9911796707
TMI Blog2013 (12) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagpur. During the previous year relevant to the assessment year under consideration, the assessee-company was in the process of acquiring land, doing site development, construction of factory buildings, erecting plant and machinery and other related activities. The assessee had placed orders for supply and erection of various plant packages with various agencies including the contractors of national and international repute. Work orders were issued for execution and supply of respective items of plant and advances were paid as per terms of contract. Means of financing the project includes share money received from various individuals and bodies corporate, unsecured loans in the form of inter-corporate deposits from various companies, genuineness of which are not under dispute. The assessee-company raised secured loans from consortium of nineteen co-operative banks, Indian Renewable Energy Development Agency, New Delhi, Bank of Maharashtra and State Bank of Indore, etc. The assessee-company had issued work order for executing the supply and erection of plant to various contractors/companies. These companies executed earth work and site development, civil construction, etc., jobs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee have left the service and the information was required to be obtained from outside sources, i.e., Mehta group of companies. Whatever information was obtained from the seized material and Mehta group of companies was being continuously analysed with its own records. A number of transactions had taken place amongst various Mehta group of companies and, therefore, it was difficult to trace the ultimate net effect in the books of those companies. The assessee, therefore, took the initiative and revised the capital work-in-progress on lump sum basis. Thus, the assessee volunteered to rework the year-wise impact of these transactions on capital work-in-progress and accordingly intimated the Assessing Officer. The assessee accordingly for the assessment years 2001-02 to 200607 surrendered the following amount in the capital work-in-progress by reducing the amount of the capital work-in-progress amount for each of the assessment years respectively on December 23, 2008 and filed the revised return for the assessment year 2006-07 giving the effect of claiming the lower depreciation. In other assessment years there was no affect on the income/loss returned by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work-in-progress was not capitalised to respective asset, except the power plant during the assessment year 200607. The Assessing Officer, while completing the assessment for each of the assessment years, mentioned that "penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 is initiated separately".(English translation). Accordingly, show-cause notice dated December 31, 2008 was issued to the assessee for each of the assessment years to the following terms : "Sub : Show-cause notice under section 271(1)(c) of the Incometax Act, 1961-Regarding. Whereas in the course of proceedings before me for the assessment year 2001-02, it appears that you have concealed the particulars of your income or furnished inaccurate particulars of such income. You are requested to appear before me at 11.00 a.m. on February 17, 2009 and show cause why an order imposing a penalty on you should not be made under section 271 of the Income-tax Act, 1961. If you do not wish to avail of yourself of this opportunity of being heard in person or through an authorised representative, you may showcause in writing on or before the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) deleted the penalty in each of the assessment year by passing a consolidated order dated May 28, 2010 by holding as under : "19. I have gone through the findings of the Assessing Officer in his penalty orders, the remand report of the Assessing Officer as well as the detailed submissions of the appellant. The appellant-company was incorporated on April 10, 2000. During the assessment years 2001-02 to 2005-06, it was in the process of acquiring land, doing site development, construction of factory buildings, erecting plant and machineries and other related activities during the assessment years under consideration. The appellant-company had placed orders for supply and erection of various plant packages with various agencies including the contractors of national and international repute and work orders were issued for execution and supply of respective items of plant and advances were paid as per the terms of contract. The means of financing the project included share money received from various individuals and bodies corporate, unsecured loans in the form of inter-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial then made available it was felt that some of the items clubbed under capital work-in-progress may not be fully explainable to the satisfaction of the Assessing Officer. It was also mentioned that on careful analysis the capital work-in-progress appeared to be on higher side and hence the appellant was preparing a revised statement of income considering the seized material, found from Mehta group of companies, The appellant had stated that reduction in capital work-in-progress would result in reduction in claim of depreciation in the future years. These facts were brought to the notice of the Assessing Officer, prior to the commencement of the assessment proceedings. Subsequent to the search in response to notice under section 153A of the Act, returns were filed showing reduced figures of capital work-in-progress for these years. The Assessing Officer has accepted the returned loss in these cases in his assessment orders under section 153A read with section 143(3) of the Act, dated December 31, 2008, but has initiated and levied penalties under section 271(1)(c) of the Act on the amounts reduced from capital work-inprogress, which were surrendered by the appellant. 