TaxTMI 
TaxTMI 
2016 (7) TMI 375
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....o. ITR-4 for the Assessment Year 2008-09. The return of income has been processed u/s 143(1) of the Act accepting the returned income. Subsequently the case has been selected for scrutiny. During the course of hearing u/s.143(2) of the Act, the Ld. AO asked for an explanation of exempted income which was shown in the 'Schedule El' of the return Form No. ITR- 4. In reply, the assessee explained that the closing balance of the investment in Mutual Funds as on 31.03.2008 had been shown in the 'Balance sheet' in the return Form No. ITR - 4 for the Assessment Year 2008-09. The income from said investment in Mutual Funds had been shown as exempted income in the 'Schedule -El' of the return Form No. ITR - 4. In support of the said contention, reliance has been placed on the decision of Bharatiya Janata Party Vs Dy CIT (2002) 258 ITR (AT) 1 (Del) wherein it was held that "Redemption of Mutual fund on maturity does not constitute transfer". Accordingly it was claimed that income arising from 'Redemption of Mutual funds' is exempted from tax. Rejecting the above explanation filed by the assessee the ld. AO treated the said exempted income as short Term Capital....
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....s the basis for capital gains tax and through wrongly claimed exempted from the capital gains tax, but that cannot be a case of penalty under section 271(1)(c) of the Income-tax Act 1961. If it has claimed any exemption after disclosing the relevant basic facts and under ignorance of the provisions of the Act of 1961, and not offered that amount for tax, in such cases, penalty should not be imposed. In such cases rather it is the duty of the Assessing Officer to ask for further details and tax the income if it is liable to tax and that has been done in this case. In view of these facts on record, we see no reason to sustain the order of the Tribunal. The order of the Tribunal is set aside and penalty is cancelled. The appeal stands allowed accordingly." 5. The Ld. AR also placed reliance on the decision of Hon'ble Supreme Court in the case of Pricewaterhouse Coopers Pvt. Ltd. Vs. CIT reported in 348 ITR 306 (SC), wherein it was held as under:- "In this case the Tax Audit Report was filed along with the return and in unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act. The assessee however file to add back the sum in its com....
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....he claim made by the assessee. Further, when the assessee offers an explanation in discharge of the onus cast upon him by Explanation 1 to section 271(1)(c), the A.O. must consider the explanation objectively and unless he finds the same against the human probabilities or unless there are any real inconsistencies or factual errors in such an explanation, the AO ought to accept the same. We only find that there is a mistake of understanding the provisions of law inasmuch as the Ld. AR was confused between the 'Mutual Fund' and 'an investor of mutual fund'. The assessee had entertained a bona fide belief that income derived from redemption of mutual fund was eligible for exemption u/s. 10(23D) of the Act. This factual misinterpretation and misunderstanding of the provisions of the I. T. Act proves a telling instance about the ignorance of the provisions of the Act. But it is bona fide understanding of the assessee that cannot be doubted with. It only amounts to sheer ignorance of law. However, the belief of the assessee seems to be bonafide and that cannot be doubted with. It is well settled that 'Ignorantia juris non excusat' meaning 'ignorance of law is of no excuse'. However, this....
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....ivil liability. b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commiss....