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Issues Involved:
1. Double deduction of bonus. 2. Imposition of penalty u/s 271(1)(c) for concealment of income. 3. Applicability of mens rea post-amendment of section 271(1)(c). Summary: Double Deduction of Bonus: The assessee, a nationalized bank, made a provision for bonus amounting to Rs. 30 lakhs for the assessment year 1972-73. Due to negotiations with the union, the actual bonus exceeded this provision by Rs. 3,45,505, which was debited in the subsequent year. The bank claimed this excess amount as a deduction for both the assessment years 1972-73 and 1973-74. Similar claims were made for the assessment years 1974-75 and 1975-76. The mistake was detected during the assessment for 1978-79, leading to the reopening of assessments for the earlier years. The bank added back the doubly deducted amounts in the revised returns. Imposition of Penalty u/s 271(1)(c) for Concealment of Income: The IAC (Asst.) initiated penalty proceedings u/s 271(1)(c) for concealment of income, imposing penalties for the assessment years 1973-74, 1974-75, 1975-76, and 1978-79. The Commissioner of Income-tax (Appeals) upheld the penalties but reduced them to the minimum prescribed amounts. The assessee-bank appealed against this order. Applicability of Mens Rea Post-Amendment of Section 271(1)(c): The learned counsel for the assessee argued that the bank's method of accounting was mercantile, and the bonus liability crystallized in the subsequent year. Therefore, the claim was made in both years to avoid the risk of the claim becoming time-barred. The counsel cited various rulings, including CIT v. Anwar Ali and Hindustan Steel Ltd. v. State of Orissa, to argue that the penalties were not justified as there was no deliberate intention to conceal income. The departmental representative countered that post-amendment of section 271(1)(c) in 1964, the element of mens rea was not required, and a fraudulent claim of deduction amounted to concealment of income. The representative cited rulings from various High Courts to support this contention. Judgment: The Tribunal agreed that post-amendment, the element of mens rea was not crucial. However, it emphasized that the assessee-bank, being a nationalized entity, could not be presumed to have the intention to evade taxes. The Tribunal noted that the bank made the claim based on a highly arguable contention and as a protective measure due to the pending assessments of preceding years. The Tribunal concluded that the penalties were not justified, as the claim was not frivolous and there was no deliberate concealment of income. The penalties u/s 271(1)(c) were thus canceled, and the appeals were allowed.
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