Penalty under new section 271 of IT Act

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S.R. JAIN (Querist)
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10 January 2025 An NRI assessee did not file return.Notice u/s 148 issued in response to which return was filed and tax of Rs 99000 after deducting TDS
was paid.In assessment return was accepted in toto without any addition.Can penalty for concealment be levied? Please give reference of some case laws.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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11 January 2025 The Supreme Court's ruling in Dharmendra Textile Processors v. CIT (2008) 306 ITR 277 significantly altered the interpretation of Section 271(1)(c) of the Income Tax Act, particularly regarding the imposition of penalties for concealment of income.
The Supreme Court clarified that the penalty under Section 271(1)(c) is a civil liability rather than a criminal one. This means that the standard for imposing penalties is lower than that required for criminal prosecution, where mens rea (intent) is typically necessary. The court stated that willful concealment is not an essential ingredient for attracting civil liability under this section.
The ruling effectively overruled the earlier decision in Dilip N. Shroff, which had established that mens rea was necessary for imposing penalties under Section 271(1)(c). This shift indicates that penalties can be imposed even in cases where there is no deliberate intent to conceal income.
The court emphasized that the primary objective of Section 271(1)(c) is to remedy loss of revenue rather than to punish wrongdoing. This perspective aligns with the view that penalties should be seen as a tool for ensuring compliance and safeguarding tax revenues, rather than solely as punitive measures.