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UOI vs. Dharmendra Textile 306 ITR 277 (SC) on 271 (1) (c) penalty distinguished
The assessee claimed set off of capital loss against profits of business, which was disallowed and penalty proceedings u/s 271 (1) (c) for ‘furnishing inaccurate particulars’ was imposed. The CIT (A) and ITAT deleted the penalty by holding that set off was wrongly claimed on account of counsel’s negligence and penalty was not leviable. The department argued before the High Court that even if the set-off of capital loss against business profits was by negligence or mistake, the fact remains that the particulars of income furnished were not correct and willful concealment not being an essential requirement for levy of penalty u/s 271(1)( c) as held by the Supreme Court in UOI vs. Dharmendra Textile Processors 306 ITR 277, penalty could not be deleted. HELD, rejecting the plea:
The judgment in Dharmendra Textile cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability u/s 276C and penalty u/s 271(1) ( c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, the concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake. In view of the finding that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax, penalty was not leviable.
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