Legal Correspondent

Only deliberate concealment will attract penalty

  • Concealment connotes criminal intention
  • Karnataka High Court verdict quashed

    New Delhi: A mere omission or negligence to disclose complete particulars of investments or income in income tax returns will not amount to concealment, the Supreme Court has held.

    "Concealment refers to a deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri, suggestio fasli [Suppression of the truth is the suggestion of a falsehood]," said a Bench consisting of Justices S.B. Sinha and Markandey Katju.

    The word `concealment' inherently carried with it the element of mens rea [criminal intention]. "Mere omission in the [income tax] return of an item of receipt does amount to neither concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances [are] found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon."

    Writing the judgment, Justice Sinha said that for a penalty under Section 271 (1) (iii) of the Income Tax Act to be imposed, "it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income."

    In the instant case, T. Ashok Pai of Bangalore, while filing his returns for 1985-86, omitted to furnish certain income particulars. Besides salary, he had shares of profit of a number of firms and he also earned a dividend and interest. On a query from the assessing authority, he said the omission was a bona fide mistake and he had no intention of concealing income.

    The Income Tax Appellate Tribunal accepted his contention. On appeal from the department, the Karnataka High Court held that the assessee was guilty of concealment of income.

    The apex court allowed Mr. Pai's appeal and set aside the impugned judgment.

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