TaxTMI 
TaxTMI 
2002 (11) TMI 16
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....g books of account. Finally, the bill books were impounded under section 131(1) on November 26, 1991, by the assessing authority for further investigation. The assessee, on the very next day, i.e., November 27, 1991, preferred a petition before the Commissioner of Income tax under section 273A making an offer of Rs. 15 lakhs; by way of income from business to cover the undisclosed income for the relevant year. He also offered an additional amount of Rs. 1 lakh towards probable disallowance out of expenditure charged to the profit and loss account. The Assessing Officer, taking into account, the above offer and also on the basis of the investigation held by him, completed the assessment on a total income of Rs. 16,25,000. The assessment was completed by order dated March 24, 1992. In the said order, it was also stated that separate proceedings for imposing penalty under section 271(1)(c) shall be initiated. Later, a show cause notice under section 274 read with section 271(1)(c) was issued to the assessee on March 24, 1992, by the Assessing Officer. The assessee replied on April 20, 1992. The assessee was heard and taking into account, the explanation and other relevant materials, ....
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.... fails and the appeal filed by it is dismissed." The Revenue appeals to this court stating that the following substantial questions of law arise out of the decision of the Appellate Tribunal: "1. Whether, on the facts and in the circumstances of the case, and also in the light of Explanation to section 271(1)(c), the Tribunal is right in law in cancelling the penalty ? 2. Whether, on the facts and in the circumstances of the case, and the question agitated before the Tribunal being the levy of penalty under section 271(1)(c) should not the Tribunal have on its own considered the question under the relevant Explanation to section 271(1)(c) or remitted the question to be considered under the relevant Explanation to section 271(1)(c)? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that 'no concealment has been established in this case in order to invoke the provisions of section 271(1)(c)' and is not the above finding wrong and against/without considering the relevant Explanation to section 271(1)(c)? 4. Whether, on the facts and in the circumstances of the case, and in the light of the decision of the Kerala High C....
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....y direct that such person shall pay by way of penalty, - . . . (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. Explanation 1. -Where in respect of any facts material to the computation of the total income of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been conce....
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....ck, inflation of purchases, suppression of sales, inexplainable cash credits in the form of fresh loans, etc..." the appellate authority also relied on the report of the Assistant Commissioner of Income-tax, Thrissur, sent to the Commissioner of Income-tax, Cochin, on December 24, 1991, in connection with the Settlement Commission's proceedings. In the said report, it is stated that no foolproof case of concealment is made out. On the basis of the above finding, the penalty order was set aside by the first appellate authority. More or less relying on the very same reason, the Appellate Tribunal affirmed it. The assessee mainly relied on the decision reported in CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP). That was a decision rendered relying on Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC). But Shadilal [1987] 168 ITR 705 (SC) has since been held to be not laying down the correct law in K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC). In this decision, the apex court held that even if there is no mention about the Explanation to section 271(1)(c), in the notice issued to the assessee, the authorities are bound to consider the effect of the Expl....