9911796707
TMI Blog2013 (12) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 - Decided against Revenue. - IT APPEAL NOS. 150 TO 155 (NAG.) OF 2010 - - - Dated:- 21-12-2012 - Order P. K. Bansal (Accountant Member).- All these appeals filed by the Revenue since involve common issue in all the assessment years, these are being disposed of by this common order for the sake of convenience. All these appeals are against the consolidated order of the Commissioner of Income-tax (Appeals) dated May 28, 2010 by which the Commissioner of Income-tax (Appeals) has deleted the penalty imposed under section 271(1)(c) of the Act by the Assessing Officer. In all these appeals, the Revenue has raised common grounds of appeal against the deletion of penalty. The brief facts of the case are that there has been search in the case of the assessee along with Mehta Group under section 132 of the Act on August 23, 2006. The assessee is a public limited company, incorporated under the Companies Act, 1956 on April 20, 2000 for settin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he execution of the work. Few companies belonging to Mehta Group made investments in the shares of the assessee-company and had also given inter-corporate deposits. Simultaneous search operation was carried out on the assessee-company along with Mehta Group under section 132 of the Income-tax Act on August 23, 2006. Notices under section 153A of the Income-tax Act were received by the assessee-company for the assessment year 2001-02 to assessment year 2006-07 on March 23, 2007. The assessee submitted the reply on April 23, 2007 and it was submitted that on perusal of the seized material then made available, it was felt that some of the items clubbed under capital work-in-progress were not properly accounted for. The assessee is carrying on the analysis of the capital workin-progress and is preparing a revised statement of income considering the seized material found from the Mehta group of companies. The reduction of the capital work-in-progress would result in reduction in claim of depreciation in future year when the business is set-up and accordingly the assessee requested more time for filing the return under section 153A and to continue assessment proceedings on the basis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 139(1) may be treated as return filed in response to notice under section 153A of the Act The assessment orders under section 153A read with section 143(3) of the Act for all these assessment years were passed on December 31, 2008 creating nil demand of tax. The details of returned income in response to notice under section 153A as well as income assessed in each of the assessment year is given as under : Assessment year Returned income Assessed income Tax 2001-02 Nil Nil Nil 2002-03 ( )2,81,545 ( )2,81,545 Nil 2003-04 ( )2,65,464 ( )2,65,464 Nil 2004-05 ( )83,122 ( )83,122 Nil 1,02,848 (under section 115JB) 1,02,848 Nil 2005-06 ( )2,13,036 ( )2,13,036 Nil In the assessment year 2006-07, originally return was filed showing a loss of Rs. 16,86,25,367 while the return under section 153A was filed on December 23, 2008 reducing the loss to Rs. 15,66,37,622 due to less claim of depreciation on the revised figures of capital work-in-progress as capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gress when the assessee got the opportunity to learn about certain information out of the material seized from premises of Mehta group. The notice was received by the assessee only on February 7, 2008. The assessee surrendered certain amount of the capital work-inprogress much before the initiation of the assessment proceedings and the surrender is not the outcome of the finding of the Assessing Officer during the assessment proceedings. No material was found during the course of assessment proceedings or search on which basis the Assessing Officer could have held that the assessee has concealed the particulars or furnished inaccurate particulars of income. The assessee relied on the decision of the hon'ble Supreme Court in the case of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 (SC) for the proposition that the assessee agreeing for the addition does not follow that the amount agreed to be added as income is correct income. There may be hundred and one reasons for such additions when the assessee realises the true position, it does not dispute certain additions but that does not mean that the assessee has filed the inaccurate particulars. Reliance was also placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant-company incurred various expenses in the normal course of business throughout the various previous years during which work of construction and erection was going on. The expenses included the interest paid by the appellant on secured loans as well as unsecured loans while making payment of interest on inter-corporate deposits (ICDs) tax was deducted at source and deposited into Government treasury. All interest and expenses were clubbed and shown under the head capital work-in-progress. The advances paid by the appellant-company to various contractors and sub-contractors for executing the work were also clubbed and shown under capital work-in-progress, in the balance sheet, with a proper disclosure by way of a statement in notes on accounts. Few companies belonging to Mehta group also did the work of supply and erection. Advances were paid to the Mehta group companies for execution of work. 20. The company was incorporated for setting up of an integrated plant for