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Issues:
1. Justification of deleting penalty under section 271(1)(a) of the Income-tax Act, 1961. 2. Perversity in the decision of the Income-tax Appellate Tribunal regarding the penalty deletion. Analysis: The case involved a situation where the assessee filed its income tax return late, resulting in a penalty being levied under section 271(1)(a) of the Income-tax Act, 1961. The Inspecting Assistant Commissioner found that the assessee had received income in India, leading to the imposition of a penalty of Rs. 7,339 on the tax amount. The Commissioner of Income-tax (Appeals) set aside the penalty, stating that mens rea needed to be proved for successful penalty imposition, which was not established in this case. The Income-tax Appellate Tribunal, after considering the quantum appeal, found that the tax liability would be nil, leading to the deletion of the penalty. However, the Revenue argued that mens rea was not a prerequisite for penalty imposition under section 271(1)(a) and that the Tribunal erred in remitting the penalty based on the quantum appeal decision. The High Court clarified that mens rea is not essential for penalty imposition under section 271(1)(a) and that the focus should be on whether there was a reasonable cause for the delay in filing the return. The court set aside the Tribunal's order and directed a reconsideration to determine if there was a reasonable cause for the delay. If no reasonable cause is found, the penalty may be upheld. The court emphasized that the Commissioner of Income-tax (Appeals) was incorrect in requiring mens rea for penalty imposition. In conclusion, the High Court returned the reference unanswered for a fresh decision, emphasizing that mens rea is not a requirement for penalty imposition under section 271(1)(a) and directing the Tribunal to reevaluate the case based on the lack of a reasonable cause for the delayed filing of the return.
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