We have heard both the sides in detail. Thrust given by the C1T(A) on the mens rea reflected in the conduct of the assessee does not survive with usual force, since the judgment of the Hon’ble Supreme Court in the case of Union of India & Others Vs. Dharmendra Textiles Processors & Ors., 306 1TR 277. The Supreme Court has held in the said case that wilful concealment is not essential for attracting civil liability of penalty under Section 271(1 )(c) of the Act. The other side of the coin is that penally cannot be imposed on an assessee only on the ground of mens rea. It is essential on the part of the Revenue authorities as well, to establish that there was furnishing of inaccurate particulars of income and/ or concealment of income. Therefore, apart from examining the Doctrine of Mens Rea, it is very essential to appreciate the facts and circumstances of the case. In this case, even though the assessee has claimed deduction of bonus in violation of Section 43B, the assessee has paid the bonus amount subsequently in the ensuing assessment year, which in turn shows that the claim/computation was not misleading or malicious. In view of the method of accounting employed by the assessee, the liability to pay the bonus has been accrued and therefore it was necessary for the assessee to provide in its account the corresponding amount to satisfy the said liability of expenditure. Therefore, treating the said expenditure in the profit and loss account which is a compilation from the ledger accounts of the assessee is a legitimate accounting treatment. The assessee cannot be held to be gone wrong on that point. Now the deviation starts from the computation of income made by the assesses for the purpose of filing return of income. When the profit and loss account has been prepared in accordance with the accounting practice followed by the assessee, there cannot be a case against the assessee that inaccurate particulars have been tiled by the assessee. The gravity of the mistake is to be confined to the computation of taxable income.
6. The incurring of the expenditure and non- deductibility of certain expenditure in the light of Section 43B are of matters which require adjustments, assessment after assessment. Only for the reason that the assessee has claimed the expenditure on the basis of the accounts does not mean that the AC) would straight away allow that deduction The present cases are testimony to the above. The AO has himself noticed that the claim of deduction was not proper lis payments were not made. The details regarding the liability towards bonus as per the accounts of the assessee and the claim of deduction on the basis of payment are all discernible if one examines a block of assessment years. When this treatment of section 43B is recurring a feature in assessments, it is necessary to examine a block of assessment years to understand whether the assessee has made any attempt to conceal its income or not. On the basis of just an individual assessment year, if one attempts to make out a case of concealment, without considering the actual payments made in the subsequent years, such attempt would be always premature. There lore, in the facts and circumstances of the case, we find that the circumstances as assumed by the assessing authority, arc not ripe enough to levy penalty on the assessee under Section 271(1)(c) of the Act. Reliance placed by the CIT(A) on the concept of mens rea against the assessee is also untenable in view of the judgement of the Honourable Supreme Court in the case of Dharmendra Textile.
7. Therefore, in the light of the factual circumstances and legal features explained above, we are of the considered view that these penalties are not justified. Accordingly, penalties are deleted.