manufacturing sugar, power, ethanol, etc. The commercial production of the entire projects were to start from December, 2006 onwards, but crushing of sugarcane started during the assessment year 2006-07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduced the same to buy peace of mind and avoid vexed litigation. In fact in the case of the assessee all advances given to Mehta group of companies were through proper banking channel and was duly recorded in the books of account of assessee. In the case of Mehta group of companies in search conducted certain transactions with the assessee-company could not be fully reconciled and therefore could not be explained by the assessee. The assessee-company has given advances as well as paid interest to Mehta group of companies and such amounts paid have not been claimed as revenue expenditure in any of the assessment years for which penalty under section 271(1)(c) of the Act has been levied in the case of the assessee. In fact in the case of the assessee up to the assessment year 2005-06 as production of sugar has not commenced and therefore there is no question of computing income from business, to which the various advances/ interest payment made to Mehta group of companies relates. The amount of advances/interest have not been claimed as expenditure in the return of income of the assessee and the aforesaid sums not being assessable as business income at the hands of the assessee, hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 271(1)(c) of the Income-tax Act, 1961 is exigible. In the case of the assessee the Assessing Officer has not established that the assessee has concealed income or furnished inaccurate particulars of income in respect of income or loss to be computed for the previous years under consideration. In view of the above there is no case for imposition of penalty under section 271(1)(c) of the Act in the case of the assessee. The perusal of orders imposing penalty and assessment orders for all the years clearly indicate that it is a mere offer of the assessee to reduce the value of capital work-inprogress, which is accepted by the Assessing Officer. The reduction in capital work-in-progress was made in order to buy peace and avoid vexed litigation. 22. The appellant has submitted various case laws in his support. The ratio of these citations support the case of the appellant. In a given case and on consideration of facts and circumstances of the case the penalty may or may not be exigible. In this regard reliance is placed on the ratio of the decision of the hon'ble apex court in the case of Hindustan Steel Ltd. v. State of Orissa reported in [1972] 83 ITR 26 (SC). It was held in CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the reduction in capital work-in-progress is offered to buy peace of mind and to avoid vexed litigation. The income as shown in the returns are accepted by the Assessing Officer without any objection and any variation as are evident from the assessment orders of the Assessing Officer. The ratio laid down by the hon'ble apex court in the case of CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC) fully supports the case of the assessee. 24. Thus, considering the totality of facts and circumstances of the case and considering the ratio laid down by various courts, l am of the considered opinion that no penalty is exigible under section 271(1)(c) of the Act for the assessment years 2001-02 to 2006-07 and hence, the Assessing Officer is not justified in levying penalties in this case. Accordingly the penalties levied for the assessment years 2001-02 to 2006-07 by the Assessing Officer are hereby cancelled." The learned Departmental representative vehemently contended that the Commissioner of Income-tax (Appeals) was not correct in law in deleting the penalty in each of the assessment year. This is a clear cut case where the assessee has furnished inaccurate particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law that even after insertion of section 271(1B), the Assessing Officer has to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed the particulars of income or submitted inaccurate particulars of income. No such satisfaction has been arrived at for initiating the proceedings under section 271(1)(c) of the Act. Even otherwise also, it is a case where no seized material is available with the Assessing Officer. The assessee voluntarily filed the reply on April 23, 2007 that some of the items clubbed under the capital work-in-progress may not be fully explained to the satisfaction of the Assessing Officer. The capital work-in-progress appears on higher side considering the seized material found from the Mehta group of companies. No material proving the undisclosed income was found in the case of the assessee. The assessee accordingly reduced the capital work-in-progress just to lie in peace. Even no material found in the case of Mehta group is brought on record. No proceedings under section 153C was initiated. The source of expenditure being incurred on the capital work-in-progress is not disputed by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urned income for the assessment years 2001-02 to 2005-06 was not affected even after considering the surrender. Hence in the opinion of the assessee, filing of the return revising the income as originally filed was not warranted for assessment years 2001-02 to 2005-06. Alternatively, by referring to Explanation 4 read with section 271(1)(c), it was pointed out that the penalty has been levied on the amount of tax