Income Tax Act, 1961: Section 271(1)(c )-Concealment of income and furnishing of inaccurate particulars of such income-Ingredients of-Imposition of penalty-AY 1998-99-Assessee, an HUF, filed a return of income showing a long term capital loss-The said capital loss had arisen on account of sale of property in which the assessee had a 1/4th share-The assessee had appointed a registered valuer for valuation of the said property-The value of the property was fixed at a certain sum-In the valuation report, it was stated that the purpose of valuation was for computation of capital gains-The Assessing Officer referred the valuation to the District Valuation Officer-The valuation of the property as made by the District Valuation Officer was adopted and on the basis thereof long term capital gain was determined-As there was a difference between the two valuations, a show cause notice was served on the assessee for concealment of income and furnishing of inaccurate particulars of such income-The assessee explained that there was no concealment of income as all the details of property were submitted along with the return of income and the difference in the matter of valuation of the 1/4th share of the assessee did not amount to concealment-The Assessing Officer rejected the explanation of the assessee and levied a minimum penalty on the assessee-Appeals field by the assessee rejected by CIT (Appeals), ITAT and the High Court-Correctness of-Held: The expression "conceal" signifies a deliberate act or omission on the part of the assessee-Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars-The Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false-Primary burden of proof, therefore, is on the revenue-The statute requires satisfaction on the part of the assessing officer that the assessee deliberately concealed his income or furnished inaccurate particulars in respect of such income-A mere omission or negligence would not constitute a deliberate act-S. 271(1)(c ) remains a penal statute-Rule of strict construction shall apply thereto-Mere difference of opinion between two experts regarding the valuation of the property does not constitute concealment of income or furnishing inaccurate particulars-The impugned order, therefore, suffers from non-application of mind-Penalty set aside. Words & Phrases: "Concealment" and "inaccurate particulars"-Meaning of-In the context of Section 271(1)(c) of the Income Tax Act, 1961. The appellant was an assessee under the Income Tax Act, 1961 and was an HUF. For the assessment year 1998-99, a certain income was declared by him, inter alia, showing a long term capital loss. The said capital loss was said to have arisen on account of sale of property being land and building in which the appellant had a 1/4th share. The appellant entered into an agreement for the sale of the undivided 1/4th share in the said property for a certain sum with one Mr. `L'. For the purpose of valuation of the said property a registered valuer was appointed. The value of the said 1/4th share in the property was fixed at a certain sum. In the valuation report, it was stated that the purpose was valuation for computation of capital gains. As regard existence of sale instances, however, although a sheet was said to have been attached thereto, no such thing was done. By reason of a consent decree, the 1/4th undivided share was sold and possession was transferred to `L' against final payment. The return filed by the appellant for the assessment year 1998-99 came up for scrutiny before the Assessing Officer, who, in exercise of the power under Section 55A of the Act, referred the matter for valuation of the said 1/4th undivided share of the appellant to the District Valuation Officer. The valuation of the land as made by the District Valuation Officer was adopted and on the basis thereof long term capital gain was determined. In view of the said order of assessment, a show cause notice under Section 274 read with Section 271 of the Act was served on the appellant to which a reply was filed by the appellant claiming that there was no concealment of income as all the details of property were submitted along with the return of income and the difference in the matter of valuation of the 1/4th share of the appellant did not amount to concealment. The Assessing Officer, however, levied a minimum penalty under Section 271(1)(c ) of the Act. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal dismissed the appeals filed by the appellant. The High Court dismissed the appeal preferred by the appellant in limine under Section 260A of the Act. Hence the appeal. Allowing the appeal, the Court HELD: 1. Interpreting Section 27(1)(c) of the Income Tax Act, 1961, some of the High Courts were of the opinion that the burden of proof and the onus lay upon the department to establish that the assessee was guilty of concealment of the particulars of income and even if the assessee had given a false explanation, the same by itself would not prove that the receipt necessarily constituted income of the assessee. However, some High Courts opined differently, holding that the penalty proceeding is included in the expression `assessment' and the true nature of penalty had been held to be additional tax. [Para 19] [518-C-D] Commissioner of Income Tax v. Anwar Ali, [1970] 2 SCC 185; Commissioner of Income Tax v. Gokuldas Harivallabhas, 34 ITR 98 and Commissioner of Income Tax v. M/s Khoday Eswarsa & Sons, [1971] 3 SCC 