IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR TUESDAY, THE 1ST APRIL 2008 / 12TH CHAITHRA 1930 ITA.No. 329 of 2002 --------------------------- ITA.458/COCH/1998 OF I.T.A.TRIBUNAL,COCHIN BENCH. .................... APPELLANT/ APPELLANT: -------------------------------------- THE COMMISSIONER OF INCOMETAX, COCHIN. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT. RESPONDENT/ RESPONDENT: -------------------------------------------- SHRI.T.M.KURUVILLA, PADATH HOUSE, KADUNGAMANGALAM, THIRUVANKULAM. BY ADV. SRI.A.KUMAR. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01/04/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N. Ramachandran Nair & T.R. Ramachandran Nair, JJ. - - - - - - - - - - - - - - - - - - - - - - - - I.T.A.No.329 of 2002 - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 1st day of April , 2008. JUDGMENT C.N. Ramachandran Nair, J. This appeal filed by the Revenue is against the order of the Tribunal confirming the order of the Commissioner of Income Tax (Appeals), cancelling penalty levied on the assessee under Section 271(1)(c) of the Income Tax Act. During the previous year relevant for the assessment year 1993-94 the assessee constructed a hotel building which was valued by him at Rs.35,55,683/-. However, the assessing officer valued the investment in the hotel building at above Rs.42 lakhs. Consequently, he made an addition of Rs.7.52 lakhs to the returned income. The assessee accepted this. Besides this addition, the officer noticed cash credits in the names of the sons and daughters of the assessee which the assessee could not prove. Consequently, this amount was also added to the total income under Section 68 of the Act. The assessment so completed, was accepted by the assessee. However, the minimum penalty levied under Section 271(1)(c) of the Act was contested in appeal. The appellate authority noticed that the assessee, by offering an addition of a total sum of Rs.12.5 lakhs, purchased peace and ITA 329/2002 2 therefore could not be subjected to penalty. The Tribunal confirmed this order by following the decision of the Supreme Court in Sir Shadilal Sugar and General Mills Ltd. v. Commissioner of Income Tax (168 ITR 705). It is against this order of the Tribunal, the Revenue has come up in appeal. 2. Learned Standing Counsel for the Revenue contended that the decision of the Supreme Court relied on by the Tribunal pertains to the unamended provision of Section 271(1)(c) and according to him, by virtue of the explanation contained in Section 271(1)(c) of the Act, the onus of proving that the income added is not the concealed income of the assessee, is on the assessee. Learned counsel for the assessee, on the other hand, contended that once the assessee agreed on the addition made, the assessment is an agreed order and there is no case of concealment and the department will not be justified in levying penalty under Section 271(1)(c). In Dilip N. Shroff v. Joint Commissioner (291 ITR 519) the Supreme Court has reiterated the requirement of mens rea in penalty proceedings. We find some distinction between the two amounts added by the assessing officer in the course of assessment. So far as the addition on account of valuation of the building, i.e. Rs.7.52 lakhs is concerned, we do not think that the department can levy penalty because the assessee conceded in the ITA 329/2002 2 course of assessment that the amount represents only the difference in the value of the building estimated by the officer. 3. We therefore confirm the order of the Tribunal so far as the penalty attributable to Rs.7.52 lakhs is concerned. However, so far as the addition of Rs.5 lakhs is concerned, it represents the unexplained credit seen in the accounts. Though the assessee tried to explain the credit as belonging to his sons and daughters, the same was not pursued him and through letter dated 6.3.1997 he offered the amount for assessment. Since the letter is not annexed to the proceedings, it is not known whether the agreed assessment is on the condition that no penalty will be levied on this amount. The assessing officer has not referred to this letter in his order while considering penalty. Moreover, the latest decision of the Supreme Court referred to above, is also not seen considered by the Tribunal or any of the lower authorities. 4. We, therefore, set aside the order of the Tribunal with direction to the assessing officer to reconsider the liability for penalty on the amount of Rs.5 lakhs added to the income returned, after considering the assessment files and the later decisions of the Supreme Court including the one relied ITA 329/2002 2 on by the assessee. If penalty is proposed again, the assessee should given an opportunity to file objection before orders are passed. The appeal is disposed of as above. (C.N. Ramachandran Nair, Judge.) (T.R. Ramachandran Nair, Judge.) kav/