TMI Blog2005 (2) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the Tribunal was right in holding that the claim for deduction made by the applicant was a false claim so as to attract the provisions of section 271(1)(c) of the Act? III. Whether, on the facts, the Tribunal was justified in holding that there was no evidence of payment made by the applicant company to the other company to justify the claim, when adequate materials were furnished in the course of the appellate proceedings?" The assessee-company filed a return of income on January 13, 1981, for the assessment year 1980-81 declaring an income of Rs. 700. The assessee claimed deduction of Rs. 12 lakhs being the lease rent paid to its licensor among other deductions. It is the claim of lease rent of Rs. 12 lakhs which is in controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led a second appeal before the Income-tax Appellate Tribunal (the "Tribunal" for short) in I. T. A. Nos. 968, 969 and 970 of 1989 and the same came to be rejected. Hence, the reference at the instance of the assessee. Sri Parthasarthi, learned counsel for the assessee, contends that the assessee in its return has neither concealed the particulars of the income nor furnished inaccurate particulars. There is no mala fide motive on the part of the assessee in avoiding the payment of legitimate tax dues. Merely because the Income-tax Officer disallowed a claim of the assessee shall not result in levy of penalty under section 271 of the Act. Reliance is placed on the following decisions: (1) Shiv Lal Tak v. CIT [2001] 251 ITR 373 (Raj); and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anuary 1, 1980 to January 10, 1980. The licensor was heavily indebted to the bank. The bank brought an action and got a receiver appointed through the court. The receiver took possession of all the assets including the factory premises in question on January 10/11 1980. Consequently, the assessee cannot make use of the plant and machinery. The assessee contends that under these circumstances, they settled the issue with the licensor and cancelled the entire agreement dated December 29, 1979, by paying a sum of Rs. 12lakhs to the licensor as lease rent in full and final settlement on March 30, 1980. The assessee in their returns claimed allowance of Rs. 12 lakhs as payment towards lease rent to the licensor. The Income-tax Officer disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer or the Appellate Assistant Commissioner or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed: Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Even in this view of the matter, the Explanation alone cannot justify levy of penalty. Absence of proof acceptable to the Department cannot be equated with fraud or wilful default. As we find no material difference between the original Explanation 1 and Explanation 1 as substituted, in our opinion, it has to be so construed as to harmonise it with the basic principles of justice and fairness as in the case of the original Explanation. We are guided by the commentaries of the learned authors Kanga and Palkhiwala, Law and Practice of Income-tax, volume 1, pages 1637, 1639 and 1640." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be said that the assessee has concealed the income. In order to justify the levy of penalty the circumstances must show that the assessee is having an intention to conceal the income and to evade the payment of tax. In this case the assessee showed the payment of Rs. 12 lakhs to the licensor in the return filed by the assessee and the same is not disputed by the Revenue. Though the Revenue refuses to accept the claim of the assessee and added the same for tax it will not automatically lead to a circumstance to levy the penalty. The law laid down by the apex court in K. P. Madhusudhanan v. CIT [2001] 251 ITR 99, has no application to the facts of this case. This decision of the apex court is subsequent to the amendment of section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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