555, referred to. 2. Thus, it appears that there is a distinct line of authorities which clearly lay down that in considering a question of penalty, mens rea is not a relevant consideration. Even assuming that when the statute says that one is liable for penalty if one furnishes inaccurate particulars, it may or may not by itself be held to be enough if the particulars furnished are found to be inaccurate is anything more needed but the question would still be as to whether reliance placed on some valuation of an approved valuer and, therefore, the furnishing of inaccurate particulars was not deliberate, meaning thereby that an element of mens rea is needed before penalty can be imposed, would have received serious consideration in the light of a large number of decisions of this Court. [Para 35] [528-B-C] Sherras v. De Rutzen, (1895) 1 QB 918; Director of Enforcement v. MCT M. Corp. Pvt. Ltd., [1996] 2 SCC 471; Addl. CIT v. Dargapandarinath Taliayya and Co., (1977) 107 ITR 85; Gujarat Travancore Agency v.CIT, (1989) 177 ITR 455 (SC); Lim Chin Aik v. The Queen, (1963) Appeal Cases 160 and Ummali Umma v. Inspecting Assistant Commissioner of Income Tax 64 ITR 669 (Kerala), referred to. Corpus Juris Secundum 85, Para 1023 and the Law Quarterly Review, [1936], p. 66, referred to. 3. The legal history of Section 271(1)(c ) of the Act traced from the Income Tax Act, 1922 prima facie shows that he explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of explanation, having regard to the principle of statutory interpretation, must be done in mind before interpreting the aforementioned provisions. Section 271(1)(c ) categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty not only is discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings, as has been noticed in some of the decisions of this Court, inure on the face of the statutory provisions. Penalty proceedings are not be initiated only to harass the assessee. The approach of the Assessing Officer in this behalf must be fair and objective. [Para 37] [528-E-G] 4.1. Section 271(1)(iii) again provides for a discretionary jurisdiction upon the assessing authority inasmuch as the amount of penalty may not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of his income, but it may not exceed three times thereof. The factors which are materials for the purpose of computation of total income as is sought to be emphasized in Explanation-1, refer to computation of income on the part of the assessee which is directly relatable to: (a) failure to offer an explanation and/or offering an explanation which is false: and (b) which he not able to substantiate and fails to prove that such explanation is bona fide. [Para 38] [528-H; 529-A] 4.2. Only in the event the factors enumerated in clauses (A) and (B) of Explanation-1 are satisfied and a finding in the behalf is arrived at by the Assessing Officer, the legal fiction created there under would be attracted. [Para 39] [529-B] Ashok Leyland Ltd. v. State of T.N., [2004] 3 SCC 1, S. Sundaram Pillai v. V. R. Pattabiraman, AIR (1985) SC 582 and Swedish Match AB v. Securities & Exchange Board of India, [2004] 11 SCC 641, referred to. 5. The expression "conceal signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars. [Para 44] [530-F] Law Lexicon and Webster's Dictionary, referred to. 6.1. The term "inaccurate particulars" is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even if the explanations are taken recourse to, a finding has to be arrived at having regard to clause (a) of Explanation-1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and materials to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which were material to the computation of his income. [Para 45] [530-G-H; 531-A] Commissioner of Income Tax v. Ram Commercial Enterprises Ltd., 246 ITR 568 and Diwan Enterprises v. Commissioner of Income Tax, 246 ITR 571, relied on. 6.2. Primary burden of proof, therefore, is on the revenue. The statute requires satisfaction on the part of the assessing officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the department. [Para 48] [531-E] D.M. Manasvi v. Commissioner of Income Tax, [1973] 3 SCC 207, relied on. 6.3. While considering as to whether the assessee has been able to discharge his burden, the assessing officer should not begin with the presumption that he is guilty. [Para 49] [531-F] 6.4. Once the primary burden of proof is discharged, the secondary burden of proof would shift on the assessee because the proceeding under Section 271(1)(c ) is of penal nature in the sense that its consequences are intended to be an effective deterrent which will not a stop to practices which the Parliament considers to be against the public interest and, therefore, it was for the department to establish that the assessee shall be guilty of the particulars of income. [Para 50] [531-G] Commissioner of Income Tax v. Anwar Ali, [1970] 2 SCC 185 and Commissioner of Income Tax v. M/s Khoday Eswarsa & Sons, [1971] 3 SCC 555, relied on. 7.1. The order imposing penalty is quasi-criminal in nature and, thus, burden lies on the department to establish that the assessee had concealed his income. Since burden or proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the basement proceeding constitute good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. [Para 51] [531-H; 532-A-B] Anatharam Veerasinghaiah & Co. v. CIT, [1980] Supp. SCC 13, relied on. 7.2. The appellant in the penalty proceedings