TaxTMI 
TaxTMI 
2012 (4) TMI 261
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....x. In the order u/s 147 r.w.s. 143(3) the Assessing Officer made the addition for the said sum by holding that it was income received on termination of warehousing agreement. The assessee remained unsuccessful before the learned CIT(A) as well as the Tribunal. 3. Pursuant to the order passed by the Tribunal in the quantum proceeding upholding the addition, the Assessing Officer imposed penalty u/s 271(1)(c) rejecting the assessee's contention that it had entertained bona fide view about the non-taxability of this amount. No relief was allowed in the first appeal. 4. Having heard the rival submissions and perused the relevant material on record it is noticed that the assessee originally entered into an agreement on 25.09.1970 with M/s. Industrial Packing Manufacturers, as per which the premises at 89, Medows Street, Bombay was leased out to assessee on year to year basis. The lessor firm got converted into company under the name and style of M/s Associated Packing Private Limited. A new agreement was entered into by such company with assessee on 30.12.1976 under which the said premises was given to the assessee on lease for a period of three years. On 09.08.1982 an agreement w....
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....eme Court decision in the case of CIT v. B.C. Srinivasa Shetty (128 I.T.R. 294)." 6. The above narration of facts clearly shows that the assessee opined that the amount in question was a capital receipt not chargeable to tax. This opinion of the assessee was bona fide, as based on a legal opinion given by Shri S.E. Dastur, a designated senior Advocate. The assessee did not stop there itself. In the Profit and loss account, the said amount was distinctly shown as extraordinary receipt not chargeable to tax by giving separate note to the annual accounts as extracted above. Apart from that the assessee also gave a separate note in the computation of income stating that it has received the said amount which is not chargeable to tax. The above facts indicate that the assessee entertained a bona fide belief that the amount in question was not chargeable to tax and due disclosure was made about its bona fide opinion of the amount being not chargeable to tax in not only the Annual accounts but in Computation of income filed with the return of income as well. Now the question arises as to whether under such circumstances can it be said that the penalty should be upheld merely on the reason....
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.... the expression "conceal" is of great importance, which signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars of income. It was, therefore, held that in the absence of mens rea penalty was not exigible. Correctness of this judgment of the Hon'ble Supreme Court was doubted by a subsequent bench of the Hon'ble Supreme Court in Union of India v. Dharamendra Textile Processors [2008] 166 Taxman 65 and the appeal was referred to a Larger Bench. Subsequently in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277/174 Taxman 571 (SC) the Larger Bench of the Hon'ble Supreme Court distinguished and overruled the judgment in Dilip N. Shroff (supra) by holding that mens rea is not an essential ingredient of section 271(1)(c). Once again this issue came up before the Hon'ble Supreme court in Union of India v. Rajasthan Wpg. & Wvg. Mills [2009] 180 Taxman 609. This later judgment was authored by the Hon'ble Judge who happened to be party to the judgment in the case of Dharamendra Textile Processors (supra). In this case, again, pena....
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....the facts relating to the same and material to the computation of his total income have been disclosed by him], 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." 11. A cursory look at the mandate of this Explanation transpires that the following elements must be present in order to bring a case with in the charge of concealment :- (a) the person fails to offer an explanation, or (b) he offers the explanation which is found by the concerned authority to be false, or (c) the person offers an explanation which he is not able to substantiate and further fails to prove that such explanation is valid and that all the facts relating to same have been disclosed by him. Whereas the above (a) and (b) are covered within clause (A) of the Explanation, (c) is enclosed in clause (B). 12. If the case falls in any of these three categories, then the deeming provision is activated and the amount added or disallowed in computing the total income is considered as the income in resp....