Commissioner of Income Tax Vs. Smt. Padma Devi Jain - Court Judgment

Excerpt:
head note: income tax penalty under s. 271(1)(c)--leviabilitybona fide explanation catch note: assessee claimed interest payment of rs. 7,19,164 to a company on outstanding bills--company later on issued a clarification regarding assessment year 1989-90 that interest of rs. 2,12,162 was credited in assessee's account--assessing officer made addition of rs. 2,12,162 and initiated penalty proceedings under section 271(1)(c) rejecting explanation of assessee that interest would be offered for taxation for ensuing assessment year 1991-92--commissioner (appeals) accepted explanation of assessee and concluded that return filed by assessee could not be treated as false--tribunal affirmed finding of commissioner (appeals) passing observation that there was no deliberateness or mes rea in assessee's action to treat return as false--since tribunal accepted explanation of assessee which was bona fide, therefore, it became futile to examine whether or not any element of deliberateness or mens rea in action of assessee was a pre-requisite to be satisfied to invite penalty proceeding. held: 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 commissioner (appeals) and 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 prerequisite to be satisfied to invite penalty proceedings. application: also to current assessment year decision: in favour of assessee in the madhya pradesh high court : indore bench b.a. khan & shambhoo singh. jj. counsel : s.k. pawnekar, for the petitioner: j w. mahajan, for the respondent - constitution of india 1055. article 141; [a.k. patnaik, c.j., dipak misra, abhay gohil, s. samvatsar, & s.k. gangele, jj] dismissal of slp arising from decision of high court whether binding precedent decision of division bench in rama and company v. state of madhya pradesh, [2007(ii) mpjr 229] overruled by full bench of same high court prior to delivery of decision of full bench order passed in division bench decision assailed in slp before supreme court dismissal of slp by short reasoned order, though declaration of law, but high court is bound to follow earlier decisions in field regard being had to concept of precedents as per law laid down by apex court and larger bench decision in jabalpur bus operators association, reported in [2003(1) mpjr 158]. court clarifies that dr. jaidev siddha v. jaiprakash siddha, 2007(2) mpjr (fb) 361; air 2007 mp 269 (fb) is not impliedly overruled in view of dismissal of slp articles 226 & 227; [a.k. patnaik, c.j., dipak misra, abhay gohil, s. samvatsar, & s.k. gangele, jj] power to issue writ under article 226 - [per majority] the high courts exercise original jurisdiction under article 226 of the constitution and supervisory jurisdiction and the power of superintendence under article 227 of the constitution. but, an eloquent and fertile one, a writ of certiorari is issued in exercise of original jurisdiction. whenever word supervisory has been used in the context of article 226 it is in contrast with the appellate or revisional jurisdiction. when a writ is issued under article 226 of the constitution in respect of courts or tribunals it is done in exercise of original jurisdiction and the parameters are different than article 227 of the constitution of india. it is worth noting that the power under article 227 was there in a different manner under the government of india act. power of superintendence is distinct from the exercise of power of revisional or supervisory jurisdiction which is a facet of the power of superintendence. the confusion occurs when one applies the principle of equivalence or equates the exercise of supervisory power and power of superintendence with original or supervisory jurisdiction. there is an acceptable nuance between the concept of jurisdiction and exercise of power by certain parameters. both do come within the fundamental concept of judicial review but the jurisdiction exercised is different when under article 226 a writ is issued it is issued in exercise of original jurisdiction whether against a tribunal or inferior courts or administrative authorities. the word superintendence has not been used in article 226 of the constitution. it is also evident that the term writs is not referred to in article 227. on a scrutiny of article 227 it would be crystal clear that power of superintendence conferred on the high courts is a power that is restricted to the courts and tribunal in relation to which it exercises jurisdiction. on the contrary the power conferred on the high court under article 226 is not constricted and confined to the courts and tribunals but it extends to any person or authority. be it noted, article 226 as has been engrafted in the constitution covers entirely a new area, a broader one in a larger spectrum. when the legislature has used the terms in exercise of original jurisdiction and supervisory jurisdiction it has to be understood that they are used in contradistinction in the constitutional context as has been interpreted by the apex court. the words of the section have to be understood to mean exercise of powers under article 226 of the constitution of india which is always original. -- m.p. samaj ke kamjor vargon ke krishi bhumi hadapne sambandhi kuchakron se paritran tatha mukti adhiniyam [3/1977]. section 2: writ appeal maintainability from order of single judge-when permissible held, maintainability of a writ appeal from an order of the learned single judge would depend upon many an aspect and cannot be put into a strait jacket formula. it cannot be stated with mathematical exactitude. it would depend upon the pleadings in the writ petition, nature of the order passed by the single judge, character and the contour of the order, directions issued, nomenclature given and the jurisdictional prospective in the constitutional context are to be perceived. it cannot be said in a hyper-technical manner that an order passed in a writ petition, if there is assail to the order emerging from the inferior tribunal or subordinate courts has to be treated all the time for all purposes to be under article 227 of the constitution of india. it would depend upon the real nature of the order passed by the learned single judge. the pleadings also assume immense significance. it would not be an over emphasis to state that an order in a writ petition can fit into the subtle contour of articles 226 and 227 of the constitution in a composite manner and they can co-inside, co-exist, overlap or imbricate. in this context it is apt to note that there may be cases where the single judge may feel disposed or inclined to issue a writ to do full and complete justice because it is to be borne in mind that article 226 of the constitution is fundamentally a repository and reservoir of justice based on equity and good conscience. it will depend upon factual matrix of each case. dr. jaidev siddha v. jaiprakash siddha, 2007(2) mpjr (fb) 361: air 2007 mp 269 (fb) is not impliedly overruled in view of dismissal of slp preferred against order reported in rama and company v. state of madhya pradesh [2007 (2) mpjr 229 (db) (mp)]. - 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 hon'ble 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 records 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? 3. it was further observed by him that where the assessee did not include any particular item in taxable income under bona fide belief, it would not be justified to condemn the return as false to invite 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 prerequisite to be satisfied to invite penalty proceedings.orderb. a. khan, j.revenue has filed this application under section 256(2) of income tax act for calling statement of the case from tribunal, indore bench on the following stated questions of law, arising out of tribunal order dt. 29th aug., 1997 :1. whether, on the facts and in the circumstances of the case, the hon'ble tribunal was justified in law in upholding canceliation of penalty of rs. 1, 1 ). 000 under section 271(1)(c).2. whether, on the facts and in the circumstance of the case, the hon'ble tribunal was justified in law in confirming hon 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 hon'ble 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 records 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?'2. it transpires that assessee had claimed interest payment of rs. 7,19,164 to escorts ltd. on the outstanding bills and delayed payments. she had filed a detailed chart of interest payment and three certificates from m/s escorts ltd. in support of her claim. however, m/s excorts ltd. later on issued a clarification regarding assessment year 1989-90 and on scrutiny it was found that out of the claimed amount, m/s escorts ltd. 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 p&l; a/c. it was explained by her that the interest amount would be offered for taxation for the ensuing assessment year1991-92. 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 commissioner (appeals) who vide detailed order dt. 3rd april, 1992, accepted her explanation and concluded that the return filed by the assessee could not be treated false in the facts and circumstances of the case. it was found by him that 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 assessing officer had come to know about the disputed overcharge interest amount.3. it was further observed by him that where the assessee did not include any particular item in taxable income under bona fide belief, it would not be justified to condemn the return as false to invite penalty.4. revenue took appeal against this to tribunal which affirmed the finding of commissioner (appeals). while doing so it made a passing observation that there was no deliberateness or mens rea in assessee's action to treat her return as false. revenue took objection to this and sought reference of the above stated questions to this court. tribunal rejected the application and in our view rightly.5. revenue counsel shri pawnekar submitted that after deletion of word 'deliberate' from s. 271(1)(c), tribunal could not have given a clean chit to the assessee by confirming the cancellation of penalty. reliance in this regard was placed on a full bench judgment of patna high court in cit v. nathu lal agarwala & sons : [1985]153itr292(patna) interpreting the amendment made in the explanation appended to s. 271(1)(c).6. 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 fac of this application and any effort to dig deep into it would eventually turn out to be totally academic. this is so because commissioner (appeals) and 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 prerequisite 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.

