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To levy penalty, AO has not to prove wilful attempt by assessee but onus is on assessee to prove bona fides
Where the assessee, being the amalgamated company, claimed that the period of 8 years available u/s 72A for set off of the unabsorbed investment allowance of the amalgamating company had to be counted from the date of amalgamation but the Tribunal rejected that stand and held that the period of 8 years had to be counted from the year of incurring the loss and in the penalty proceedings u/s 271(1)(c) the CIT (A) held that notwithstanding the view on merits, penalty could not be imposed because the claim was bona fide and there was nothing to suggest gross or wilful negligence or fraud by the assessee, HELD, reversing the order of the CIT (A) that:
(i) The claim of the assessee was patently wrong and such claim could not avoid penalty;
(ii) The judgement of the Supreme Court in UOI vs. Dharmendra Textile Processors 174 TM 571 fortifies the interpretation that where the assessee offers an explanation, the onus is on the assessee to substantiate the explanation or prove the bona fides and show that there is full disclosure of all the facts relating to the explanation. The AO is not obliged to prove that there was a wilful attempt by the assessee or that the explanation of the assessee is not bona fide;
(iii) 271(1)(c) has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability.
See Also: Supreme court decision in Dharmendra Textile Processors – Does it change the law on section 271 (1) (c). By J.P.Shah, Advocate Ahmedabad. (2008) 40 BCAJ. January 2009 .p 505
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