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TMI Blog2015 (9) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... his order dated 20.07.2012. 2.1 The facts of the case are that the assessee, an individual, was during the course of the assessment proceedings found to have withdrawn Rs. 10 lacs from a company, Gallant Freight and Travels Private Limited ('GFTPL' or 'the company' hereinafter), in which he was a director, holding 37% shares. The company had accumulated profits exceeding the said amount, so that the provision of section 2(22)(e) stood attracted. The assessee, on being show caused in the matter, explained that the company required liquidity and, therefore, as per its usual practice, made investment in a Mutual Fund, though in his name in-as-much as the same could not, for technical reasons, be made in the name of the company. The same did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d favour with the Revenue in-as-much as a willful default or mens rea was not an ingredient for the levy of penalty u/s. 271(1)(c), which was levied, as well as confirmed, relying on the decisions in the case of Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 (SC) and CIT vs. Nathulal Agarwala & Sons [1985] 153 ITR 292 (Pat)(FB). Per the latter decision, it stood clarified that it is not that the moment an unacceptable or fantastic explanation is offered by the assessee that the presumption cast by Explanation 1 to the provision stands rebutted. Aggrieved, the assessee is in second appeal. 3. We have heard the parties, and perused the material on record. 3.1 Our first observation in the matter is that the addition havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realized his mistake, itself belies his earlier explanation. If the funds were released to the assessee's bank account for investment on behalf of the company, what, we wonder, is the 'mistake' committed? The investment being unable to be held in the company's name, for some unstated technical reason/s, could always be held by a director for and on behalf of the company, who would in that case be liable to return the sale proceeds of the investment, and not the only amount advanced, as in the present case, establishing it to be a transaction of loan or advance. We may toward this advert to parallel provisions under the Companies Act, 1956. Section 187-C relates to the declaration/s by a person not holding beneficial interest in any share, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Court discountenanced the plea of a bona fide mistake on account of being unaware of the provision of law, which would be by itself not sufficient. All the relevant facts and circumstances of the case could though be considered to arrive at a finding of fact with regard to a bona fide belief, and which had not been evaluated by the tribunal. The matter was accordingly restored back to it for the purpose, to do so upon considering all the material facts and circumstances. The matter of bona fide belief, or a mistake on its basis, would thus have to be examined on its merits. The assessee in the instant case himself admits to have realized his mistake, implying of his knowledge of having, perhaps inadvertently, violated the law in- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re saying, i.e., that the assessee having realized his mistake well in time, with the default u/s. 2(22)(e) - the law on which is very clear, having been committed, he ought to have returned the said income in-asmuch as he has no reason for not so doing, preferring instead not to return his income - in the admitted facts of the case, in accordance with law. He could have, at least, while not returning the same, narrated the sequence of events leading to the attraction of the provision of section 2(22)(e), besides the subsequent events, pleading to an indulgence in non-invoking section 2(22)(e). It is though doubtful if this would have served the purpose in-as-much as the assessee himself admits to have realized his mistake, i.e., having bec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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