TaxTMI 
TaxTMI 
2005 (2) TMI 94
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....section 271(1)(c) of the Act are attracted in the instant case and thus the penalty levied is liable to be upheld? II. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the claim for deduction made by the applicant was a false claim so as to attract the provisions of section 271(1)(c) of the Act? III. Whether, on the facts, the Tribunal was justified in holding that there was no evidence of payment made by the applicant company to the other company to justify the claim, when adequate materials were furnished in the course of the appellate proceedings?" 2. The assessee-company filed a return of income on January 13, 1981, for the assessment year 1980-81 declaring an income....
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....vying penalty in the disallowance of Rs. 12 lakhs under the head Lease rent, vide order dated February 27, 1989. Aggrieved by this order of the Commissioner of Income-tax (Appeals), the assessee filed a second appeal before the Income-tax Appellate Tribunal (the "Tribunal" for short) in I. T. A. Nos. 968, 969 and 970 of 1989 and the same came to be rejected. Hence, the reference at the instance of the assessee. 4. Sri Parthasarthi, learned counsel for the assessee, contends that the assessee in its return has neither concealed the particulars of the income nor furnished inaccurate particulars. There is no mala fide motive on the part of the assessee in avoiding the payment of legitimate tax dues. Merely because the Income-tax Officer dis....
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.... the plant and machinery of the licensor for processing vanaspathi for a period of 11 months on some terms and conditions. The assessee invested some money and ran the factory of the licensor for a period of 10 days only, i.e., between January 1, 1980 to January 10, 1980. The licensor was heavily indebted to the bank. The bank brought an action and got a receiver appointed through the court. The receiver took possession of all the assets including the factory premises in question on January 10/11 1980. Consequently, the assessee cannot make use of the plant and machinery. The assessee contends that under these circumstances, they settled the issue with the licensor and cancelled the entire agreement dated December 29, 1979, by paying a sum ....
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.... way of penalty,-... Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate, 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: Provided that nothing contained in this Explanat....
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....lse, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. Alternatively treating the Explanation as dealing with both the ingredients (i) and (ii) above, where the circumstances do not lead to the reasonable and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Even in this view of the matter, the Explanation alone cannot justify levy of penalty. Absence of proof acceptable to the Department cannot be equated with fraud or wilful default. As we find no material difference between the original Explanation 1 and Explanation 1 as subst....
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.... there is no obligation for the assessee to pay the lease rent to the licensor under the agreement dated December 29, 1979, and therefore the assessee is not entitled for deduction and the Revenue brought the same to tax. Merely because the Revenue refuses to accept the claim of the assessee and treated the same as income it cannot be said that the assessee has concealed the income. In order to justify the levy of penalty the circumstances must show that the assessee is having an intention to conceal the income and to evade the payment of tax. In this case the assessee showed the payment of Rs. 12 lakhs to the licensor in the return filed by the assessee and the same is not disputed by the Revenue. Though the Revenue refuses to accept the c....