No mensrea required for levy of penalty for concealment- Land mark decision of Supreme court.

When number of tax payers is mounting day by day, increased emphasis is placed naturally on voluntary compliance. Effective compliance cannot be expected unless the tax evasion is dealt sternly. In this back ground, the provision for levy of penalty is common in any taxing statute.

As we all know, up to 9-9-1986, the revenue was required to establish mensrea for levy of penalty. Subsequently in view of the amendment of law,it is for the assessee to establish that there was no mensrea in his actions though they led to concealment of income or furnishing of incorrect particulars of income.

The issue of existence of mens rea for levy of penalty came up for judicial scrutiny several times. In Dilip Shroff v JCIT Mumbai 291 ITR 519(SC), the Apex court held that the “ Both concealment and furnishing of inaccurate particulars refer to deliberate acts on the part of the assessee” . Similar was the decision in T. Ashok Pai v CIT 292 ITR 11 (SC), where in it was held that “ The word “inaccurate” in the context of levying penalty under section 271(1)(c) signifies a deliberate omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars” .In view of these decisions, the onus bounced back on the revenue to prove that the assessee has deliberately concealed particulars of income.

In view of this decision the issue of the issue of existence of mensrea for levy of penalty has now been dispensed with. Once the concealment is established in terms of explanations below section 2171(1)(c),the penalty is leviable automatically. It is not out of context to mention here that the benefit of reasonable cause as per section 273B, is also not applicable for sections 271(1)(c), 271(1)(d) [Concealment or furnishing inaccurate particulars of Fringe benefits] and 271AAA [ un accounted income found during search].