Judgment:
ORDERB. A. KHAN, J.

Revenue has filed this application under section 256(2) of Income Tax Act for calling statement of the case from Tribunal, Indore Bench on the following stated questions of law, arising out of Tribunal order dt. 29th Aug., 1997 :

1. Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal was justified in law in upholding cancelIation of penalty of Rs. 1, 1 ). 000 under section 271(1)(c).

2. Whether, on the facts and in the circumstance of the case, the Hon'ble Tribunal was justified in law in confirming Hon 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 Hon'ble 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 records 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?'

2. It transpires that assessee had claimed interest payment of Rs. 7,19,164 to Escorts Ltd. on the outstanding bills and delayed payments. She had filed a detailed chart of interest payment and three certificates from M/s Escorts Ltd. in support of her claim. However, M/s Excorts Ltd. later on issued a clarification regarding assessment year 1989-90 and on scrutiny it was found that out of the claimed amount, M/s Escorts Ltd. 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 P&L; a/c. It was explained by her that the interest amount would be offered for taxation for the ensuing assessment year1991-92. 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 Commissioner (Appeals) who vide detailed order dt. 3rd April, 1992, accepted her explanation and concluded that the return filed by the assessee could not be treated false in the facts and circumstances of the case. It was found by him that 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 assessing officer had come to know about the disputed overcharge interest amount.

3. It was further observed by him that where the assessee did not include any particular item in taxable income under bona fide belief, it would not be justified to condemn the return as false to invite penalty.

4. Revenue took appeal against this to Tribunal which affirmed the finding of Commissioner (Appeals). While doing so it made a passing observation that there was no deliberateness or mens rea in assessee's action to treat her return as false. Revenue took objection to this and sought reference of the above stated questions to this Court. Tribunal rejected the application and in our view rightly.

5. Revenue counsel Shri Pawnekar submitted that after deletion of word 'deliberate' from s. 271(1)(c), Tribunal could not have given a clean chit to the assessee by confirming the cancellation of penalty. Reliance in this regard was placed on a Full Bench judgment of Patna High Court in CIT v. Nathu Lal Agarwala & Sons : [1985]153ITR292(Patna) interpreting the amendment made in the explanation appended to s. 271(1)(c).

6. 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 fac of this application and any effort to dig deep into it would eventually turn out to be totally academic. This is so because Commissioner (Appeals) and 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 prerequisite 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.