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2006 (3) TMI 129 - HC - Income TaxPenalty levied u/s 271(1)(c) - Absence Of Mens rea - HELD THAT - In our view discretion so exercised by CIT(A) and later by the Tribunal in accepting the explanation offered by assessee being judicious does not call for any interference. It is noticed from the record of the case that it is a case of surrender of income by the assessee and full amount of tax has been paid. The Tribunal has given reasons for accepting the factual version of the assessee.Thus we do not consider it to be a case for holding that it attracts the Explanation appended to s. 271(1)(c) ibid for levying the penalty. Accordingly the appeal fails and is dismissed.
Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act for the assessment year 1993-94. Analysis: The appeal was filed by the Revenue (CIT) under section 260A of the IT Act against the order passed by the Income-tax Appellate Tribunal (Tribunal) in ITA No. 130/Ind/1997. The substantial question of law raised was whether the Tribunal was correct in deleting the penalty levied under section 271(1)(c) of the IT Act. The dispute primarily revolved around the imposition of penalty for the assessment year 1993-94 by the Assessing Officer (AO), which was later set aside by the CIT(A) and Tribunal. The Tribunal noted that a similar penalty imposed for the assessment year 1991-92 was also set aside by the Tribunal, and that order had attained finality as it was not appealed by the Revenue. Consequently, the Tribunal upheld the order of the CIT(A) and quashed the penalty for the assessment year in question, leading to the appeal by the CIT. The Tribunal, in its decision, emphasized the independence of assessment and penalty proceedings, stating that the imposition of penalty does not automatically follow if an addition has been made to the quantum side. It highlighted that the assessee had voluntarily offered additional income to avoid prolonged litigation with the department, and the penalty imposed by the AO based on this surrendered amount was deemed unsustainable. The Tribunal referred to legal precedents to support its decision, including observations by the Supreme Court regarding the nature of agreed additions not necessarily constituting concealed income. The Tribunal also cited previous instances where penalties were cancelled by the CIT(A) and upheld by the Tribunal due to lack of evidence of concealment. The Tribunal concluded that the penalty in question was not justified, and the CIT(A) rightly cancelled it. The High Court, after considering the arguments and perusing the case record, decided to dismiss the appeal. It concurred with the Tribunal's finding that no mens rea, as required under section 271(1)(c) for imposing the penalty, was established against the assessee. The Court upheld the Tribunal's decision, noting that the discretion exercised by the CIT(A) and the Tribunal in accepting the explanation offered by the assessee was judicious and did not warrant interference. The Court also observed that the case involved the surrender of income by the assessee with full tax payment, and the Tribunal's acceptance of the factual version provided by the assessee further supported the decision to not levy the penalty under the Explanation appended to section 271(1)(c) of the IT Act. Consequently, the appeal was dismissed with no costs incurred.
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