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TMI Blog2009 (9) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... f facts of the case are that the assessee, a company incorporated on Cyprus, is an indirect wholly owned subsidiary of Precision Drilling Corporation, a corporation incorporated in the province of Alberta, Canada. The assessee company filed its return of income for the year under consideration on 31-10-2005 reporting total income under section 44BB amounting to Rs. 8,88,92,580. On 4-10-2006 the assessee company filed a revised return declaring a total income of Rs. 8,85,17,120. The case was selected for scrutiny and called for various documents and information to determine the total taxable income and tax liability of the assessee. The assessee complied with all notices issued by the Assessing Officer and provided all the information and do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion to conceal income or submit inaccurate particulars of income and this intention is not at all manifest in the assessee's case. So far as the question of imposition of penalty is concerned in respect of additions/disallowances that remained sustained after the order of the CIT(A) validity of imposition of penalty the provisions of section 271(1)(c) read with Explanation 1 thereto and various judicial pronounced have to be considered in this context. According to the assessee, the position regarding imposition of penalty under section 271(1)(c) read with Explanation 1 thereto as applicable with effect from 1-4-1976 is that penalty is to be imposed if the Assessing Officer is satisfied that the person has concealed the particulars of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f concealment or filing the inaccurate particulars of income does not arise. In view of the above, I am of the opinion that no penal action be taken if the full disclosure was made by the appellant in relation to the facts of the case. I am of the opinion that the penalty on this issue be deleted. In view of the above discussion, the penalty order under section 271(1)(c) of the Income-tax Act, 1961 passed by the Assessing Officer is hereby cancelled." 5. We have carefully considered the rival submissions and, perused the material on record along with the order of the tax authorities below. We have also gone through the case laws as cited before us. Section 271(1)(c) reads as under :-- "271. (1) If the Assessing Officer or the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) in respect of any fact relating to the computation of total income states that the amount added or disallowed in computing the total income of an assessee shall be deemed to be the income in respect of which particulars have been concealed. This deeming provision for concealment is not absolute one. Explanation 1 to section 271(1)(c) provides that an amount added or disallowed in computing the total income of a person falling under clause (A) or (B ) of Explanation 1 shall, for the purpose of section 271(1)(c), be deemed to represent the income in respect of which particulars had been concealed. Explanation 1 refers to two situations in which presumption of concealment created by Explanation 1 is available. The first situation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has discharged his onus and has rebutted the presumptions available to the revenue under Explanation 1 to section 271(1)(c). This explanation given by the assessee cannot be regarded to be a false explanation until and unless, in our opinion, the revenue proves that the explanation given by the assessee is false. In our opinion, no penalty under section 271(1)(c) can be imposed on the assessee. 7. In the case of National Textiles v. CIT [2001] 249 ITR 125 (Guj.) the question before the Hon'ble Gujarat High Court was about the levy of penalty under section 271(1)(c) in respect of the addition made under section 68 by recourse to Explanation 1 below section 271(1)(c). In this case the Hon'ble Gujarat High Court while holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Even in this view of the matter the Explanation alone cannot justify levy of penalty. Absence of proof acceptable to the Department cannot be equated with fraud or wilful default." In our opinion, even if the Tribunal has confirmed the addition does not mean that the assessee has concealed the income or has furnished inaccurate particulars of such income. When a disallowance is made merely on an estimate basis, the penalty cannot automatically be imposed. Similar view was taken by the Hon'ble Rajasthan High Court in the case of Shiv Lal Tak v. CIT [2001] 251 ITR 373. Similar view has been taken by the Hon'ble Jurisdictional High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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