COMMISSIONER OF INCOME TAX, BHOPAL versus HINDUSTAN ELECTOR GRAPHITES LTD., INDORE

Citation: [2000] 2 S.C.R. 506 · Decided: 27-03-2000 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Dismissed

Judgment (excerpt)

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COMMISSIONER OF INCOME TAX, BHOPAL 
v. 
HINDUSTAN ELECTOR GRAPHITES LTD., INDORE 
MARCH 27, 2000 
[D.P. WADHWA AND MRS. RUMA PAL, JJ.] 
Income Tax Act, 1961 : 
S.28(iii)(b) (as inserted by Finance Act, 1990) and ss.143(1A) and 
234-Additional tax-Cash compensatory suppo.rt received against exports-
Included under the head "profits aiul gains of business or profession" after the 
assessee had filed the return-Amendment made with retrospective effect-
Assessee could not offer to tax the. amount of cash compensatory support 
received by it in the previous year-Revenue treating the amount as additional 
income and levied income tax thereon at higher rate and also charged 
interest-Held, levy of additional tax not warranted-Jn the circumstances, 
provisions.of s.143(1A) could not be invoked. 
Respondent-assessee, a public limited company, filed its return of 
income for assessment year 1989-90 on 29.12.1989. The last date for filing 
of return was 31.12.1989. Cash assistance received by any person against 
exports under any scheme of the Government was not chargeable under 
the heads "profits and gains of business or profession" under s.28 of the 
Income Tax Act, 1961 on the date when the assessee filed the return. 
Therefore, the amount or Rs. 1,31,41,030 received by the assessee in the 
previous year as cash compensatory support was not offered to tax. The 
Finance Bill, which received assent of the President of India on 31.5.1990, 
introduced with retrospective effect from 1.4.1967, clause (iii)(b) in s.28 
bringing under the head "profits and gains of business or profession" cash 
assistance received or receivable by any person against exports under any 
scheme of the Government of India. The assessing officer added the amount 
of Rs. 1,31,41,030 representing the cash compensatory support, received 
by the assessee. He treated this as additional income under s.143(1A) and 
levied on it amount of tax at higher rate and also charged interest under 
s.234 of the Act. The appeal filed by the assessee before the Commissioner 
of Income Tax failed on.this aspect. However, the Income Tax Appellate 
Tribunal allowed the appeal ~f the assessee holding that no additional tax 
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could be levied in respect of the amount of cash compensatory support nor 
506 
C.I.T. v. HINDUSTAN ELECTOR GRAPHITES LTD. 
507 
could any interest under s.234 could be charged. At the instance of Revenue 
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the Tribunal made a reference to the High Court, which held in favour of 
the assessee. Aggrieved, Revenue filed the present appeal. 
Dismissing the appeal, the Court 
HELD : 1.1. In the circumstances of the present case levy of addi-
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tional tax taking into account the income by way of cash compensatory 
support is not warranted. (514-F] 
1.2. The obligation is to file a correct 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. The law on the date of filing of the return is to be seem. 
It was not disputed that the return when filed by the assessee could not be 
termed as an incorrect return on the date of filing of the return. [511-F] 
1.3. Levy of additional tax bears all the characteristics of penalty. To 
attract penal provisions there has to be some element of lack of bona fules 
unless the law specifically provides otherwise. The present case does not 
represent even a bona fule mistake. It is not a case where under some 
mistaken belief the assessee did not disclose the cash compensatory support 
received by it which it could offer to tax. Additional tax was levied as the 
assessee did not in his return show the income by way of cash compensatory 
support. It was after the assessee had filed his return 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 over be the legislative intent. It 
shocks the very conscience if in the circumstances Section 143(1A) could 
be invoked to levy the additional tax. [513-G-H, 514-A-C] 
Modem Fibotex India Ltd. and Another v. Deputy Commissioner of 
Income-tax and Others, (1995) 212 ITR 496 (Cal.), upheld. 
Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales 
Tax, Indore, (1980) 124 IT

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