Judgment:
ORDER
A.M. Sapre, J.
1. This is an appeal filed by Revenue (CIT) under Section 260A of the IT Act against the order dt. 27th Nov., 2002, passed by Income-tax Appellate Tribunal (for brevity hereinafter referred to as Tribunal) in ITA No. 130/Ind/1997. This appeal was admitted for final hearing on following substantial question of law :
Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact, in deleting the penalty levied under Section 271(1)(c) of the IT Act ?
2. Heard Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the Revenue and Shri Vijay Asudani, learned counsel for the assessee.
3. The dispute in this appeal essentially relates to imposition of penalty under Section 271(1)(c) of the Act for the asst. yr. 1993-94. The AO imposed the penalty by taking recourse to the provisions of Section 271(1)(c) ibid on the assessee during the assessment year in question. However, the CIT(A) and later Tribunal set it aside by holding that no case for penalty is made out on facts and that explanation offered by the assessee is acceptable. It was further held that in somewhat similar circumstances, the AO had imposed penalty for the asst. yr. 1991-92 and the same was set, aside by the Tribunal for that year on same facts. It was also not disputed that the said order was not questioned in appeal by the Revenue and the same thus attained finality. In these circumstances, the Tribunal while upholding the order of CIT(A) quashed the penalty which was imposed by the AO on the assessee for the assessment year in question, i.e., 1993-94 which has given rise to filing of this appeal by the CIT on aforementioned substantial question of law.
4. Having heard learned counsel for the parties and having perused record of the case, we are inclined to dismiss the appeal.
5. This is how the Tribunal while upholding the order of CIT(A) which had set aside the order of AO imposing the penalty held in para 5 :
We have considered the arguments of the parties in view of the material available on record and have gone through the judgments relied upon by them as well as the order impugned. An identical issue was raised during the asst. yr. 1991-92 wherein vide para 4 of the order the Tribunal has confirmed the actions of the CIT(A) cancelling the penalty. Contents of para 4 of the order of the Tribunal on the issue are reproduced hereunder:We have heard the arguments advanced by the learned representatives of the parties. It is now well established that the assessment and the penalty proceedings are independent of each other and the imposition of the penalty does not automatically follow as a matter of course if an addition has been made to the quantum side. Reference may be made to the decision in CIT v. Ganga Cold Storage 125 Taxation 45 (All). Perusal of the assessment order would reveal that the assessee had claimed expenses under various heads, like sales promotion, lease rent, bad debts, entertainment expenses, etc. The AO was of the view that the expenses claimed by the assessee were on the higher side. During the course of assessment proceedings vide letter dt. 2nd Jan., 1994 it was stated by the assessee that though all the expenses and purchases, etc. are genuine, fully vouched and are fully allowable but in order to avoid protracted litigation with the Department, and to purchase peace an additional income of Rs. 25 lacs was offered with the understanding that no penalty proceedings would be initiated. It is with reference to the above surrendered amount of Rs. 25 lacs that the AO imposed the impugned penalty. We are afraid, the imposition of the impugned penalty is not sustainable at all. In Sir Shadi Lal Sugar & General Mills Ltd. and Anr. v. CIT : [1987]168ITR705(SC) their Lordships of the apex Court had observed that there may be 101 reasons for the assessee to agree to certain additions. However, from the assessee agreeing to the said additions to his income, it does not follow that the amount agreed to be added was concealed income. The CIT(A) has, inter alia, followed the Tribunal's decision for the asst. yrs. 1984-85 and 1985-86 for cancelling the penalty levied with reference to the offer of additional income of Rs. 25 lacs. Nothing has been pointed out by the Revenue that there was any flaw in the order of the CIT(A). It may be stated that similar penalty of Rs. 15,50,000 was imposed by the AO for the asst. yr. 1987-88 which was cancelled by the CIT(A) vide his order dt. 22nd March, 1994. When the matter was taken by the Revenue before the Tribunal, the Tribunal vide their decision rendered on 28th June, 1998 held that the CIT(A) was perfectly justified in cancelling the said penalty. Observing inter alia that in the absence of any evidence brought on record by the Revenue that the amount offered was concealed income of the assessee, the penalty for concealment is not exigible at all. The Tribunal has also observed that the principle of law enunciated by the Supreme Court in Sir Shadi Lal Sugar & General Mills Ltd. (supra) has been applied by the Hon'ble Calcutta High Court in the decision in Girdharilal Soni v. CIT : [1989]179ITR111(Cal) For the reasons aforesaid and the detailed reasons recorded by the CIT(A), we hold that in the facts and circumstances of the case, the impugned penalty is not justified and the CIT(A) has rightly cancelled it.
6. It was then the impugned finding was recorded in favour of assessee holding that no mens rea as contemplated under Section 271(1)(c) for imposing the penalty is made out against the assessee. We find no good ground to upset the aforesaid finding of Tribunal and while concurring with the view so taken supra uphold the same. In our view, discretion so exercised by CIT(A) and later by the Tribunal in accepting the explanation offered by assessee being judicious does not call for any interference.
7. It is noticed from the record of the case that it is a case of surrender of income by the assessee and full amount of tax has been paid. The Tribunal has given reasons for accepting the factual version of the assessee. In this view of the matter we do not consider it to be a case for holding that it attracts the Explanation appended to Section 271(1)(c) ibid for levying the penalty.
8. Accordingly and in view of aforesaid discussion, the appeal fails and is dismissed. No costs.