Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 2001-02 - Whether before penalty can be imposed upon an assessee under section 271(1)(c), not only it has to be found as a question of fact that explanation offered by assessee is not bona fide, but it must also be found as a fact that assessee has not disclosed all facts which are material to computation of his income and if either of these two ingredients are missing, then penalty cannot be imposed upon assessee - Held, yes FACTS For the relevant assessment year, the assessee claimed 100 per cent deduction under section 80HHE in respect of the profits earned from rendering software services. During assessment proceedings, the Assessing Officer pointed out to the assessee that his claim of 100 per cent deduction under section 80HHE was not permissible and he would be entitled only to 80 per cent deduction. The assessee, on realizing the mistake, accepted the same. The Assessing Officer accordingly made assessment allowing the deduction at 80 per cent as against the claimed deduction of 100 per cent under section 80HHE. He also initiated penalty proceedings under section 271(1)(c) against the assessee. The assessee gave the explanation that he being a software professional was not well-versed with the intricacies of the Income-tax Act; and that he had relied upon the advice given by his chartered accountant, who had issued a certificate indicating that 100 per cent deduction could be granted under section 80HHE. The Assessing Officer did not accept the explanation offered by the assessee and held that the assessee had an intention to furnish inaccurate particulars and, therefore, levied penalty under section 271(1)(c) upon him. On appeal, the Commissioner (Appeals) found that the excess deduction had been claimed by the assessee due to the mistake of his consultant and ignorance of the law in force and it could be said to be a reasonable cause for committing the said mistake. He, therefore, deleted the penalty levied upon the assessee. On the revenue's appeal, the Tribunal upheld the order of the Commissioner (Appeals), holding that all primary facts were…

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