sought to be evaded by reason of concealment of particulars of income or furnishing of inaccurate particulars of the income. Explanation 4 defines the tax sought to be evaded. Neither clause (A), (B) or (C) of this Explanation is applicable in the case of the assessee. The surrender made by the assessee in reducing the capital work-inprogress in the assessment years 2001-02 to 2005-06 does not reduce the loss declared in the return or convert that loss into income. The loss or income assessed in each of the assessment year, remains the same. Thus, there is no tax which remains evaded and, therefore, there cannot be any penalty on this basis also. We have carefully considered the rival submissions and perused the material available on record along with various case laws b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the satisfaction during the course of assessment proceeding is not necessary. In the case of the assessee, we noted that there is a direction that the penalty proceedings under section 271(1)(c) is separately initiated. Now the question arises whether this direction will tantamount to be the satisfaction recorded by the Assessing Officer for the concealment of the particulars of income or furnishing of inaccurate particulars of income. This is undisputed fact that in the case of the assessee the assessments have been framed by the Assessing Officer at the same income or loss at which the assessee has filed the return in pursuance to the notice issued under section 153A. The Assessing Officer has not made any addition or disallowance while computing the total income or loss of the assessee. In our opinion, section 271(1B) will not apply in the case of the assessee and the Assessing Officer is bound to record the satisfaction for the concealment of the particulars of income or furnishing of inaccurate particulars of income. We have gone through the assessment order for each of the assessment year and we find that in the assessment order, anything which may designate that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Dajibhai Kanjibhai [1991] 189 ITR 41 (Bom) ; (9) CIT v. Rampur Engineering Co. Ltd. [2009] 309 ITR 143 (Delhi)[FB] ; and (10) V. V. Projects and Investments Pvt. Ltd. v. Deputy CIT [2008] 300 ITR 40 (AP). Thus, the jurisdictional High Court has also taken the similar view in the case of CIT v. Dajibhai Kanjibhai [1991] 189 ITR 41 (Bom) relying on the decision of the hon'ble Supreme Court in the case of CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC) as under (headnote of 189 ITR) : "The power to impose penalty under section 271(1)(c) of the Income-tax Act, 1961, depends upon the satisfaction of the Income Tax Officer in the course of the assessment 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) of section 271(1) before the assessment proceedings are concluded." The hon'ble Andhra Pradesh High Court in the case of Chennakesava Pharmaceuticals v. CIT [2012] 349 ITR 196 (AP) has observed as under: "In Rampur Engineering Co. Ltd.'s case [2009] 309 ITR 143 (Delhi)[FB], a Full Bench of the Delhi High Court considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has concealed his income or has deliberately furnished inaccurate particulars thereof is essentially a finding of fact which has to be spelt out by way of recording the satisfaction of the Assessing Officer was required under section 271(1) of the Act. Therefore, in the absence of such a finding in the assessment order no penalty proceedings can be initiated.' It rejected the contention of the Revenue that the penalty proceedings are independent and it is sufficient if the satisfaction is recorded in the order levying penalty. It also referred to Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) and noted that the Supreme Court in that case had held that the order imposing penalty under section 271(1)(c) being penal in nature, the rule of strict construction shall apply." In Dilip N. Shroff's case [2007] 291 ITR 519 (SC), the Supreme Court approved the judgment in Ram Commercial Enterprises Ltd.'s case [2000] 246 ITR 568 (Delhi) and also held that section 271(1)(c) being a penal provision must be strictly construed and that mens rea is necessary ingredient for penalty under section 271(1)(c) of the Act But, in Union of India v. Dharamendra Textile Processors [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings, i.e., in the assessment order is the foundation and backbone of initiating the penalty proceedings under section 271(1)(c). To overrule these decisions, section 271(1B) inserted by the Finance Act, 2008, but we have already held in the preceding paras that this section is not applicable on the facts and circumstances of the case. Applying the above principle and the fact that the provision of section 271(1B) is not applicable in the case of the assessee. The Assessing Officer in this case should have recorded his satisfaction in the assessment order that the assessee had either concealed the income or furnished the inaccurate particulars of the income in his return before proceeding further. We notice that in each of the assessment years, the Assessing Officer, in the assessment order passed under section 143(3) read with section 153A, has not recorded any satisfaction but has simply mentioned that the penalty proceedings under section 271(1)(c) has been initiated separately (English translation). Nowhere the Assessing Officer noted in the Assessing Officer his satisfaction that there was furnishing of inaccurate particulars of income by