21. I hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o made due compliance of deduction of tax at source in respect of interest payments made by the assessee-company and also in respect of advances for construction activity of the project. The transactions having been duly disclosed, could not be said to have been hidden by the assessee from the Revenue authorities. The transaction of the assessee with Mehta group has no bearing on the taxable income of various years under consideration. It is on account of the assessee non-reconciliation of accounts with Mehta group the assessee, in order to buy peace of mind and avoid vexed litigation the assessee had agreed to revise the value of capital work-in-progress in the case of the assessee. It has also been not the case of the Assessing Officer that the assessee has claimed higher loss which stands reduced as a result of assessment. Perusal of assessment orders/penalty orders indicate that capital work-in-progress is revised on the basis of offer of the assessee alone and does not refer to any specific seized document. In view of the above there is no case for levy of penalty under section 271(1)(c) of the Income-tax Act, 1961. It is also evident from record that amount offered to reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings. In the case of CIT v. Suresh Chandra Mittal reported in [2000] 241 ITR 124 (MP) the assessee's returns were originally filed showing meagre income. Later on in pursuance of notice under section 148 of the Act revised returns were filed showing higher income to purchase peace of mind and to avoid litigation. The revised returns were accepted and regularised. On initiation of penalty proceedings and the levy of penalty under section 271(1)(c) of the Act the hon'ble Tribunal held that no penalty could be levied. The hon'ble High Court held that once the revised return was regularised and accepted without any objection, the declaration of income made by the assessee to buy peace and avoid litigation has to be treated as bona fide and the hon'ble Tribunal was justified in cancelling penalty. The hon'ble Supreme Court in an appeal against the said order CIT v. Suresh Chandra Mittal reported in [2001] 251 ITR 9 (SC) held that the assessee had originally filed showing meager income. When after action under section 132 of Income-tax Act, 1961 a notice under section 148 of the Act was served on the assessee, he filed revised return showing higher income. Eventually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction for the company but it also invested in the shares and provided the inter-corporate deposits to the assessee. Had there been no search, the assessee would have not come forward for the surrender of the capital work-in-progress. The reliance was placed on the decision of hon'ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) for the proposition of law that mens rea is not an essential ingredient for the levy of the penalty under section 271(1)(c). It is a civil liability. The Assessing Officer need not to prove intention of the assessee and the Assessing Officer has no discretion except to levy the penalty wherever the assessee has committed the default. Reliance was also placed on the decision of the Supreme Court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC). The learned authorised representative, on the other hand, relied on the order of the Commissioner of Income-tax (Appeals) and contended that the Commissioner of Income-tax (Appeals) has rightly deleted the penalty. It was contended that the Assessing Officer, while initiating the penalty, was not satisfied for which default he is initiatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer vide order dated December 31, 2008 resulting in nil demand thereby accepting the returned income. This proves that there is neither any concealment nor furnishing of inaccurate particulars of income. No satisfaction has been recorded. Reliance was placed on the decision of the hon'ble Kerala High Court in the case of CIT v. M. George and Brothers [1986] 160 ITR 511 (Ker) for the proposition of law that though the return did not show certain items of income, but there was simultaneous disclosure by the assessee, then in such a case it would be incorrect to levy penalty. Reliance was also placed on the decision hon'ble Supreme Court in the case of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) that penalty under section 271(1)(c) is not automatic and the factors enumerated in clauses (A) and (B) of Explanation 1 have to be satisfied. Referring to the decision of Dharamendra Textile Processors, it was pointed out that this decision nowhere states that the penalty is automatic. In this regard attention was drawn towards the decision of Income-tax Appellate Tribunal, Pune Bench in the case of Kanbay Software India Pvt. Ltd. v. Dy. CIT [2009] 122 TTJ (Pune) 721 and that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c)." This provision creates a legal fiction by which satisfaction of the Assessing Officer is deemed to have been recorded in case where an addition or disallowance is made by the Assessing Officer and a direction for initiation of the penalty proceedings is issued. The