By C. N. Vaze, Chartered Accountant
Is It Fair
1. Introduction :
Of late, there has been a storm over conflicting decisions of
the Apex Court on ‘mens rea’ as an essential element of penalty for
‘concealment of income or furnishing inaccurate particulars of income ? The two
conflicting decisions particularly under reference are
— Dilip Shroff’s case 291 ITR 519 and Dharmendra Textiles
case 306 ITR 227.
The January 2009 issue of BCAJ carries an article on the
judicial analysis of these decisions. The purpose of the present article is to
bring out certain practical aspects occasioned by the e-regime.
2. As readers are aware, the process of submission of returns
has undergone a structural change in the last couple of years. Firstly,
corporate and other large entities like firms with tax audit are required to
file an on-line return. One has to fill in only what is prescribed in the form.
There is no room to furnish any explanation.
Secondly, others who file paper returns, can submit only the
return-form without any enclosures; not even a statement of income.
Now, under Income Tax, there are innumerable issues which are
debatable; many claims which are arguable. Assessees may have bona fide
claims e.g., on S. 14A; 40(a)(ia) — rate of deduction; 50C, 2(22)(e) and
so on. One may want to make a claim by placing on record the relevant facts,
reasoning and case law, if any relied on to be transparent. But he is deprived
of this opportunity and is permitted to submit only the arithmetic calculation.
This is unfair. In this context all these decisions now need to be reconsidered.
3. ‘Mens rea’ — a viewpoint. Admittedly, words like
‘deliberately’ or ‘wilfully’ are missing before the expression — ‘concealed or
furnished.’ However, one view is that the expressions ‘concealed’, ‘furnished
inaccurate particulars’, and tax ‘sought to be evaded’ — essentially connote
some deliberate or conscious act. Thus, the concept of ‘mens rea’ is
embedded in these three expressions without there being a need for separate
words like ‘deliberate’ or ‘wilful’. So also, in the two recent decisions cited
earlier, there is an issue as to whether an ‘obiter dicta’ can prevail
over the ‘ratio’.
4. It is unfortunate that on the one hand, there is chaotic
ambiguity in the provisions of law; on the other hand, there is no opportunity
to disclose your viewpoint proactively. This is aggravated by the ill-motivated
administration. Further, conflicting judicial decisions also make the life of an
assessee difficult. In the environment an assessee could suffer about 68%
outgoing in terms of tax and penalty, apart from interest.
5. Is it then fair to :
- try to punish honest taxpayers ?
- make all lawful remedies ill-affordable ?
- force an assessee to yield to unlawful demands ?
To make the law fair :
- penalty and interest should not be levied unless there exists ‘mens rea’.
- an assessee should have the opportunity of giving reasons for a claim for
deduction or an expenditure.
