2008 (8) TMI 15

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.... return declaring an income of Rs 41,30,950/- and claimed 100% deduction under Section 80 HHE of the Income-tax Act, 1961 (hereinafter referred to as 'the said Act') in respect of the profits from rendering software services. It is an admitted position that for this assessment year, i.e., 2001-02, the assessee could have claimed only 80% deduction. The entire issue is with regard to the claim of the assessee for 100% deduction and as to whether the assessee in doing so made itself liable for penalty under Section 271(1)(c) of the said Act. 3. In the course of the assessment under Section 143(3), the Assessing Officer pointed out to the assessee that his claim of 100% deduction under Section 80 HHE was not permissible and he would....

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....e due to the mistake of the assessee's consultant and ignorance of the law in force. The Commissioner of Income-tax (Appeals) returned a definite finding that it is not a question of excess deduction having been claimed mala fidely, on the other hand, it is a case where the appellant has shown reasonable cause to have made such a claim. It was also found that the assessee relied upon the expert's advice which ultimately turned out to be wrong. In these circumstances, the assessee could be said to have had a reasonable cause for committing the said mistake. Consequently, the Commissioner of Income-tax (Appeals) deleted the penalty. 7. Being aggrieved by this decision, the revenue filed an appeal before the Income-tax Appellate Tri....

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....by him is not only not bona fide, but all the facts relating to the same and material to the income were not disclosed by him. The Supreme Court observed that apart from the assessee's explanation being not bona fide, the Assessing Officer should also return a finding of fact that the assessee had not disclosed all the facts which were material to the computation of his income. 9. From the aforesaid decision of the Supreme Court, it is clear that de hors the question of mens rea and the question of the effect the deletion of the word 'deliberate' from the provisions of Section 271(1)(c) would have on the issue of mens rea, as per the terms of the said explanation 1(B) before penalty can be imposed upon an assessee, it has to ....