the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of capital workin-progress but it did not have any impact on the income of the assessee so far it relates to the assessment years 2001-02 to 2005-06. The Assessing Officer observed, while framing the assessment, that penalty proceedings under section 271(1)(c) of the Income-tax Act is separately initiated but it does not show how it affects the concealment of the particulars of income of the assessee or furnishing of the inaccurate particulars of the income. In fact, neither the returned income nor the assessed income is being affected by the reduction of the amount of the capital work-in-progress as surrendered by the assessee. Concealment of particulars of income or furnishing of inaccurate particulars of such income, both are the different charges. The preamble of section 271(1)(c) clearly states that if the Assessing Officer, in the course of any proceedings under this Act, is not satisfied that any person has concealed the particulars of the income or furnished inaccurate particulars of such income, the satisfaction, therefore, in our opinion, must be related either with the concealment of the particulars of income of the assessee or furnishing of inaccurate particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e penalty on the assessee for giving false information in the income-tax return neither for concealment of particulars of income nor for furnishing inaccurate particulars of income. In our opinion, it is incumbent on the Assessing Officer to mention whether the penalty is levied for concealment of income or for furnishing of inaccurate particulars of income. In the absence of specific charge, the order would be bad in law. Section 271(1)(c) does not talk of levy of the penalty for giving false information in the return. The Assessing Officer levied penalty entirely for a different charge. Our view that there must be specific charge is duly supported by the decision of the hon'ble Gujarat High Court in the case of CIT v. Manu Engineering Works [1980] 122 ITR 306 (Guj), New Sorathia Engineering Co. [2006] 282 ITR 642 (Guj), Padma Ram Bharali [1977] 110 ITR 54 (Gauhati) on this basis itself the orders were held to be bad in law. The Gujarat High Court in the case of New Sorathia Engineering Co. [2006] 282 ITR 642 (Guj), held as under (headnote) : "It is incumbent upon the assessing officer to state whether the penalty was being levied for concealment of particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, therefore, no question of applicability of Explanation 1 arises. The charge in the penalty order against the assessee is for furnishing the false particulars. In the case of furnishing of the inaccurate particulars of income, in our opinion, since the deeming provision given under Explanation 1 is not applicable, the onus is on the Revenue to prove that the assessee has filed the false particulars of income in the return filed. In the return filed in response to notice issued under section 153A, this a fact there is no filing of inaccurate particulars and no addition/disallowance has been made by the Assessing Officer while making assessment under section 143(3) read with section 153A. Even, otherwise, in the case of the assessee, we noted that the assessee has surrendered the investment made in capital work-in-progress. Source of the investment is not disputed by the Revenue. It is not the case of the Revenue that the assessee was not having the sufficient income to invest in the capital work-in-progress or investment shown in capital work-in progress is made out of undisclosed income. Once source of the investment is not disputed and the assessee has sufficient source to inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Explanation 4 defines the expression "the amount of tax sought to be evaded". It contains three clauses, which are applicable in different situations. These clauses are reproduced as under : "(a) in any case where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income ; (b) in any case to which Explanation 3 applies, means the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148 ; (c) in any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished." Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where the assessee has submitted the return under section 153A showing a particular income and the assessment has been framed by the Assessing Officer on the same income as returned without any variation. The preamble of section 271(1) states that if the Assessing Officer, in the course of any proceeding under this Act, is satisfied that any person has concealed the particulars of income or furnished inaccurate particulars of such income, he may direct such person to pay the penalty. The concealment of the particulars of income or furnishing of particulars of inaccurate income is always with reference to the return filed by the assessee. Section 153A was inserted into statute with effect from 1st June, 2003 by the Finance Act, 2003 which reads as under : "153A. Not withstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall (a) issue notice to such person requiring him to furnish within such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six assessment years for assessment or reassessment of total income. The second proviso to section 153A provides that such notice will have the effect of abating all the pending assessment or reassessment proceedings, so as to avoid multiplicity of proceedings, which was a feature of block assessment the hon'ble Allahabad High Court in the case CIT (Central), Kanpur v. Smt. Shaila Agarwal [2012] 346 ITR 130 (All) ; [2011] 16 Taxman.com 232 (All) has held that the word "abatement" is referable to something, which is pending alive, or is subject to deduction. The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/suit ; abatement of legacies ; abatement of nuisance ; and all actions for such nature, which have the pendency or continuance. