A Bench headed by Chief Justice S H Kapadia had earlier left it open for the government to decide whether it wanted to go ahead with the criminal prosecution of the firm even after it paid the penalty and was not seeking refund.
PwC had challenged the Calcutta High Courts order which held that the firm had failed to furnish its true and correct particulars of accounts while filing the returns. The High Court had also upheld the penalty imposed by the authorities at 100% of the tax alleged to be evaded.
... the penalty under that provision is a civil liability and wilful concealment is not an essential ingredient for attracting civil liability as in the matter of prosecution under section 276C (The Income Tax Act 1961 )... We also find that the mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities, the HC stated.
Stating that there was was no wilful concealment, PwC said that the penalty under Section 271 (1)(c) of the Act cannot be imposed if there was merely a bona fide human error on its employees part while preparing the return.
According to PwC, the HC failed to appreciate that the Income-Tax Appellate Tribunal erred in not deleting the penalty. The firm said that in the present case the matter was merely a human error and the Revenue had to establish a foolproof case for attracting penalty.
However, the revenue authorities stated that the assessee is a well known chartered accountants company and the director of the company had signed the return of income and, therefore, it was unusual to accept that such a reputed practicing firm and tax consultant would commit such mistake and would not detect the same for such a long time.