Penalty — Concealment of income — Matter remanded to the High Court since it had relied upon its earlier decision which, though approved by the Supreme Court in some other matter, was later held to not lay down the correct law by Larger Bench of the Supre

Atul Mohan Bindal, the assessee, filed return of his income
for the A.Y. 2002-03, declaring his total income at Rs.1,98,50,021. In the
assessment proceedings u/s.143, a notice along with questionnaire was issued to
him by the Assessing Officer. Pursuant thereto, the assessee attended the
assessment proceedings and furnished the requisite details. During the
assessment proceedings, it transpired that the assessee worked with M/s. DHL
International(S) Pte. Ltd., Singapore, during the previous year and was paid
salary in Singapore amounting to US $ 36,680.79 equivalent to Rs. 17,81,952. The
assessee explained that an amount of US $ 8199.87 (Rs.3,98,350) was deducted as
tax from the aforesaid salary income and having paid tax on salary income earned
in Singapore, he was of the view that the said income was not liable to be
included in the total income in India. He, however, offered salary income of
Rs.17,81,952 to be included in his total income. The assessee was also found to
have received an amount of Rs. 5,00,000 from his erstwhile employer M/s.
Honey-well International (India) Pvt. Ltd. in the previous year. His explanation
was that the said amount was exempted u/s.10(10B) of the Act being retrenchment
compensation. According to the Assessing Officer, that amount could not be
exempted u/s.10(10B), as the assessee was not a workman. The assessee also
earned interest income of Rs.22,812 from Bank of India, which was not included
by him in the total income but he offered for tax the said amount. The AO,
accordingly, added Rs.17,81,952, Rs.5,00,000 and Rs. 22,812 to the income
declared by the assessee in the return and assessed the total income of the
assessee at Rs.2,21,54,785. Penalty proceeding u/s. 271(1)(c) were initiated
separately and penalty of Rs.7,75,211 was imposed.

The assessee accepted the order of assessment but challenged
the order of penalty in appeal before the Commissioner of Income-tax (Appeals).

The Commissioner of Income-tax (Appeals) allowed the appeal
and set aside the order of penalty. The Commissioner of Income-tax (Appeals)
held that the assessee has neither concealed the particulars of his income, nor
furnished any inaccurate particulars thereof.

The Tribunal upheld the order of the Commissioner of
Income-tax (Appeals).

The Delhi High Court considered the question whether the
Assessing Officer had recorded a valid satisfaction for initiating penalty
proceedings u/s.271(1)(c) of the Act. Inter alia, relying upon a decision of
that Court in CIT v. Ram Commercial Enterprises Ltd., (2000) 246 ITR 568 (Delhi)
and noticing that Ram Commercial Enterprises had been approved by the Supreme
Court in Dilip N. Shroff v. Joint CIT, (2007) 291 ITR 519 (SC) and T. Ashok Pai
v. CIT, (2007) 292 ITR 11, held that from the reading of the assessment order,
it was not discernible as to why the AO chose to initiate proceedings against
the assessee and under which part of S. 271(1)(c). The High Court, therefore,
accepted the view of the Tribunal and the Commissioner of Income-tax (Appeals)
and dismissed the appeal of the Revenue with cost of Rs.5,000.

On an appeal, the Supreme Court held that a close look at S.
271(1)(c) and Explanation 1 appended thereto would show that in the course of
any proceedings under the Act, inter alia, if the Assessing Officer is satisfied
that a person has concealed the particulars of his income or furnished
inaccurate particulars of such income, such person may be directed to pay
penalty. The quantum of penalty is prescribed in clause (iii). Explanation 1,
appended to S. 271(1) provides that if that person fails to offer an explanation
or the explanation offered by such person is found to be false or the
explanation offered by him is not substantiated and he fails to prove that such
explanation is bona fide and that all the facts relating to the same and
material to the computation of his total income have been disclosed by him, for
the purposes of S. 271(1)(c), the amount added or disallowed in computing the
total income is deemed to represent the concealed income. The penalty spoken of
in S. 271(1)(c) is neither criminal nor quasi-criminal but a civil liability;
albeit a strict liability. Such liability being civil in nature, mens rea is not
essential.

The Supreme Court further held that insofar as the present
case was concerned, as noticed above, the High Court had relied upon its earlier
decision in Ram Commercial Enterprises Ltd. (2000) 246 ITR 568 (Delhi) which is
said to have been approved by the Supreme Court in Dilip N. Shroff (2007) 291
ITR 519. However, Dilip N. Shroff (2007) 291 ITR 519 was held to be not laying
down good law in Dharamendra Textile (2008) 306 ITR 277 (SC) and Dharmendra
Textile was explained by the Supreme Court in Rajasthan Spinning and Weaving
Mills (2009) 8 Scale 231. According to the Supreme Court the matter therefore
needed to be reconsidered by the High Court in the light of its decisions in
Dharmendra Textile (2008) 306 ITR 277 (SC) and Rajasthan Spinning and Weaving
Mills (2009) 8 Scale 231.

The Supreme Court therefore allowed the appeal and the
judgment of the High Court of Delhi was set aside. The matter was remitted back
to the High Court for fresh consideration and decision as indicated above.