2017 (11) TMI 1492 - HC - Income Tax

Wilful attempt to evade tax, etc. - Punishable offence under the Income Tax Act - Excessive / false claim of depreciation on land - Held that - only after the order sheet entry made by the Department of Income Tax, that the correction was made by the petitioner in the subsequent Assessment year - the contention of the learned counsel for the petitioner that the mistake in the balance sheet was suo moto rectified in the balance sheet of the subsequent year much before it was scrutinised by the Assessment Officers cannot be accepted. The another contention of the counsel for the petitioner that the alleged mistake was mere clerical in nature, not deliberate and no element of mens rea is present, also, does not hold any ground as it has been rightly held by the learned ACMM that no sincere efforts were put in by the petitioner after detection of the alleged mistake by filing the revised return immediately thereafter. It is a manifest procedure that before filing of the Income Tax return for the assessment year 2007-2008 by the petitioner, the same is scrutinized, firstly, by the auditors of the company. Secondly, by the directors of the company before endorsing their signatures on the final Balance Sheet. Therefore, it cannot be considered as a mere accounting mistake. Order of ACMM imposing sentence of fine confirmed.

Summary

Issues:
Quashing of judgment and sentence under Section 266C/277 of the Income Tax Act.

Analysis:
1. The petitioner sought the quashing of a judgment and sentence under Section 266C/277 of the Income Tax Act. The petitioner claimed that a clerical mistake in claiming depreciation on land was rectified in the subsequent year and brought to the attention of the Assessing Officer. The petitioner argued that there was no mens rea involved and vicarious liability should not apply. The respondent contended that the judgment was reasoned and valid.

2. The court examined the facts and submissions. It was established that the mistake in claiming depreciation on land was only corrected after the Assessing Officer's inquiry. Evidence showed that the mistake was detected earlier but not rectified promptly. The court noted that the mistake was not rectified immediately after detection, casting doubt on the petitioner's actions.

3. The court rejected the argument that the mistake was clerical and lacked mens rea. It was observed that the procedure required scrutiny by auditors and directors before finalizing the balance sheet, indicating a lack of oversight in the process. The court upheld the judgment and sentence, concluding that it was well-reasoned and free from infirmity.

4. The judgment emphasized that the observations should not be construed as a reflection on the case's merits. Ultimately, the petition seeking to quash the judgment and sentence under Section 266C/277 of the Income Tax Act was dismissed.