TaxTMI 
TaxTMI 
2006 (11) TMI 132
X X X X Extracts X X X X
X X X X Extracts X X X X
....s has been taxed as income from other sources. The Assessment had been unsuccessfully challenged, but not pursued further since, according to Ms. S.M. Kapila, the learned Counsel for the Assessee, the quantum of the levied tax was not commercially commensurate with the costs of further litigation. 2. So far as the Order of the AO dated 23.3.2000 imposing penalty under Section 271 (1) (c) of the Income-Tax Act (IT Act) is concerned, it has been upheld by the CIT(A)-XVII, New Delhi observing inter alia that -"Had there been no scrutiny of the accounts, the incorrect claim of deduction of interest from income under the head Other Sources could have been allowed, leading to tax evasion". This is fallacious reasoning since in our opinion every assessee is expected to file its Return honestly and diligently regardless of whether a scrutiny is in order or not. It would indeed be detrimental to the interests of the Revenue to enable an assessee to file a Return which it knows to be legally incorrect, on the premise that it was for the Department to order a scrutiny or to otherwise detect the legal incongruity of its Return. The CIT(A) was of the further opinion that interest paid on bor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the Assessment that is eventually framed by the AO is for a larger income, penalty proceedings are not an inexorable or inevitable consequence. It is axiomatic that Section 271(1)(c) is attracted only in those instances where the Assessee has concealed the particulars of his income, or has furnished inaccurate particulars of such income with an intent to mislead the Revenue into accepting its Return for an income offered for taxing which is lesser than the income actually exigible to tax. Since all the transactions had been mentioned by the Assessee in its Return, concealment is obviously not made out. Even if the Assessee's version of the occurrence of a printing error is totally discounted and ignored, the Revenue would be unfair to contend that the matter was absolutely free of doubt. Where two opinions are possible, adopting one of them can scarcely be viewed as malafide, with an intent to evade payment of Income-Tax. Recompense has been provided for in Section 234 of the I.T. Act by way of levy of interest, which, in the present case, has been paid without demur. In Dr. Prannoy Roy vs. Commissioner of Income-Tax, [2002] 254 ITR 755 His Lordship S.B. Sinha, as Chief Justice o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in this Judgment. 6. Mr. Jolly has stressed the point that mens rea is not an essential element for the imposition of penalty under Section 270. However, it is trite that mens rea is an essential ingredient in every offence, but this presumption can be effaced by the statute creating the offence, as has been opined by the Supreme Court in State of Maharashtra vs. Mayer Hans George, [1965] 35 Comp Cas 557 ; AIR 1965 SC 722. Equally, a penalty imposed for a fiscal transgression partakes of the character of a civil obligation dissimilar to a punishment imposed under penal law. Hindustan Steel Ltd. vs. State of Orissa, [1972] 83 ITR 26,29 (SC) ; [1970] 25 STC 211 (SC) was decided by a Three Judge Bench called upon to construe Sections 9(1) and 25(1)(C) of the Orissa Sales Tax Act which empowered the imposition of a penalty for failure to register as a 'dealer'. Their Lordships recorded the following opinion:- "But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the penalty is to follow." 8. A Two Judge Bench in the case of Gujarat Travancore Agency vs. CIT, Kerala, [1989] 177 ITR 455(SC), without reference to Hindustan Steel Ltd., [1972] 83 ITR 26, (SC) has observed that mens rea is not a necessary concomitant of the offence of late filing of a Return punishable under Section 271 (a) of the IT Act. Similarly, their Lordships have concluded in The Chairman, SEBI Shriram Mutual Fund, [2006] 131 Comp Cas 591 (SC) ; [2006] 11 JT 164 (SC). that the Scheme of the SEBI is that defaults for failure are nothing but failure or default of statutory civil obligations provided under the Act and the Regulations made thereunder". However, as we have already noted the SEBI Act employs the word "shall" in its penalty provision, whereas the IT Act uses the word "may", thereby bringing about an appreciable difference in the ambit of the statutes. 9. We are mindful of the view preferred by the Apex Court in Commissioner of Income-Tax vs. Dr. V.P. Gopinathan, [2001] 248 ITR 449 which is extremely topical. Dr. Gopinathan had put moneys in FDRs and had then borrowed on this collateral. He sought to deduct from the income earned on the FDRs the inte....