2007 (5) TMI 199 - SC - Income Tax

Whether the Tribunal was right in holding that penalty under section 271(1)(c) was not exigible in the present case - It is not a case where penalty has been imposed for breach or contravention of a commercial statute where lack of intention to contravene or existence of bona fides may not be of much importance. It is also not a case where penalty is mandatorily imposable - appeal of assessee is allowed

Issues Involved:
1. Legitimacy of penalty under section 271(1)(c) of the Income-tax Act.
2. Mens rea and bona fides of the assessee.
3. Role and responsibility of the agent (Syndicate Bank) in filing the returns.
4. High Court's interference with the Tribunal's findings of fact.

Issue-wise Detailed Analysis:

1. Legitimacy of Penalty under Section 271(1)(c):
The primary question was whether the penalty under section 271(1)(c) was applicable. The Income-tax Appellate Tribunal held that penalty proceedings for concealment or furnishing inaccurate particulars of income may not be attracted if the revised return is accepted. The Tribunal noted that the revised return was accepted by the Department, and no penalty was imposed concerning the original return. It was concluded that the assessee was not guilty of concealment of income.

2. Mens Rea and Bona Fides of the Assessee:
The Tribunal found that the assessee acted bona fide, relying on the professional group at Syndicate Bank for tax matters. The High Court, however, disagreed, stating that the principal (assessee) is responsible for the agent's (Syndicate Bank) actions. The High Court emphasized that the assessee, being an engineer and taxpayer for many years, could not claim ignorance of the return's contents. The Supreme Court reiterated that the burden of proof in penalty proceedings lies with the Department, and the omission of the word "deliberate" in the statute does not diminish the requirement for proving mens rea.

3. Role and Responsibility of the Agent:
The High Court held that there was no evidence showing the agent (Syndicate Bank) acted beyond its authority or disobeyed the principal's instructions. The High Court asserted that the agent prepared the return based on the information provided by the assessee, and any negligence by the bank could not excuse the assessee's responsibility.

4. High Court's Interference with the Tribunal's Findings of Fact:
The Supreme Court highlighted that the High Court should not ordinarily disturb the Tribunal's findings of fact unless they are perverse. The Tribunal, being the highest authority to determine facts, concluded that the assessee did not deliberately conceal income. The Supreme Court cited previous judgments, emphasizing that the High Court's jurisdiction in reference applications is limited to answering questions of law, not re-evaluating factual determinations unless they are perverse.

Conclusion:
The Supreme Court set aside the High Court's judgment, supporting the Tribunal's finding that the assessee did not deliberately conceal income and acted on incorrect legal advice. The appeal was allowed, and no costs were ordered. The judgment underscores the importance of distinguishing between deliberate concealment and bona fide errors in tax matters.

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