TMI Blog2006 (8) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... 85/Ind/1994 was dismissed, which was admitted for final hearing on September 7, 2000, on the following substantial questions of law: "(i) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the onus is on the Revenue to prove mens rea even when the primary onus is upon the assessee to prove that there was no concealment in view of Explanation 1 to section 271(1) (c) of the Income-tax Act ? (ii) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that independent enquiry should have been conducted into the explanation of the assessee by the Revenue during the penalty proceedings, in spite of the fact that no details regarding purchase such as the names and addresses of the parties from whom purchase were made, prohibiting the Department for making any enquiry in this regard? (iii) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in cancelling penalty under section 271(1) (c) of the Act levied upon the assessee by the Assessing Officer?" 2. The short facts of the case are that the assessee-company has made pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce vouchers evidencing acquisition of the rolls forged at Rs. 15,00,000. The case comes within the purview of sub-section (1) (c) of section 271 of the Act and in the circumstances the penalty was rightly levied by the concerned Assessing Officer which was wrongly cancelled by the Commissioner of Income-tax (Appeals) and also by the Tribunal. 5. Section 271(1)(c) of the Income-tax Act reads as under: "271. Failure to furnish returns, comply with notices, concealment of income, etc.— (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person — (b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, —………….. (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum of ten thousand rupees for each such failure; (iii) in the cases referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m any fraud or gross or wilful neglect and the quantum of proof necessary would be that required in a civil case, namely, preponderance of probabilities. In the facts and circumstances, it was observed by the Full Bench that as there was no conscious concealment of income and as this was not a case where the Revenue through its machinery had unearthed the concealment and as the Tribunal on a consideration of the entire matter had found that there was no concealment as such by the assessee, it could not be said that the Tribunal's finding was perverse or legally wrong and, therefore, there was no point for reference. 7. Further reliance was placed on a case in the matter of Sir Shadilal Sugar and General Mills Ltd. v. CIT reported in [1987] 168 ITR 705 wherein the hon'ble Supreme Court has observed that the assessee has only accepted certain amounts as taxable, it had not been accepted by the assessee that it had deliberately furnished inaccurate particulars or concealed any income. It was further observed that from the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. There may be hundred and one reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year was 1958-59 wherein the Assessing Officer made an addition of Rs. 1,37,700 towards cane against shortage in cane and salary of outstation staff and no appeal was filed by the assessee against the addition. Notice was issued under section 274 read with section 271 of the Act in March, 1963, and after considering the reply the penalty was imposed. In the circumstances, the Supreme Court held that the appellant has only accepted certain amounts as taxable, it has not been accepted by the appellant that it has deliberately furnished inaccurate particulars or concealed any income. Hence, it was held that the amount agreed to be added cannot be taken as concealed income, as there may be hundred and one reasons for such admission. So far as the Full Bench of the Kerala High Court in the matter of CIT v. India Sea Foods [1996] 218 ITR 629 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. So far as K. P. Madhusudhanan [2001] 251 ITR 99 which was delivered on August 21, 2001, is concerned, in this case the hon'ble apex co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty provided by that section. 12. From perusal of the record, it appears that the order passed by the learned Tribunal dated October 22, 1998, is completely based on the decision in the case of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR as at that time the decision of the apex court in the matter of K. P. Mudhusudhanan [2001] 251 ITR 99 was not there. 13. The combined reading of Explanation 1 to section 271(1) (c) of the Act and the verdict of the hon'ble apex court in the matter of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 and K. P. Madhusudhanan [2001] 251 ITR 99 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 mens rea. 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 Explanation 1 to section 271(1)(c) of the Act was added to the Income-tax Act and after taking into consideration the Explanation, the hon'ble apex court in the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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