TaxTMI 
TaxTMI 
2018 (12) TMI 828
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....)(viii) of the Act. The impugned order deletes penalty imposed on the respondent-assessee bank for concealment of income under Section 271(1)(c) of the Act. 4. The contention of the Revenue is that the Tribunal has erred in accepting the explanation given by the respondent-assessee bank as to why they had claimed deduction and benefit of Section 36(1) (viii) of the Act, though the respondent-assessee bank was not engaged in providing long-term finance for construction or purchase of houses in India for residential purpose. It is submitted that penalty under Section 271(1)(c) of the Act is to be imposed when an assessee conceals its income and furnishes inaccurate particulars of income. Mens rea or guilty mind is not required and necessary to impose penalty under the said Section. 5. We agree with the counsel for the Revenue that mens rea or guilty mind is not required to be established to impose penalty under Section 271(1)(c) of the Act. However, Explanation 1 to Section 271(1)(c) states that where in respect of any facts material to computation of total income of an assessee, the assessee offers no explanation or where an assessee offers an explanation, which he is not able....
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....f the Companies Act, 1956 (1 of 1956); (c) "Government company" shall have the meaning assigned to it in Section 617 of the Companies Act, 1956 (1 of 1956); (d) "infrastructure facility" shall have the meaning assigned to it in clause (23G) of Section 10; (e) "long-term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;" A reading of the said clause would indicate that the said deduction was applicable in respect of any special reserve created or maintained by a financial corporation engaged in providing long-term finance for industrial or agricultural development or for development of infrastructure facility in India or public company formed and registered in India with the object of carrying on business or providing long-term finance for construction or purchase of houses in India for residential purpose. Such deduction cannot exceed 40% of the profits derived from such business for providing long-term finance computed under the head "profits and gains from business or profession" which was carried to such reserve. ....
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....r residential purposes; and (iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility in India; (c) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (d) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P; (e) "housing finance company" means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes; (f) "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (g) "infrastructure facility" means- (i) an infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA, or a....
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....ngs, the respondent-assessee bank had written a letter dated 2nd December, 2002 referring to the discussions held and the view expressed that the respondent-assessee bank was eligible and entitled to deduction under Section 36(1)(viii) of the Act, as it would satisfy the requirement and condition of providing long-term finance for housing. 11. The respondent-assessee bank had also taken legal opinion from a Chartered Accountant, who had opined that they were eligible and would be entitled to benefit of deduction under Section 36(1)(viii) of the Act being engaged in re-financing of long-term financing loans given by other financial institutions for purchase of residential houses in India. Thus, the respondent-assessee bank had bonafidely and genuinely believed that they were eligible and entitled to the said deduction. 12. Accordingly and in terms of the genuine belief predicated on the opinions expressed, the respondent-assessee bank had created a special reserve in the respective years to which the profits from the business of long-term finance were transferred to claim deduction under Section 36(1)(viii) of the Act. 13. To us there cannot be any doubt or debate, therefor....
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....sessee fulfills the required conditions of section 36(1)(viii) of the IT Act, and had also created the necessary Special Reserve to the extent of Rs. 35.50 crores, in the accounts for the year ended on 31.3.2003. Housing finance loans are to be extended for a period not less than 5 years each. Therefore some of the loans recovered can not be advanced again but retained to meet its obligations of repayment of borrowings. The bank has obligations like repayment of borrowings at committed dates. Further banking prudence requires certain portion of the funds to be kept in liquid form or in Gilts to meet the financial commitments. The RBI which owns this bank, has prescribed the norms of such liquid funds by way of SLR and CRR ratios for the Commercial/ Scheduled Banks. This bank also follows such ratios of the purposes of financial prudence. These funds are deployed by way of call money or short deposits, overnight deposits and other deposits with other banks for short periods as well as in Gilts. The income earned on it is nothing but recouping a part of interest paid on the funds and is incidental to the only main business of Housing finance. Since....
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....to provide that corporations engaged in providing long-term finance(including re-financing) for development of housing in India will be eligible for the benefit under section 36(1)(viii)." 16. Section 3 (22) of General Clauses Act, 1897 states that a thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not. Section 52 of the Indian Penal Code, 1860 says that nothing is said to be done or believed in "good faith" which is done or believed without due care and attention. In Shiv Sarup Gupta v. Dr. Mahesh Chand Gupta AIR 1999 SC 2507, the Supreme Court interpreted the word 'genuine' to mean not spurious, natural, real, pure and sincere. It means absence of fraud or deceit. It should reflect the state of mind of the doer. 17. In the context of Explanation 1 to Section 271(1)(c), the word bona fide, i.e. good faith, would require due care and attention, which means reasonable care and attention. There should be an element of honesty attached to the defence and the explanation given by the assessee and there should be absence of any pretence, deceit or fraud (see paragraph 184 and onward in Subramanian Swamy v. ....