had produced relevant particulars to show that there were material in support of the valuation report, although a part of which was not annexed with the report. [Para 52] [532-C] 7.3. Before, thus, a penalty can be imposed, the entirely of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had furnished inaccurate particulars thereof. [Para 53] [532-D] 7.4. It is now a well-settled principle of law that more stringent of law, more strict construction thereof would be necessary. Even when the burden is required to be discharged by an assessee, it would not be as heavy as the prosecution. [Para 55] [532-F] P.N. Krishna Lal v. Govt. of Kerala, [1995] Supp. 2 SCC 187, relied on. 8. It may be true that the legislature has attempted to shift the burden form revenue to the assessee. It may further be correct that different views have been expressed as regard construction of statutes in the light of the changing legislative scenario, but the tenor of a penal proceeding remains the same. [Para 61] [534-D] Union of India v. Pramod Gupta, [2005] 12 SCC 1 and D. M. Manasvi v. Commissioner of Income Tax, [1973] 3 SCC 207, referred to. 9. Section 271(1)(c ) remains a penal statute. Rule of strict construction shall apply thereto. Ingredients of imposing penalty remain the same. The purpose of the legislature that it is meant to be deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20% under the 1922 Act to 300% in 1985. [Para 66] [535-B] Sadhu Singh v. District Board (1969) RCR 156, P.J. Irani v. State of Madras, [1962] 2 SCR 169 and The Workmen of M/s Firestone Tyre & Rubber Co. of India (P) Ltd. v. The Management AIR (1973) SC 1227, referred to. 10. `Concealment of income' and `furnishing of inaccurate particulars' are different. But concealment and furnishing inaccurate particulars refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression veri or suggestion falsi. Although it may not be very accurate or apt but suppression veri would amount to concealment, suggestion falsi would amount to furnishing of inaccurate particulars. [Para 67] [535-C-D] 11.1. The authorities did not arrive at a finding that the consideration amount fixed for the sale of property was wholly inadequate. The authorities also do not show what inaccurate particulars are furnished by the appellant. They also do not state what should have been the accepted principles of valuation. It is, therefore, not possible to accept the submissions of the respondent that concealment or furnishing of inaccurate particulars would overlap each other, but the same would not mean that they do not represent different concepts. Had they not been so, the Parliament would not have used the different terminologies. [Para 68] [535-E-F] 11.2. What was, therefore, necessary to be found out in respect whereof the assessing officer was required to arrive at a satisfaction was `falsity' in furnishing of explanation by the assessee. Explanation-1, therefore, categorically states that such explanation must either be false or not otherwise substantiated. Even in explanation-4, the expression "evaded" finds place. [Para 69] [535-H; 536-A] Commissioner of Income Tax v. Mussadilal Ram Bharose, [1987] 2 SCC 39 and Commissioner of Income Tax v. K.R. Sadayappan, [1990] 4 SCC 1, relied on. 12.1. The assessee could get the valuation done through any other mode of index value or the assessee could have engaged any other valuer other than a registered valuer also. In the instant case, the assessee had chosen to obtain the opinion of a registered valuer. [Para 79] [539-B] 12.2. The registered valuer has arrived at its opinion on certain basis. He, while making the valuation report, disclosed all the particulars. He disclosed that he had chosen the index method. He did not rely upon any sales instance. He might have referred to the valuation of the property as mentioned in a local newspaper. But it is not in dispute that he did not furnish any inaccurate particulars. It is true that he has not enclosed the sheet showing sale instance but nothing turns out thereupon as he had not relied upon any sale instance. [Para 80] [539-C] 13. A duty may be enjoined on the assessee to make a correct discloser of income but if such disclosure is based on the opinion of an expert, who is otherwise also a registered valuer having been appointed in terms of a statutory scheme, only because his opinion is not accepted or some other expert gives another opinion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars. [Para 82] [539-G-H] 14. It is of some significance that in the standard proforma used by the Assessing Office in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same has not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even, the respondent, while placing the order of assessment, laid emphasis that he had dealt with both the situations. [Para 83] [540-A-B] 15. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [Para 84] [540-C] Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, [2000] 2 SCC 718, relied on. 16. The Income Tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income Tax and the Income Tax Appellate Tribunal. [Para 85] [540-D] K. C. Builders v. Assistant Commissioner of Income Tax, [2004] 2 SCC 731, referred to. Anil B. Dewan, Sr. Adv., S.J. Mehta, Ramesh Singh, Bina Gupta and Inklee Barooah for the Appellant. Gopal Subramanium, ASG., Amit Dayal, and B.V. Balaram Das for the Respondents., 2007(7 )SCR499 , 2007(6 )SCC329 , 2007(8 )SCALE304 ,