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof. The word "pending" occurring in the second proviso to section 153A of the Act, is also significant. It is qualified by the words "on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 153A, the original return of income filed under section 139 cannot be considered. Further in case of search initiated after June 1, 2003 a return of income is always filed on issue of notice under section 153A in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made in the prescribed form and verified in the prescribed manner. The Assessing Officer requires the assessee to set forth such other particulars as may be prescribed in these returns. This section also states that all the provisions of this Act, as are applicable to a return to be furnished under section 139, will apply to this return. In view of this, the Assessing Officer has to frame an assessment on the basis of the return filed under section 153A. As has been held above, the penalty under section 271(1)(c) is imposable when there is variation in assessed and returned income. If there is no variation, there will be no concealment or furnishing of inaccurate particulars of income. When there is no concealment or furnishing of inaccurate particulars of income, question of levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer in the return filed by the assessee under section 153A, in our opinion, in this case it cannot be said that the assessee has furnished the false particulars. Section 271(1)(c) does not authorise the Assessing Officer to compare the return filed under section 139(1) and under section 153A and compare the difference in the particulars of income in both the returns to treat such difference to be the false particulars of income. The fault has to be seen with the return filed by the assessee when an assessment under section 143(3) read with section 153A is made with reference to the return filed under section 153A and when the penalty proceedings is initiated in the order passed under section 143(3) read with section 153A, this will also relate to the satisfaction of the assessee with reference to the return filed under section 153A. Our aforesaid view is also strengthened in view of the Explanation 5 given under section 271(1)(c) of the Act. This Explanation is applicable in the case of the search taken place before June 1, 2007 and the assessee is found to be the owner of any money, billion, jewellery or any other valuable, article or thing. This Explanation is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the assessment proceedings and, therefore, if any addition is made, it does not mean that the penalty will automatically be levied. The case of the assessee is even much stronger as in the case of the assessee there is no addition being made by the Assessing Officer with reference to the return filed under section 153A and prior to the filing of the return under section 153A, the Assessing Officer has not brought out any material on record which may prove that the assessee has filed the false particulars of income. The penalty proceedings is initiated separately with the logic that in penalty proceedings the assessee is given an opportunity to explain its case if he successfully explains his position, the Assessing Officer has to drop penalty proceeding. In this case, we noted that the Assessing Officer has imposed the penalty for furnishing the false particulars by the assessee. Section 271(1)(c) deals with two situations for imposing penalty ; has concealed the particulars of income or has furnished inaccurate particulars of such income. Explanation 1 is applicable only in case of first situation, i.e., the amount added or disallowed in the total income be deemed to represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT, Delhi v. Atul Mohan Bindal [2009] 317 ITR 1 (SC) ; [2009] 9 SCC 589 ; [2009] 30 (I) ITCL 339 (SC), where this court was considering the same provision, the court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This court referred to another decision of this court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC), as also, the decision in Union of India v. Rajasthan Spinning and Weaving Mills [2010] 1 GSTR 66 (SC) ; [2009] 13 SCC 448 and reiterated in para 13 that (page 13 of 317 ITR) : 13. It goes without saying that for applicability of section 271(1)(c), conditions stated therein must exist.' 9. