assesseeconcealed certain amounts of income, the penalty must follow as amatter of course irrespective of the reasons for nondisclosure or theeffect of the unearthing of the same. He contends that the respondentdid not even dispute the fact that he failed to explain the cash advances, and infact, came forward with a plan to include the amountsin the assessment. The learned counsel further submits that the viewtaken 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 tothe effect that the respondent’s did not have any intention to suppressor conceal any items of income or advances and that accidentalfailure to mention some of the items, cannot be a ground for levying ofpenalty. He submits that the Supreme Court categorically held thatthe proceedings under Section 271 of the Act are quasi criminal innature and unless the Department establishes the intention on the partof the assessee to conceal, the penalty cannot be levied. A perusal of the order of assessment based on the return filedby the respondent for the assessment year 1991-1992 discloses thatloss of Rs.1,90,16,148/- was shown. After allowing part of the loss tobe set off against the profit, there remained unabsorbed depreciationof about Rs.2,40,00,000/-. Obviously, because the loss was phenomenal there was somelaxity on the part of the respondent in furnishing accurate figures. Inthe course of processing the return, the Income Tax Officerdisallowed all amounts aggregating about Rs.35,00,000/-. Therespondent did not seriously object to that, and in a way agreed for theamount being treated as income. However, the factum of respondentagreeing for inclusion of the said amount in the assessment wastreated as a proof of concealment. I n Hindusthan Steel Limited Vs. State of Orissa[[1]]the Supreme Court observedthat the penalty proceedings under a taxenactment cannot be initiated as a matter of course as they are quasicriminal in nature and they may not be ordinarily initiated unless the Obviously, because the loss was phenomenal there was somelaxity on the part of the respondent in furnishing accurate figures. Inthe course of processing the return, the Income Tax Officerdisallowed all amounts aggregating about Rs.35,00,000/-. Therespondent did not seriously object to that, and in a way agreed for theamount being treated as income. However, the factum of respondentagreeing for inclusion of the said amount in the assessment wastreated as a proof of concealment. I n Hindusthan Steel Limited Vs. State of Orissa[[1]]the Supreme Court observedthat the penalty proceedings under a taxenactment cannot be initiated as a matter of course as they are quasicriminal in nature and they may not be ordinarily initiated unless the concerned assessee is shown to have acted deliberately in defianceof law or was guilty of conduct, contumacious or dishonest or acted ina conscious disregard of its obligation. The said principle was appliedby the Tribunal. It was held that the alleged concealment on the partof the respondent did not attract under Section 271(1)(c) of the Act. Discussion was also undertaken on merits, with reference to Section40(A)(2) of the Act. Though certain questions have been framed whileadmitting the appeal, we do not find them to be of much relevanceparticularly in view of the conclusions arrived by the Tribunal onfacts. On appreciation of material before it, the Tribunal took the viewthat there was no deliberate and wilful act of concealment on the partof the respondent. The department is not able to demonstrate that theview taken by the Tribunal was contrary to specific provisions of thelaw or binding precedent. We, therefore, dismiss the appeal. No order as to costs. __________________________ L. NARASIMHA REDDY, J Date:01.07.2014Ssv/Gk ____________________________ CHALLA KODANDA RAM, J HON’BLE SRI JUSTICE L. NARASIMHA REDDYAND HON’BLE SRI JUSTICE CHALLA KODANDA RAM Ssv/Gk [1]83 ITR 26 I.T.T.A.No.96 of 2001 Date: 01.07.2014