TMI Blog2000 (1) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... materials were found, on the basis of which further investigations were carried out. Since the materials found by the Departmental authorities disclosed suppressions, the assessee approached the Department for a settlement of the income-tax liability of the firm and its partners. Several rounds of discussions were held. It is to be noted that by the time of the search, the return for the concerned assessment year 1983-84 had been filed. On March 29, 1985, four of the partners wrote a letter to the Assessing Officer agreeing for an addition of Rs. 41 lakhs, but indicated that they were agreeable for such addition only if the penal provisions were not applied. From the letter dated March 29, 1985, it is evident that the partners agreed to accept Rs. 41 lakhs as additional profit for the concerned assessment year. The Income-tax Officer wrote a letter to the assessee suggesting that it may file a revised return since the amount involved was substantial. The assessee filed a revised return adding Rs. 41 lakhs to the income already disclosed. The assessment was accordingly completed. Penalty proceedings were also initiated. The assessee preferred appeal questioning the correctness of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1949] 1 KB 227. Prof. De Smith in his Judicial Review of Administrative Action (4th edition at page 103) observed that "the citizen is entitled to rely on their having the authority that they have asserted." The doctrine of promissory estoppel has been evolved by the courts, on the principles of equity, to avoid injustice. "Estoppel" in Black's Law Dictionary, is indicated to mean that a party is prevented by his own acts from claiming a right to the detriment of other party who was entitled to rely on such conduct and has acted accordingly. Section 115 of the Indian Evidence Act is also, more or less, couched in a language which conveys the same expression. "Promissory estoppel" is defined in Black's Law Dictionary as "an estoppel which arises when there is a promise which promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of promisee, and which does induce such action or forbearance, and such promise is binding if injustice can be avoided only by enforcement of promise." These definitions in Black's Law Dictionary which are based on decided cases, indicate that before the rule of promissory estoppel can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary, not only to equity but also to good faith, to allow the promisor to go back on his promise. It should not be necessary for the other party to show that he acted to his detriment in reliance on the promise. It should be sufficient that he acted on it." This principle has been evolved by equity to avoid injustice. It is neither in the realm of contract nor in the realm of estoppel. Its object is to interpose equity shorn of its form to mitigate the rigour of strict law. In Union of India v. Anglo Afghan, Agencies [1968] AIR 1968 SC 718, it was, inter alia, observed as follows: "We are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set up, no person may be deprived of his right or liberty except in due course of and by authority of law : if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the law---common or statute---the courts will be competent to, and indeed would be bound, to protect the rights of the aggrieved citizen." It was furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that it is under no obligation to act in a manner, i.e., fair and just or that it is not bound by the considerations of honesty and good faith. In fact, the Government should be held to a high standard of rectangular rectitude while dealing with citizens. Since the doctrine of promissory estoppel is an equitable doctrine, it must yield where equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the court would not raise an equity in favour of the promisee and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government should be held bound by the promise made by it. But the Government must be able to show that in view of the facts as have transpired, public interest would not be prejudiced. Where the Government is required to carrying out the promise the court would have to balance the public interest in the Government's carrying out the promise made to the citizens, which helps citizens t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill Ltd. v. CIT [1987] 168 ITR 705, as the Tribunal held. Its conclusion has been arrived at by a clear misappreciation of the ratio laid down in the said case. It is for the Department to consider, the explanation offered by the assessee in respect of an amount which was offered to be taxed. It is not automatic that whenever an amount has been offered by the assessee, penalty is to be levied (sic). Therefore, in the penalty proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including a particular item of income in its return, though it may have offered the amount to be taxed subsequently. If such an explanation is offered, the Department has to examine its acceptability and record a finding as to whether the explanation is acceptable or not. Only if the explanation is not found acceptable, the question of penalty will arise. In others words, the explanation of the assessee has to be considered on the merits. The Tribunal has not kept this aspect in view. Learned counsel for the parties suggested that the matter may be remitted back to the Tribunal for consideration of the explanation of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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