Thomas Garbarek Vs. DCIT (ITAT Pune)- ITAT held that penalty under section 271(1)(c) of the Act should not be leviable where the assessees have been able to establish their bonafide and innocence. A mere omission or negligence would not constitute a deliberate act of suppression of income so as to trigger levy of penalty, unless there is a direct attempt to hide an income from the knowledge of the income tax authorities. In particular relevance to assessees is the observation of the Tribunal that ‘bona fide belief can also be substantiated by circumstantial evidence when possibility of documentary evidence cannot be expected’.
It is not necessary that bona fide belief should be substantiated with documentary evidence. The claim of bona fide belief can also be substantiated by circumstantial evidence, when possibility of documentary evidence cannot be expected. Since the tax was borne by the employer, there is no economic rationale as to why the assessees would indulge in under-reporting of income.There is no dispute that the assessees were assisted by well known tax advisors, and under a bona fide belief signed the tax returns.The tax laws had undergone various changes in the preceding years and the concept of grossing up being technical in nature can certainly be treated as out of the scope of common knowledge of assessees.The assessees did not dispute the contentions of the AO and paid the additional tax liability even for the years where the time limit for assessment proceedings had elapsed.As regards the applicability of the Supreme Court decision in the case of Dharmendra Textile Processors (above), the principles laid down therein needs to be examined based on facts of each case and conditions specified in the law in this regard and hence are not applicable in every case of non-payment or short payment of taxes. In this regard, reference was made to the case of U0I v. Rajasthan Spinning & Weaving  23 DTR 154 (SC). The Pune Tribunal in the case of Hans Christian Gaas5 had relied on various Supreme Court decisions and held that penalty was not leviable since income had inadvertently been under reported under a bona fide approach belief, and this was upheld by the Bombay High Court.
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