TMI Blog1996 (3) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... efunds of taxes were credited. In this account, the assessee credited, amongst other amounts, the refund of Rs. 7,05,382 on 24-5-1989. Other refunds amounting to Rs. 10,34,286 and Rs. 6,463 were also credited on 15th April and 21st February respectively, but with those amounts we are not concerned in the present appeal. In the ledger account, the refund voucher number alone was given by way of details and it is common ground that the break-up of the amount into income-tax and interest was not given. The printed accounts disclosed a loss of Rs. 58,89,802. The aforesaid loss was reduced by an amount of Rs. 6,11,721 described as ' Income-tax/Surtax/Refund/Adjustment (for earlier years) '.The net loss was thus reduced to Rs. 52,78,080. 3. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed income. The assessment, however, resulted in a net loss of Rs. 47,59,510 and there was no tax payable. 4. Penalty proceedings under section 271(1)(c) were initiated for non-disclosure of the interest received from the Income-tax Department. The assessee furnished a detailed reply in response thereto, dated 22-1-1992. It is not necessary to reproduce the reply here but it is sufficient to notice that the assessee contended that it did not have the details of the refund and only on coming to know all the details from the assessment order it realised that the refund included interest also. It was also contended that there was no proper application of mind regarding the break-up of the refund, which did not amount to concealment. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to carelessness or lack of alertness but by no stretch of imagination can it be stated that the assessee tried to conceal a receipt which was issued by the very Department which was making the assessments of the assessee. He referred to various authorities in support of his contention that a bona fide error or mistake does not invite penalty proceedings as also to the well known Supreme Court judgment in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, wherein it was held that penalty cannot be imposed merely because it is lawful to do so. As regards the reliance on Explanation 4 to section 271(1)(c), he submitted that even under the Explanation, concealment has to be established which implies that there must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the refund has been credited to the books of account. An attempt appears to have been made while preparing the final accounts to verify as to what portion of the same related to the earlier years. It is quite possible that the assessee and its auditors, while preparing the final accounts, were exercised with the ascertainment of the refund relating to the year of account in order to eliminate transactions relating to the earlier years and that in carrying out this exercise, it simply did not strike them that the interest element embedded in the refund had to be declared as income. Secondly, the assessee had huge brought forward losses amounting to Rs. 1.87 crores and even for the year under appeal, the loss, without adjusting the income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or carelessness in ascertaining the break-up of the refund, it should be given the benefit of doubt since what we are having in hand is a case of penalty. The principles that have to be kept in mind in a penalty matter have been summarised by the Orissa High Court in CIT v. Labala Haribandhu Sahu [1983] 142 ITR 21. The following paragraph at page 25 of the report sums up the position : " Here again, we think, the Tribunal kept the proper perspective in view and looked at the matter from the right aspect. As was pointed out by the Supreme Court in the case of Hindustan Steel Ltd v. State of Orissa [1972] 83 ITR 26, merely because there is a provision for the imposition of penalty it is not mandatory that the taxing officer must exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the Tribunal was justified in deleting the penalty levied under section 271(1)(c) of the IT Act. " Applying the aforesaid test to the present case, as already stated, we are of the view that no contumacy or guilty conduct can be attributed to the assessee. On a balance of probabilities and the weight of evidence, it appears to us that the assessee cannot be stated to have concealed its income or furnished inaccurate particulars thereof. 10. The income-tax authorities have referred to Explanation 4(a) to section 271(1)(c) of the Act. This Explanation has been specifically inserted to impose penalty even where the assessment had resulted in a loss. The Explanation itself does not authorise the levy of penalty which should fall sq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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