Madhya Pradesh High Court
Commissioner Of Income-Tax vs Smt. Padma Devi Jain on 12 February, 1999
Equivalent citations: [2000]245ITR818(MP)
Author: Shambhoo Singh
Bench: Shambhoo Singh
JUDGMENT B.A. Khan, J.
1. The Revenue has filed this application under Section 256(2) of the Income-tax Act, 1961, for calling for a statement of the case from the Income-tax Appellate Tribunal, Indore Bench, on the following stated questions of law, arising out of the Tribunal's order dated August 29, 1997:
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in upholding cancellation of penalty of Rs. 1,15,000 under Section 271(1)(c) ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in confirming cancellation of the penalty of Rs. 1,15,000 levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act holding that there is no mens rea of the assessee to conceal the income or to furnish inaccurate particulars of income, although the statutory provisions relating to levy of penalty under Section 271(1)(c) do not have any such condition relating to mens rea ?
3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in confirming cancellation of the penalty under Section 271(1)(c) of the Act even when the material available on record clearly established that the assessee had claimed a liability which she was not liable to bear and of which legal position, the assessee was already aware under the terms of dealership and as such deduction, in the matter, was wrongly claimed ?"
It transpires that the assessee had claimed interest payment of Rs. 7,19,164 to Escorts Limited on the outstanding bills and delayed payments. She had filed a detailed chart of interest payment and three certificates from Escorts Limited in support of her claim. However, Escorts Limited later on issued a clarification regarding the assessment year 1989-90 and on scrutiny it was found that out of the claimed amount, Escorts Limited had Credited an interest of Rs. 2,12,162 to the assessee's account. Upon this she was asked to explain why this interest amount be not added towards her disclosed income as it was claimed by her in the profit and loss account. It was explained by her that the interest amount would be offered for taxation for the ensuing assessment year 1991-92. The Assessing Officer rejected her claim and made addition of this amount and initiated penalty proceedings against her under Section 271(1)(c) of the Act. She took an appeal before the Commissioner of Income-tax (Appeals) who vide detailed order dated April 3, 1992, accepted her explanation and concluded that the return filed by the assessee could not be treated as false in the facts and circumstances of the case. It was found by him that the assessee had not made any wrong claim for interest, nor had she furnished any inadequate particulars of her income. On the contrary, it was on the basis of the facts furnished by her that the Assessing Officer had come to know about the disputed overcharge interest amount.
2. It was further observed by him that where the assessee did not include any particular item in the taxable income under the bona fide belief, it would not be justified to condemn the return as false to invite penalty.
3. The Revenue took appeal against this to the Tribunal which affirmed the finding of the Commissioner of Income-tax (Appeals). While doing so it made a passing observation that there was no deliberateness or mens rea in the assessee's action to treat her return as false. The Revenue took objection to this and sought reference of the abovestated questions to this court. The Tribunal rejected the application and in our view rightly.
4. The Revenue's counsel, Shri Pawnekar, submitted that after deletion of the word "deliberate" from Section 271(1)(c), the Tribunal could not have given a clean chit to the assessee by confirming the cancellation of penalty. Reliance in this regard was placed on CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292, a Full Bench judgment of the Patna High Court interpreting the amendment made in the Explanation appended to Section 271(1)(c).
5. It appears to us that the controversy involving use of the words "deliberate" and "mens rea" does not assume importance for purposes of deciding the fact of this application and any effort to dig deep into it would eventually turn out to be totally academic. This is so because the Commissioner of Income-tax (Appeals) and the Tribunal had in fact accepted the explanation of the assessee regarding the overcharged interest amount and her bona fides and had returned findings of fact in the facts and circumstances of the case that her return could not be branded false inviting imposition of penalty. Therefore, it becomes futile to examine whether or not any element of deliberateness or mens rea in the action of an assessee was a pre-requisite to be satisfied to invite penalty proceedings. Determination of this issue could await an appropriate proceeding". For the present, we do not feel inclined to call for the statement of the case on any of the questions stated above. This application is accordingly rejected.