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Issues Involved:
1. Whether the Tribunal is justified in entertaining the additional ground of appeal after the assessee conceded the delay in filing the return. 2. Whether the Tribunal is justified in cancelling the penalties levied under section 271(1)(a) of the Income-tax Act, 1961, for the assessment years 1965-66 and 1966-67. Issue-wise Detailed Analysis: 1. Justification for Entertaining Additional Ground of Appeal: The Tribunal allowed the assessee to raise the ground that there was no deliberate omission in filing the returns late, despite the assessee conceding the delay before the Appellate Assistant Commissioner. The Tribunal reasoned that the ground involved a question of law and had been taken by the assessee at the earliest opportunity. The court upheld this decision, noting that the discretion to allow such grounds lies with the appellate authority and was exercised judiciously in favor of the assessee. Consequently, the court answered the first question in the affirmative, favoring the assessee and against the department. 2. Justification for Cancelling Penalties Levied: The Tribunal cancelled the penalties for the years 1965-66 and 1966-67, stating that the Income-tax Officer did not provide evidence to disprove the assessee's bona fide belief that there was no taxable income, which led to the delay in filing returns. The Tribunal emphasized that the burden of proof lay on the department to show that the delay was due to deliberate default and not a bona fide belief. The court noted that the Tribunal's view required the department to establish that the assessee could not have had a bona fide belief. The court examined the statutory provisions and judicial precedents, highlighting the difference between penalty provisions and criminal prosecutions. It noted that under the Income-tax Act, 1961, the imposition of a penalty does not necessarily require proof of mens rea (guilty mind) as in criminal law. The court referred to various decisions, including the Supreme Court's rulings, which clarified that penalty proceedings are remedial and coercive, not strictly penal. The court concluded that the requirement of mens rea is not necessary for imposing penalties under section 271(1)(a) of the Income-tax Act, 1961. Therefore, it answered the second question in the negative, favoring the department and against the assessee. Additional Judgment: In a related writ petition (O.P. No. 4614 of 1971) concerning the Wealth-tax Act, the court held that mens rea is not an essential ingredient for imposing penalties under section 18 of the Wealth-tax Act, which corresponds to section 271 of the Income-tax Act, 1961. The court dismissed the writ petition without costs, consistent with its findings in the income-tax case.
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