TaxTMI 
TaxTMI 
2006 (8) TMI 175
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....f 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 purchases in cash for which advance of Rs. 74,92,919 and Rs. 79,00,198 were made under section 40A(3) of the Act in the accounting years 1989-90 and 1990-91, respectively. Against these additions though the assessee went in appeal before the Commissioner of Income-tax (Appeals) but the appeals were dismissed on the ground that these advances were made on account of surrender made by the assessee during the course of assessment. Consequen....
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.... 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 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 a....
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.... 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 reasons for such admission, i.e, when the assessee realises the true position, it does not dispute certain disallowances but that does not absolve the Revenue from proving the mens rea of quasi-criminal offence. 8. Shri R. L. Jain, learned counsel for the appellant placed reliance on a decision of the apex court in the matter of K. P. Madhusudhanan v. CIT reported in [2001] 251 ITR 99 wherein the apex court observed that the Explanation to section 271(1)(c) is part....
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.... 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 court has considered the Explanation to section 271(1)(c) and has held that since in the case of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 the Revenue was required to prove mens rea of quasi-criminal offence, therefore, the Legislature has added the Explanation to section 271 of the Act. It was further observed that by reason of addition of the Explanation that view in the matter of Sir Shadilal Sugar and General Mills Ltd. [1987] 168 ITR 705 can no longer be said to be appli....
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....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 K. P. Madhusudhanan [2001] 251 ITR 99 has laid down that no separate enquiry is necessary for imposing the penalty. However, from a plain reading of the Explanation, it is evident that some sort of enquiry is necessary, therefore, the proceedings initiated by the Revenue for imposing the penalty under section 271(1)(c) of the Act shall be treated as proceedings and the assessee is at liberty to show his bona fides in that proceedings. If the assessee fails to show his bona fides, in that case penalty can be imposed by the Revenue....