ORDER
SMT. P. K. AMMINI, J. M. :
This is an appeal by the assessee against the levy of penalty under s. 271(1)(c) of the IT Act, 1961, in respect of the asst. yr. 1988-89. The previous year of the assessee ended on 31st March, 1988. The assessee was employed as a driver in the Bharath Petroleum Corporation Ltd., Ernakulam. The assessee filed his return of income on 30th June, 1988, declaring an income of Rs. 23,130 and the Assessing Officer (AO) completed the assessment on 24th Nov., 1988, accepting the income returned by the assessee. The assessee got an ordinary Maruti car on 17th Dec., 1987, as an incentive lucky prize awarded to the investors for National Savings Scheme 1986, from the Government of Kerala. The cost of this car was Rs. 81,728.30. The assessee did not disclose the value of this car as his income. Hence, the AO invoked the provisions of s. 143(2)(b) of the Act and completed the assessment under s. 143(3) r/w s. 143(2)(b) on 27th June, 1990, bringing the amount of Rs. 81,728 to tax as income under the head Other sources. Subsequently the AO invoked the rectification proceedings under s. 154 of the Act and held that f. 1st April, 1987, a new s. 115BB has been inserted in the Act for taxing such winnings from lotteries at a flat rate of tax at 40%. Thus he calculated the tax at a flat rate of 40% on the income from lottery winnings. On appeal this was confirmed.
2. The AO also initiated penalty proceedings under s. 271(1)(c) of the Act, by issuing notice under s. 274 r/w s. 271 on 27th June, 1990. The main objection of the assessee was that he was under a bona fide belief that the lottery income in kind is not subject to tax in the hands of the winner, that if tax would have been deducted under the provisions of the Act by the appropriate authority there would not have been any avoidance of tax in this respect, that there was no conscious act on his part to conceal his income. It was further contended that under the definition of income under s. 2(24) of the Act, there would be some sort of income which is to be included with reference to the inclusive definition of income and as such the benefit arising from the lottery is not to be converted into money for want of an enabling provision in the Act. The assessee also cited examples in the provisions of s. 17(2), 28(iv) and 80-O of the IT Act, where there is enabling provision to include the value of any benefit derived.
3. According to the AO the definition of income included not only money payment but also the value of benefit or perquisite whether convertible into money or not. Sec. 115BB also says that winning from lotteries should be taxed at a flat rate of 40%. Therefore, he rejected the contention of the assessee and also relied on the decision of the Kerala High Court in the case of K. C. Suresh vs. Director of Lotteries (1993) 199 ITR 266 (Ker) wherein it is held that winnings from lotteries in kind are also to be considered as income holding that the definition of income included not only money payment but also the value of any benefit or perquisite whether convertible into money or not. It was also noticed by the AO that the assessee purchased a Deluxe Maruti car costing Rs. 1,14,833.60 instead of the lucky prize of ordinary Maruti car costing Rs. 81,828.30. The difference in the prize of Rs. 33,105.30 was paid by the assessee. Therefore, the value of the lucky prize has been converted into moneys worth and handed over to the assessee. The assessee has not mentioned about the winning from lottery in Part 1, page 2, item 5(a) of the IT return filed for asst. yr. 1988-89, i.e., column for winnings from lottery, etc. under s. 115BB of the Act. Thus, he held that if the assessee had no intention to wilfully conceal particulars of the above winnings, he would have shown the winnings in the above column and claimed exemption thereon. But for the information gathered by the intelligence wing of the Department, the above information would never have been detected. Accordingly, he levied a sum of Rs. 31,700 under s. 271(1)(c) of the Act. The assessee went in appeal before the Dy. CIT(A), but did not succeed. Hence, further appeal.
4. Having heard rival submissions we are of the opinion that the levy of penalty under s. 271(1)(c) of the Act is not sustainable in law. In this case the assessee is a winner of lucky prize of Maruti car by virtue of his participation in National Savings Scheme. In a case of levy of penalty under s. 271(1)(c) we have to see whether the assessee has consciously concealed or suppressed the particulars of income. In this case, the prize was announced and published on 8th March, 1987, in Indian Express a daily newspaper and thus this fact has become public knowledge. If the date of the announcement of the prize is taken as the criterion, the cash equivalent of the prize as income has accrued in the asst. yr. 1987-88. This cannot be assessed in the asst. yr. 1988-89. If the actual date of delivery of the car is taken as the criterion, the prize obtained by the assessee is also not assessable in the asst. yr. 1988-89. The date of invoice of Popular Vehicles & Services Ltd. bearing No. 2701-80025CD for the Maruti car and delivery of the same was on 21st April, 1988, in which case the income is assessable in the asst. yr. 1989-90 and not in the asst. yr. 1988-89, in relation to which the penalty has been levied.
5. Further whether the winning in kind from lottery would constitute income (Maruti car as a prize) was settled by the decision of the Kerala High Court in the case of K. C. Suresh vs. Director of Lotteries & Ors. (supra) only on 21st Feb., 1992. Therefore, there is force in the contention of Shri Kesavan that the assessee was under the bona fide impression that the Maruti car received by the assessee was in the nature of capital receipt. The assessee is not an educated person and he was employed as a driver in Bharat Petroleum Corporation Ltd. He depended on time department of his employer for filing his tax return. In the circumstances, we hold that the assessee had acted in good faith. Mens rea cannot be attributed to the conduct of the assessee.
6. In the result, the appeal is allowed.