Penalty under section 271(1)(c): consistent accounting method and lack of mens rea defeated the proposed reference.

Penalty under section 271(1)(c) was examined in the context of revised returns, shifting of income between years, and the assessee's accounting method. The Tribunal found the method of accounting consistent and not mala fide, held that the mental element required for penalty had not been established, and concluded that the assessee had discharged the burden under the Explanation to section 271(1)(c). On that material, no useful purpose would be served by directing a reference, and the proposed questions were not required to be referred.

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Issues: Whether the questions sought to be referred concerning levy of penalty under section 271(1)(c) of the Income-tax Act, 1961, mens rea, and discharge of the onus under the Explanation warranted reference to the High Court.

Analysis: The Tribunal had examined the assessee's revised return, the disparity between the returned and assessed income, the shifting of income to another year, and the accounting method adopted. It found that the method of accounting was consistent and not mala fide, that the mental element necessary for penalty had not been established, and that on the material before it the assessee had discharged the burden cast by the Explanation to section 271(1)(c). The High Court found no useful purpose in directing a reference, as the Tribunal's order was proper on the material before it and was liable to be sustained.

Conclusion: The proposed questions were not required to be referred, and the assessee succeeded.

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