2008 (12) TMI 795 - HC - Income Tax

Summary

Issues Involved:
1. Justification of sustaining penalty at 100% in absence of concealment or furnishing inaccurate particulars.
2. Justification of imposing penalty u/s 271(1)(c) without finding mens rea or deliberate intention to avoid tax.

Summary:

Issue 1: Justification of sustaining penalty at 100% in absence of concealment or furnishing inaccurate particulars

The appellant contended that the Tribunal erred in sustaining the penalty at 100% despite acknowledging the failure to offer the provision for gratuity to tax as a human error and a silly mistake. The Tribunal also noted that the Assessing Officer ignored this during the regular assessment. The appellant argued there was no wilful concealment, as the audit report u/s 44AB was duly filed, and the provision for payment of gratuity was clearly stated as not allowable u/s 40A(7). The appellant maintained that there was no evidence of evasion or concealment of tax, and thus, the penalty was unsustainable in law. The appellant cited precedents where the courts held that the burden of proof lies on the Revenue to establish concealment or furnishing of inaccurate particulars, and bona fide explanations by the assessee should not attract penalties.

Issue 2: Justification of imposing penalty u/s 271(1)(c) without finding mens rea or deliberate intention to avoid tax

The respondent argued that the appellant's conduct attracted Section 271(1)(c) of the Act, as the original return did not disclose the income in question, and the revised return filed under protest also failed to do so. The respondent highlighted that the appellant, a reputed Chartered Accountant firm, should not have committed such an error. The Tribunal's decision to impose a 100% penalty was based on the appellant's failure to disclose the income despite several opportunities. The court noted that Section 271(1)(c) imposes strict liability for concealment or inaccurate particulars, and wilful concealment is not necessary for civil liability under this section. The court also referenced the Supreme Court's ruling that mens rea is not essential for imposing penalties for civil obligations.

Conclusion:

The court dismissed the appeal, affirming the Tribunal's decision to impose a 100% penalty. The court concluded that the appellant failed to discharge their strict liability to furnish true and correct particulars of accounts while filing the return. The penalty under Section 271(1)(c) is a civil liability, and mens rea is not required for such penalties.