said provision is made effective retrospectively with effect from April 1, 1989. Fiction is created for a definite purpose and they are limited to the purpose for which they are created and cannot extend beyond their legitimate field. The legal fiction has to be interpreted strictly as it is intended to enlarge the meaning of a particular word or to include materials which otherwise may or may not fall within the main provision. If we interpret section 271(1B), it is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee then the Revenue has to show that the satisfaction of the Assessing Officer to the fact that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income. This is the condition precedent for initiating the penalty. Until and unless the satisfaction is arrived at in the course of any proceedings under the Act, the penalty cannot be levied. This view was taken by the hon'ble Supreme Court in the case of CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC) while constituting the provision of section 28(1)(c) of the Incometax Act, 1922 and reiterated in the case of D. M. Manasvi v. CIT [1972] 86 ITR 557 (SC). While constituting the provision of section 271(1)(c) of the Income-tax Act, the Full Bench of the hon'ble Punjab and Haryana High Court in the case of the CIT v. Mohinder Lal [1987] 168 ITR 101 (P&H), held that it is the satisfaction of the Income-tax Officer in the course of assessment proceedings regarding the concealment of income which constitutes the basis for levy of penalty. Subsequently, a question arises as to whether such satisfaction must be recorded in the assessment order. Divergent views had been expressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1972] 86 ITR 557 (SC), that power to impose penalty under section 271 of the Act depends upon the satisfaction of the Income-tax Officer in the course of the proceedings under the Act. It cannot be exercised if he is not satisfied and has not recorded his satisfaction about the existence of the conditions specified in clauses (a), (b) and (c) before the proceedings are concluded. It is true that mere absence of the words 'I am satisfied' may not be fatal but such a satisfaction must be spelt out from the order of the assessing authority as to the concealment of income or deliberately furnishing inaccurate particulars. In the absence of a clear finding as to the concealment of income or deliberately furnishing inaccurate particulars, the initiation of penalty proceedings will be without jurisdiction. In our opinion, the law is correctly laid down in Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi) and we are in respectful agreement with the same. The reference is answered accordingly.' In V. V. Projects and Investments Pvt. Ltd.'s case [2008] 300 ITR 40 (AP), a Division Bench of this court considered the decisions in Manasvi's case [1972] 86 ITR 557 (SC), Munish Iron St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s essential ingredient for imposing penalty under section 271(1)(c) of the Act. This was pointed out in Reliance Petroproducts Pvt. Ltd.'s case [2010] 322 ITR 158 (SC). In Reliance Petroproducts Pvt. Ltd.'s case [2010] 322 ITR 158 (SC), the Supreme Court also held that imposition of penalty is unwarranted when there is no finding in the assessment order that details supplied by the assessee were found to be false. This indicates that the view taken by the Delhi High Court in Ram Commercial Enterprises Ltd.'s case [2000] 246 ITR 568 (Delhi) which has been approved in Dilip N. Shroff's case [2007] 291 ITR 519 (SC) continues to be valid and this part of the judgment in Dilip N. Shroff's case [2007] 291 ITR 519 (SC) has not been overruled and continues to be good law. Moreover, the decision of the Delhi High Court in Ram Commercial Enterprises Ltd.'s case [2000] 246 ITR 568 (Delhi) was also followed by the same High Court in CIT v. M. K. Sharma [2008] 307 ITR 147 (Delhi) and SLP(C) No. 17591 of 2008 filed against the said decision was dismissed by the Supreme Court on July 18, 2008 (see [2008] 306 ITR (St.) 2). Moreover, the decision in Ram Commercial Enterprises was approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional validity of section 271(1B) provision was challenged before the hon'ble Delhi High Court in the cases of Ms. Madhushree and British Airways PLC v. Union of India [2009] 317 ITR 107 (Delhi). The scope of the amendment was explained at page 146 as under : "In our opinion, the impugned provision only provides that an order initiating penalty cannot be declared bad in law because it states the penalty proceedings are initiated, if otherwise it is discernible from record that the Assessing Officer has arrived at prima facie satisfaction for initiation of penalty proceedings. The issue is of discernibility of the 'satisfaction' arrived at by the Assessing Officer during the course of proceeding before him." "The presence of prima facie satisfaction for initiation of penalty proceedings was and remains a jurisdictional fact which cannot be wished away as the provision stands even today, i.e., post amendment." "If there is no material to initiate penalty proceedings ; an assessee will be entitled to recourse to a court of law." In view of the above judgment, it is clear that the satisfaction of the authority is still a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated but does not state for what default, whether for the concealment of particulars of income or for furnishing of inaccurate particulars of income is being initiated. Even the hon'ble Supreme Court in Varkey Chacko v. CIT [1993] 203 ITR 