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision in Dilip N. Shroff v. Joint CIT, Mumbai [2007] 291 ITR 519 (SC) was overruled by this court in Union of India v. Dharamendra Textile Processors, was that according to this court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in case of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC). However, it must be pointed out that in Union of India v. Dharamendra Textile Processors, no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC), where the court explained the meaning of the terms 'conceal and inaccurate'. It was only the ultimate inference in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) was overruled." Now coming to the order of the Supreme court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) as has been relied on by the learned Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in the books of account in respect thereof. The assessee since was unable to furnish evidence for such loans, offered the amount of Rs. 93,000 as additional income. The penalty proceedings were initiated by the Assessing Officer under section 271(1)(c). The Assessing Officer did not agree with the explanation of the assessee and noted that it had itself offered the addition of Rs. 93,000. Applying Explanation 1(B) of section 271(1)(c), the Assessing Officer imposed upon the assessee penalty of Rs. 37,975. The Tribunal cancelled the penalty for the reason that in the notice initiating penalty proceedings the assessee was not intimated about the proposed action under Explanation 1(B) to section 271(1)(c) but the High Court on a reference held that the imposition of penalty was valid. Under these facts when the matter went before the hon'ble Supreme Court, the hon'ble Supreme Court held in the above manner. In this judgment we also noted that the Supreme Court has observed that by reason of the addition of Explanation 1(B) to section 271(1)(c) the view taken by the apex court in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC) can no longer be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) needs consideration. The Explanations added to section 271(1)(c) in their entirety also indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing returns. The judgment in Dilip N. Shroff's case [2007] 291 ITR 519 (SC) has also not considered the provisions of section 276C of the Income-tax Act. Therefore, in our view, the judgment in the case of Dilip N.Shroff v. Joint CIT needs consideration by the Larger Bench of this court particularly when it has ramifications not only regarding the provisions of the Income-tax Act but also with regard to the provisions of sections 3A and 11AC of the Central Excise Act and rule 96ZQ(5) of the Central Excise Rules. For the aforestated reasons, we direct the registry to place our order in this batch of civil appeals before the hon'ble Chief Justice of India for appropriate directions. Before concluding, we may mention that in the present cases, the assessee had challenged the virus of rule 96ZQ(5). By the impugned judgment, the Gujarat High Court has read down the said rule incorporating the mens rea requirement. It is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant thereto he filed revised returns of income for these assessment years showing higher income. Eventually the assessment orders were passed and the returns submitted were regularised under section 148. In the penalty proceedings under section 271(1)(c) the assessee claimed that he had offered additional income to buy peace of mind and avoid litigation. Penalty orders were passed and the Commissioner (Appeals) confirmed the orders. But the Appellate Tribunal held that the Revenue had not discharged its burden of proving concealment and had simply rested its conclusion on the acts of voluntary surrender done by the assessee in good faith and that penalty could not be levied. On a reference, the hon'ble High Court held that it is well settled that under section 271(1)(c) the initial burden lies on the Revenue to establish that the assessee has concealed the income or had furnished inaccurate particulars of such income. The burden shifts to the assessee only if he fails to offer any explanation for the undisclosed income or offers an explanation which is found to be false by the assessing authority. However, the proviso to Explanation 1 provides for shifting of this burden again wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court appearing in the same ITR were different inasmuch as the Madhya Pradesh High Court in CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP) which was subsequently confirmed in CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC) was really concerned with the following : We find ourselves in agreement with the view taken by the Tribunal. It is well settled that under section 271(1)(c), the initial burden lies on the Revenue to establish that the assessee had concealed the income or had furnished inaccurate particulars of such income. The burden shifts to the assessee only if he fails to offer any explanation for the disclosed income or offers an explanation which is found to be false by the assessing authority. However, the proviso to Explanation 1 provides for shifting of this burden again where the explanation offered by the assessee is found to be bona fide." Whereas on the other hand, what the Supreme Court was concerned with in K. P. Madhusudhanan [2001] 251 ITR 99 (SC) was as to whether, even after the insertion of the Explanation 1 below section 271(1)(c), it was necessary for the Revenue to prove mens rea. It would appear that the two issues as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhusudhanan [2001] 251 ITR 99 (SC) it has also been observed by hon'ble apex court when the Income-tax Officer 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 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 and did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 but 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, consequently, be liable to the penalty provided by that section." The combined reading of Explanation 1 to section 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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