“(i) The deduction claimed by the assessee was legitimate
and bona fide in terms of the conflicting determination of law on the
proposition in question. The categorical finding at the hands of the
Tribunal in its order was that the assessee had disclosed the entire facts
without having concealed any income. There was no allegation against the
assessee that it had furnished inaccurate particulars of income. The
determination of the Tribunal had not been controverted even in the grounds
raised in the appeal. The assessee was guilty of neither of the two
conditions. Therefore, in the absence of the two pre-requisites postulated
u/s.271(1)(c) it was not open to the Revenue to inflict any penalty on the
assessee.
(ii) The second contention advanced by the appallent-Revenue
was that the impugned order passed by the Income-tax Appellate Tribunal
deleting the penalty imposed on the respondent-assessee u/s.271(1)(c) of the
Act was not sustainable in law because of the clear judgment in UOI v.
Dharmendra Textile Processors, (2008) 306 ITR 277. According to the
learned counsel for the appellant-Revenue, the entire income which remained
undisclosed, ‘with or without’ any conscious act of the assessee was liable
to penal action. It is submitted by the learned counsel for the
appellant-Revenue that the concept of law with regard to levy of penalty has
drastically changed in view of the said judgment, inasmuch as now penalty
can be levied even when an assessee claims deduction or exemption by
disclosing the correct particulars of its income. According to the learned
counsel, if an addition is made in quantum proceedings by the Revenue
authorities, which addition attains finality, an assessee per se
becomes liable for penal action u/s.271(1)(c) of the Act. It is the vehement
contention of the learned counsel for the appellant-Revenue that a penalty
automatically becomes leviable against the respondent-assessee u/s.271(1)(c)
of the Act, after the finalisation of quantum proceedings. In this behalf,
it is also pointed out that in view of the judgment of the Supreme Court,
referred to above, the dichotomy between penalty proceedings and assessment
proceedings stands completely obliterated.
(iii) It is also essential for us to notice, while
dealing with the second submission advanced by the learned counsel for the
appellant-Revenue, that the issue which arose for determination before the
Supreme Court in UOI v. Dharmendra Textile Processors (supra)
was whether u/s.11AC inserted in the Central Excise Act, 1944, by the
Finance Act, 1996, penalty for evasion of payment of tax had to be
mandatorily levied, in case of short of levy or non-levy of duty under the
Central Excise Act, 1944, irrespective of the fact whether it was an
intentional or innocent omission. In other words, the Apex Court was
examining a proposition whether mens rea was an essential ingredient
before penalty u/s.11AC of the Central Excise Act, 1944, could be levied. In
view of the factual position noticed herein above, the issue of mens rea
does not arise in the present controversy because the ingredients, before
any penalty can be imposed on an assessee u/s.271(1)(c) of the Act, were not
made out in the instant case as has been concluded in the foregoing
paragraph. Thus viewed, the judgment relied upon by the learned counsel for
the appellant-Revenue is, besides being a judgment under a different
legislative enactment, is totally inapplicable to the facts and
circumstances of this case. Accordingly, we find no merit even in the second
contention advanced by the learned counsel for the appellant-Revenue.”