885 (SC) has held that a penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Therefore, in our opinion, the penalty proceedings on this basis also are bound to be quashed. Now coming to another argument, we noted that in this case the Assessing Officer ultimately levied the penalty under section 271(1)(c) of the Act for furnishing the false particulars in the return by the assessee. Section 271(1)(c) stipulates that penalty proceedings can be initiated on two charges : (i) concealment of particulars of income and (ii) furnishing of inaccurate particulars of income. This is settled law in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Guj) was applicable and the order of penalty could not be upheld by the Tribunal. The order was invalid." Both the charges are entirely different. The word "conceal" as per Webster Dictionary means : "to hide, withdraw or to remove from observation, cover or keep from sight, to keep secret, to avoid disclosing or divulging". That means particulars of income. On the other hand, where the particulars are disclosed but said disclosure is not correct, true or accurate, any good amount in furnishing of inaccurate particulars of income. Thrust of the Legislature is upon the particulars of income. In the case of Kanbay Software India Pvt. Ltd. v. Dy. CIT [2009] 122 TTJ (Pune) 721, it was held that the expression "particular" refers to facts, details or the information about someone or something. Thus, the details or information about the income will deal with actual details of income and cannot be extended to areas which are subjective, such as status of taxability of income, admissibility of deduction and interpretation of the law. The hon'ble Supreme Court accordingly in the case of CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) (the undersigned was the author of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. It may be a case of furnishing of the inaccurate particulars of investment but not furnishing of inaccurate particulars of the income. Merely the assessee has surrendered the part of the investment in capital work-in-progress, it will not convert surrender of such investment into an income. During the assessment years 2001-02 to 2005-06, this is a fact that the assessee has not claimed any depreciation as it is only the capital work-in-progress, which was in existence and the capital work-in-progress was not transferred to the respective assets, which are entitled to depreciation. On this basis itself also, we are of the firm view that no penalty can be imposed on the assessee under section 271(1)(c) of the Act. Even we noted that in this case, no penalty can be quantified under section 271(1)(c) even if it is held that the assessee has committed the default liable to penalty under section 271(1)(c). We have gone through the provisions of section 271(1)(c) of the Act, which states that if the Assessing Officer, in the course of any proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount is reducing the loss declared in the return or the second situation is that such amount converts the loss into income. The tax sought to be evaded shall mean the tax that could have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished. In the case of the assessee, the assessee has disclosed loss in the return filed for the assessment years 2002-03 to 2006-07. The Assessing Officer has accepted the said loss in the assessment framed by him. The loss declared in the return has not been reduced or loss has not been converted into income due to the investment made in the capital work-in-progress surrendered by the assessee. In view of Explanation 4(a), in our opinion, the tax sought to be evaded will be nil and both situations in clause (a) will not apply in the case of the assessee. Clause (b) of this Explanation applied to a case where Explanation 3 applies. Clause (c), in our opinion, is the residuary clause. In such case, it would be main difference between the tax on total income assessed and the tax on total income reduced by the amount in respect of which penalty is sought to be levied. The case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 ; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. Explanation.-For the removal of doubts, it is hereby declared that (i) save as otherwise provided in this section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section ; (ii) in an assessment or reassessment made in respect of an assessment year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich an appeal has been decided by the Commissioner (Appeals) is not a continuation of the proceedings of assessment. Thus while section 153A prescribes for assessment or reassessment of total income in search cases, section 153B prescribes the time limit for completion of assessment under section 153A. Section 153C relates to the cases where books of accounts or documents or assets seized under section 132 or requisition made under section 132A belong to a person other than a person in whose case search under section 132 or requisition under section 132A was made. Thus provisions of sections 153A, 153B and 153C are completed code for search assessments wherein search has been initiated after 31st May, 2003. The existence of the words "all other provisions of this Act shall apply to the assessment made under this section" in Explanation (i) of section 153A makes it clear that in search assessments, amongst others the provisions relating to penalty and prosecution will also be applicable. However, when normal assessment procedure covered by sections 139, 147, 148, 149, 151 and 153 has been