TMI Blog2006 (11) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... ts overdraft account. The Assessee had in this manner shown only a sum of Rs.3,17,319/- as "Income from Other Sources". While framing the Assessment, the AO had calculated the income of the Assessee by deducting the interest paid by it on its overdraft borrowings from its 'agricultural' earnings, which are exempt from taxation. The entire interest earned from the FDRs has been taxed as income from other sources. The Assessment had been unsuccessfully challenged, but not pursued further since, according to Ms. S.M. Kapila, the learned Counsel for the Assessee, the quantum of the levied tax was not commercially commensurate with the costs of further litigation. 2. So far as the Order of the AO dated 23.3.2000 imposing penalty under Section 271 (1) (c) of the Income-Tax Act (IT Act) is concerned, it has been upheld by the CIT(A)-XVII, New Delhi observing inter alia that -"Had there been no scrutiny of the accounts, the incorrect claim of deduction of interest from income under the head Other Sources could have been allowed, leading to tax evasion". This is fallacious reasoning since in our opinion every assessee is expected to file its Return honestly and diligently regardless of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted upon it by the decision of the Assessee to abide by the ITAT decision on that score. We shall, therefore, refrain from going further than saying that it is certainly an arguable dialectic. 4. It is plain to us that in the context of Section 271 of the IT Act, the ITAT was fully mindful of the fact that even if a Return of Income is found to be incorrect and the Assessment that is eventually framed by the AO is for a larger income, penalty proceedings are not an inexorable or inevitable consequence. It is axiomatic that Section 271(1)(c) is attracted only in those instances where the Assessee has concealed the particulars of his income, or has furnished inaccurate particulars of such income with an intent to mislead the Revenue into accepting its Return for an income offered for taxing which is lesser than the income actually exigible to tax. Since all the transactions had been mentioned by the Assessee in its Return, concealment is obviously not made out. Even if the Assessee's version of the occurrence of a printing error is totally discounted and ignored, the Revenue would be unfair to contend that the matter was absolutely free of doubt. Where two opinions are possible, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 234 is "shall" which cannot be construed as "may". Hence, imposition of interest is mandatory. The Securities and Exchange Board of India Act, 1922 also prescribes that the relevant Authority "shall" impose penalty and, therefore, the decision in The Chairman, SEBI vs. Shriram Mutual Fund, [2006] 131 Comp Cas 591 (SC) ; [2006] 11 JT 164 (SC) which will be referred to later in this Judgment. 6. Mr. Jolly has stressed the point that mens rea is not an essential element for the imposition of penalty under Section 270. However, it is trite that mens rea is an essential ingredient in every offence, but this presumption can be effaced by the statute creating the offence, as has been opined by the Supreme Court in State of Maharashtra vs. Mayer Hans George, [1965] 35 Comp Cas 557 ; AIR 1965 SC 722. Equally, a penalty imposed for a fiscal transgression partakes of the character of a civil obligation dissimilar to a punishment imposed under penal law. Hindustan Steel Ltd. vs. State of Orissa, [1972] 83 ITR 26,29 (SC) ; [1970] 25 STC 211 (SC) was decided by a Three Judge Bench called upon to construe Sections 9(1) and 25(1)(C) of the Orissa Sales Tax Act which empow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a careful perusal of Section 15(D) (b) and Section 15-E of the Act, there is nothing which requires that mens rea must be proved before penalty can be imposed under these provisions. Hence once the contravention is established then the penalty is to follow." 8. A Two Judge Bench in the case of Gujarat Travancore Agency vs. CIT, Kerala, [1989] 177 ITR 455(SC), without reference to Hindustan Steel Ltd ., [1972] 83 ITR 26, (SC) has observed that mens rea is not a necessary concomitant of the offence of late filing of a Return punishable under Section 271 (a) of the IT Act. Similarly, their Lordships have concluded in The Chairman, SEBI Shriram Mutual Fund, [2006] 131 Comp Cas 591 (SC) ; [2006] 11 JT 164 (SC). that the Scheme of the SEBI is that defaults for failure are nothing but failure or default of statutory civil obligations provided under the Act and the Regulations made thereunder". However, as we have already noted the SEBI Act employs the word "shall" in its penalty provision, whereas the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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