TMI Blog2009 (12) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 80-I of the Income-tax Act. However, in respect of melamine project there is income as shown in enclosed statement and is eligible for deduction of claim of Rs. 1,56,24,449 as per annexure 14 and accordingly deduction is claimed while computing income." The Assessing Officer allowed deduction to the assessee after adjusting carried forward investment allowance amounting to Rs. 1,77,82,524 and thereby the deduction claimed by the assessee was reduced by Rs. 49,02,306. The Assessing Officer initiated penalty proceedings for filing inaccurate particulars of income by the assessee. The assessee in reply thereby submitted the explanation that the deduction has been claimed by the assessee under section 80-I on the profit without deducting depreciation and investment allowance on the basis of decision of the hon'ble Orissa High Court in the case of CIT v. Tarun Udyog [1991] 191 ITR 688 and that of Karnataka High Court in the case of CIT v. H. M. T. Ltd. [1993] 199 ITR 235 and thus the assessee was under bona fide belief that the assessee is entitled to the deduction under section 80-I without setting off the brought forward investment allowance. Therefore, no penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance on the basis of decision of the hon'ble Orissa High Court in the case of CIT v. Tarun Udyog [1991] 191 ITR 688. This decision was pronounced on July 2, 1991. The Karnataka High Court also had taken similar view in the case of CIT v. H. M. T. Ltd. [1993] 199 ITR 235. It is only on March 5, 1997, the hon'ble Supreme Court in the case of CIT v. Kotagiri Industrial Co-operative Tea Factory Ltd. [1997] 224 ITR 604 took the view that unabsorbed losses for the earlier years are to be set off prior to allowing the deduction to the assessee. The hon'ble Tribunal has confirmed the penalty on the basis of the decision of the hon'ble Supreme Court. The assessee was under bona fide belief that the assessee was entitled to the deduction under section 80-I without setting off the brought forward investment allowance. The assessee has submitted a note No. 12 mentioning clearly how he computed the deduction under section 80-I. Thus this is not a case of furnishing of inaccurate particulars of income. Prior to the decision of the High Court, there was a decision of the Appellate Tribunal in the case of Digchem Industries v. ITO 27 TTJ (Jp) 593 dated November 18, 1986. The view taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inaccurate particulars of the income. The penalty proceedings and the assessment proceedings, both are different. Explanation 1 to section 271(1)(c) states that the amount added or disallowed in computing the total income of the assessee shall be deemed to be the income in respect of which particulars have been concealed. This deeming provision is not absolute one but is rebuttable one. It only shifted the onus on the assessee. Explanation 1 refers to the two situations in which presumption of concealment of the particulars of income is deemed. The first situation is where the assessee in respect of any fact material to the computation of his total income fails to offer an explanation or offers an explanation, which is found by the Assessing Officer or the Commissioner to be false. The second situation is where the assessee in respect of any facts material to the computation of his total income offers an explanation, which the assessee is not able to substantiate and also fails to prove that such explanation was bona fide one and that all the facts relating to the computation of total income have been disclosed by him. The presumption available under the Explanation to section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a false one. For this, in our opinion no penalty can be imposed on the assessee. Similar view has been taken by the Gujarat High Court in the case of National Textiles v. CIT [2001] 249 ITR 125, in which it was held (headnote) : "In order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus, i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to section 271(1)(c) has no bearing on factor No. 1 but has a bearing only on factor No. 2. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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) ; [2007] 8 Scale 304 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 [2007] 291 ITR 519 (SC) ; [2007] 8 Scale 304 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 afore stated 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 made clear that if the larger Bench takes a view to say that the penalty under the said clause is mand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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