completely excluded by operation of non-obstante clause "Notwithstanding anything contained" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of particulars of income or furnishing of the inaccurate particulars of income takes place when the return is filed. The concept of voluntary return of income may be important in penalty proceedings initiated in course of normal assessment proceedings made under section 143(3) or 147 but not under section 153A. From the above discussion it follows that where returned income filed under section 153A is accepted by the Assessing Officer, there will be no concealment of income or furnishing of inaccurate particulars of income and consequently penalty under section 271(1)(c) cannot be imposed. Section 271 does not talk of for the purpose of ascertaining the default whether of concealment of income or furnishing of inaccurate particulars of income, the return filed under section 139 or the return filed by the assessee will be considered not the return filed under section 153A of the Act. This satisfaction for concealment of particulars of income or furnishing of inaccurate particulars of income has to come from the assessment order passed in consequence of return filed under section 153A. The assessee in this case, in each of the assessment years, filed the return on December 23, 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature to look into the concealment of the particulars of the income or furnishing of inaccurate particulars of income with reference to the return filed under section 139(1), the Legislature would have provided so. On this basis also, in our opinion, no penalty can be imposed under section 271(1)(c) of the Act as there is no variation in the income returned in response to notice under section 153A vis-a-vis assessment passed under section 143(3) read with section 271(1)(c) of the Act. Since the learned Departmental representative has vehemently relied on the decision of the hon'ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors [2007] 295 ITR 244 (SC) we, therefore, have to refer that decision also. In the case of Dharamendra Textile Processors, we noted that the hon'ble Supreme Court has held that the penalty under section 271(1)(c) is civil liability (wilful concealment) and mens rea are not necessary ingredients for taxing the civil liability as is the case in the matter of prosecution under section 276 of the Income-tax Act. It has further been held that in that case that mens rea is not an essential ingredient for imposing the penalty. The hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as shown the investment in capital work-in-progress in the return filed under section 153A at a reduced figure as compared to the figure taken in the return filed prior to the search. Thus, returns were duly supported by the audited profit and loss account as well as the balance sheet, auditors' reports and certificate. The assessee has disclosed all the necessary particulars. The assessee subsequently revised the figures of investment in capital work-in-progress, which does not have any impact on the income assessed just to buy peace in response to notice issued under section 153A. This fact has not been disputed by the Assessing Officer. The Assessing Officer has not brought out any material on record, even though there had been search in the case of the assessee on the basis of which it can be said that the assessee has furnished inaccurate particulars of its income even though the onus to prove that the assessee has furnished the false particulars of income lies on the Department as Explanation 1 is not applicable as has been held by us in the earlier paragraphs. Therefore, in our opinion, the decision of hon'ble Supreme Court in the case of Dharamendra Textile Processors will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability would arise. In Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) ; [2007] 6 SCC 329, this court explained the terms 'concealment of income' and 'furnishing inaccurate particulars'. The court went on to hold therein that in order to attract the penalty under section 271(1)(c), mens rea was necessary, as according to the court, the word 'inaccurate' signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of section 271(1)(c) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term 'inaccurate particulars' was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the Assessing Officer must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; "We find it difficult to accept as correct the two judgments aforementioned. The Explanation to section 271(1)(c) is apart of section 271. When the Income-tax Officer or the Appellate Assistant Commissioner issues to an assessee a notice under section 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By reason of the Explanation, where the total income returned by the assessee is less than 80 per cent. of the total income assessed under section 143 or 144 or 147, reduced to the extent therein provided the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof unless he proves that the failure to return the correct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71(1)(c) was confirmed in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) in view of the Explanation to section 271(1)(c). This case is also concerned with the law prior to April 1, 1976. We have already held that in the case of the assessee Explanation is not applicable and even there is no evidence on record that the Assessing Officer has deducted the additional income not shown by the assessee and in consequence thereof