TaxTMI 
TaxTMI 
2009 (8) TMI 754
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....tration under s. 12A of IT Act. The due date for filing of return of income is 31st Oct., 2003. Since no return of income was filed, the AO issued notice under s. 148 of IT Act requiring the assessee to furnish its return of income for the asst. yr. 2003-04 which was furnished by the assessee declaring nil income. The assessment under s. 143(3) was completed on 30th Aug., 2006 at an income of Rs. 39,88,210 by making certain additions and disallowances. Penalty proceedings under s. 271(1)(c) of IT Act for concealment of income and furnishing of inaccurate particulars were also initiated. 3. Against the additions/disallowances made, the assessee preferred appeal and matter travelled upto Tribunal. Consequent to the order by Tribunal, the income finally determined stood at Rs. 21,02,720 as against 'nil' income declared by the assessee. Accordingly, a fresh opportunity vide notice dt. 7th July, 2008 was again allowed to the assessee to show cause as to why penalty under s. 271 (1)(c) of the IT Act be not imposed. 4. In his reply to the show-cause notice, the assessee tendered explanation vide letter dt. 21st July, 2008. It was explained therein that the assessee made compliance t....
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....erial on record to support the explanation, he held that the assessee has knowingly furnished inaccurate particulars of income and committed default in terms of s. 271(1)(c) of IT Act. Accordingly penalty of Rs. 6,35,057 equal to 100 per cent of tax sought to be evaded amounting to Rs. 21,02,720, has been imposed on the assessee. 6. Before the learned CIT(A), the assessee pleaded that there was a reasonable cause for not filing return of income under s. 139 of IT Act within the statutory period. As regards concealment of particulars of his income, it was explained that the assessee filed his return disclosing full facts relevant to computation of his income. In case the claim of depreciation is allowed to it, there will be no assessable income and as such it cannot be a case of furnishing of inaccurate particulars of its income. Disallowance of depreciation per se would not attract penalty under s. 271(1)(c) of IT Act. Certain case laws were also relied in support of his claim before the learned CIT(A). 7. The learned CIT(A) considering that return of income has been filed pursuant to issuance of notice under s. 148 of IT Act and the registration under s. 12A has subsequently....
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....61." (iii) All the relevant facts were disclosed in the IT return specifying the reason why there is no taxable income of the assessee. Therefore, there is neither concealment of particulars of income nor furnishing of inaccurate particulars of income. (iv) It is further submitted that mens rea is also an important concept in penalty proceedings. Mens rea is evil intention or knowledge of the wrongfulness of the act that a person commits. It is said to be present if a person does something incorrectly deliberately knowing that his action is against law. In other words, the person has a guilty mind in committing the relevant act. Only when such mental attitude is present in an act, the person who commits it is said to have acted deliberately in defiance of law or is guilty of dishonest conduct. The expression 'concealed' in s. 271(1)(c) imports the concept of mens rea or guilty mind in that section and consequently, the intention of the legislature appears to be that an assessee is not to be penalized unless the necessary mental element could be spelt out in his act from the material on record. In other words, in the case of levy of penalty, always there should be mens r....
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....n WDV of fixed assets; there would not be any taxable income therefore, it is neither case of concealment of income nor furnishing of inaccurate particulars of income. It is a case of disallowance of depreciation. Depreciation is not allowed by the IT Department on WDV of fixed assets as on 1st April, 2004. (vii) Disallowance of an expense per se cannot mean that the assessee has furnished incorrect particulars of its income. Concealment involves penal action. It has to be proved as a conscious act. It is true that direct evidence may not be available in every case. Yet, as a necessary corollary from the facts and circumstances established on the record-CIT vs. Ajaib Singh & Co. (2001) 170 CTR (P&H) 489 : (2001) 119 Taxman 825 (P&H). In other words, the mere fact that certain amounts claimed by the assessee have been disallowed and, treated as income does not necessarily lead to the conclusion that the assessee is guilty of fraud or wilful neglect. The fact that the Explanation to s. 271(l)(c) requires the assessee to show that there was no fraud or wilful negligence in any way, does not enable the Revenue to contend that there is a presumption of fraud or negligence without ....
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....ments that are referred to and relied upon by the parties during the course of arguments shall alone be treated as part of the record of the Tribunal." As the respondent placed no material on record before the Tribunal to support his plea, we do not consider it necessary to comment on the merits or demerits thereof more so when penalty under s. 271(1)(c) of IT Act, can also be imposed for the twin defaults being concealment of particulars of income and furnishing of inaccurate particulars of such income and even for overlapping of default. A reference may be had to the judgment by Hon'ble Gauhati High Court in Padma Ram Bharali vs. CIT (1977) 110 ITR 54 (Gau). Plea raised as such by the assessee, therefore, stands rejected. 12. Further that one of the reasons taken by the assessing authority for deeming the assessee to have concealed particulars of its income, is that the assessee has failed to file its return of income voluntarily as per provisions of s. 139 of IT Act. The Expln. 3 below s. 271(1)(c) of IT Act reads as under: "Where any person fails, without reasonable cause, to furnish within the period specified in sub-s. (1) of s. 153 a return of his income which he is....
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....A) also, the assessee did not lay any documentary evidence or material or basis to show as to how depreciation on the WDV of fixed assets is allowable to him when he has been assessed as a charitable institute. The particulars of the assets owned and eligible for depreciation or enabling rule or provision of the Act, were also not brought before the authorities below to substantiate such plea. Even before the Tribunal no such material or, evidence nor enabling provision of law has been shown which could go to show that the explanation offered by the assessee stands substantiated or that he can be held to have proved such explanation as bona fide. Had the assessee laid some relevant material and evidence to substantiate his explanation there could have been a finding of fact by examining relevancy and sufficiency of the material and it is thereafter only the learned CIT(A) could have come to the conclusion that the assessee has discharged onus which could have become the conclusion of fact. The learned CIT(A), however, did not record any finding of fact as such but has reached a general conclusion that the assessee has not concealed any particulars of his income nor furnished inaccu....
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....t substituted Explanations makes it clear that the statute visualized assessment proceedings and penalty proceedings be wholly distinct and independent of each other. In essence, the Explanation (after 1964) is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts, are within the special knowledge of the assessee. Sec. 106 of the Indian Evidence Act, 1872 (in short, the 'Evidence Act') gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the AO as to whether he can invoke the Explanation or not. Explanation 1, which primarily concerns the case at hand, automatically comes into operation when in respect of any facts material to the computation of the total income of any person, there is failure to offer an explanation or the explanation is offered which is found to be false by the AO or the first appellate authority, or an explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to ....
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....s per rule of evidence, there is distinction between set of facts 'not proved' and facts disproved and facts proved. Benefit of the principle that mere non-satisfactory nature of explanation furnished cannot amount to proof of falsity of explanation furnished can apply in case the fact finding authority reaches to a stage where it can only conclude that the fact alleged is 'not proved' which would result that except rejection of the explanation furnished by the assessee, there is no material to sustain the plea of concealment. But, on the other hand, if the state of affairs reveal a stage where one can positively reach a conclusion that the fact alleged is proved or disproved, the principle that mere rejection of explanation cannot result in levy of penalty will have no application. To reach this stage also, inquiry will have to be undertaken of the disclosure made in the return or in the statement annexed to the return and to arrive at a finding whether the particulars disclosed are truthful, or false or not proved to be satisfactory. The principle to which the Tribunal has referred would apply in the last case. In the first case, it would be a positive case of no concealment, in ....