the assessee has declared the additional income. The assessee surrendered the gift to be taken its income as the assessee expressed his inability to produce the concerned donor although the evidence were produce to discharge his onus entrusted under section 68 of the Income-tax Act. Therefore, we are of the view that the decision in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) will not assist the Revenue and will not be applicable to the facts of the case before us. We also noted that in the case of Union of India v. Dharamendra Textile Processors [2007] 295 ITR 244 (SC), the hon'ble apex court has held as under: "We are of the view that there is a conflict of opinions b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench takes a view to say that the penalty under the said clause is mandatory, then it would still be open to the assessee to challenge the virus of the said rule 96ZQ(5) and, therefore, in that event, the matter has to be kept before the Division Bench for passing appropriate orders." In the aforesaid case also, we also noted that the hon'ble apex court has held that the record before the Assessing Officer must speak of that the assessee has concealed the income. We have already held that in the case before us there is no material or evidence being brought on record or before us which may prove that the assessee has concealed the particulars of income and the Revenue has deducted the additional income except the allegation sent by ADI that the assessee has received accommodation entry. This judgment also in our opinion will not be applicable to the facts of the case before us. We have also gone through the decision of the hon'ble apex court in the case of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC), which affirmed the decision of the hon'ble Madhya Pradesh High Court reported as CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP), wherein the hon'ble High Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s burden again where the explanation offered by the assessee is found to be bona fide. It was further held that though it is true that the assessee had not surrendered at all and that he had done so on the persistent queries made by the Assessing Officer, but once the revised assessment was regularised by the Revenue and once the Assessing Authority had failed to take any objection in the matter, the declaration of income made by the assessee in his revised returns and his explanation that he had done so to buy peace with the Department and to come out of the vexed litigation could be treated as bona fide in the facts and circumstances of the case. Therefore, the Tribunal was justified in cancelling the penalty levied by the Assessing Officer and affirmed by the Commissioner of Income-tax (Appeals) in the facts and circumstances of the case. In our opinion, the case of the assessee is at a better footing than the case of Suresh Chandra Mittal. In the case before us the assessee has surrendered the investment in capital work-in-progress by reducing the value of capital work-inprogress which has the effect of lower claim of depreciation in the assessment years 2006-07 onwards. This w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the initial burden even after the insertion of Explanation 1 lay with the Department and as to whether the Department still had to prove mens rea, are different and, therefore, it may not be possible to suggest that the aforesaid two decisions of the Supreme Court conflicted with each other. In the case before us penalty has not been imposed by invoking the Explanation to section 271(1)(c). In case of Deputy Director of Income-tax v. Chirag Metal Rolling Mills Ltd. [2008] 305 ITR 29 (MP), the hon'ble Madhya Pradesh High Court has observed as under after considering aforesaid two decisions of hon'ble apex court (page 34) : "So far as Full Bench of the Kerala High Court, in the matter of CIT v. India Sea Foods [1996] 218 ITR 629 (Ker) [FB] and CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP) are concerned, are based on the law laid down by the hon'ble apex court in the matter of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 (SC). So far as K. P. Madhusudan's case [2001] 251 ITR 99 (SC) which was delivered on August 21, 2001 is concerned, in this case the hon'ble apex court has considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion." The combined reading of Explanation 1 to section 271(1)(c) of the Act and the verdict of hon'ble apex court in the matter of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 (SC) and K. P. Madhusudhanan [2001] 251 ITR 99 (SC) it is crystal clear that prior to Explanation 1 the position of law was if the assessee agrees for addition of his income to buy peace then it will not follow that agreed amount to be added was concealed income and the Revenue was required to prove the otherwise. Because of this view taken by the hon'ble apex court in the matter of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 (SC) the Explanation 1 to section 271(1)(c) was added to the Income-tax Act and after taking into consideration the Explanation, hon'ble apex court in the matter of K. P. Madhusudhanan [2001] 251 ITR 99 (SC) has laid down that no separate enquiry is necessary for imposing the penalty. However, from a plain reading of Explanation, it is evident that some sort of enquiry is necessary, therefore, the proceedings initiated by the Revenue for imposing the penalty under section 271(1)(c) of the Act shall be treated as proceedings and the assessee is at l ..... 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