CASE NO.:
Appeal (civil)  2746 of 2007

PETITIONER:
Dilip N. Shroff

RESPONDENT:
Joint Commissioner of Income Tax, Mumbai & Anr

DATE OF JUDGMENT: 18/05/2007

BENCH:
S.B. Sinha & P.K. Balasubramanyan

JUDGMENT:
J U D G M E N T

CIVIL APPEAL NO.  2746                   OF 2007
[Arising out of S.L.P. (Civil) No.26831 of 2004]

S.B. SINHA, J :

1. Leave granted.

2. The Appellant herein is an assessee under the Income Tax Act.  It is
an HUF.  For the assessment year 1998-99, an income of Rs.30,80,030/- was
declared by it, inter alia, showing a long term capital loss of Rs.34,12,000/- .
The said capital loss was said to have arisen on account of sale of property
being land and building known as 'Jekison Niwas', 220 Walkeshwar Road,
Mumbai.  Admittedly, the Appellant had 1/4th share therein.  It entered into
an agreement for sale of undivided 1/4th share in the said property for a sum
of Rs.8 crores with one M/s Layer Exports Pvt. Ltd..  For the purpose of
valuation of the said property, one Shri U.D. Chande, a registered valuer,
was appointed.  On 01.04.1981, the value of the said 1/4th share in the
property was determined at Rs. 2,52,00,000/-.  In the said valuation report, it
was stated that the purpose was valuation for computation of capital gains.
The report was filed in the prescribed form.  All the required particulars/
information were furnished.  In the said report, description of the property,
location thereof, whether situated in residential/commercial/mixed/industrial
area, and classification thereof were shown.  As regard, proximity to civic
amenities, it was stated that the plot is very close to "Raj Bhawan".  All
other amenities except cinema were within 1 k.m.  Means and proximity to
surface  communication by which the locality is served were also stated.  All
other requisite particulars, as specified, were stated.

3. After noticing that the total development  area of land is 4605 sq. yds
with an F.S.I. of 1.33, it was stated

"I am informed that the land was reserved for a vegetable
& retail market before 1965.  I am of the opinion that it is
possible to get this reservation modified or waived and
hence I consider the effect of this on the value of the
property negligible.  In any event there will be no loss of
F.S.I. even if reservation is retained for the purpose of
my valuation of share in the property.

Based on the sales instances the prices given in
"Accommodation Times" I am of the opinion and feel
that the rate of the Residential Apartment in the area in
1981 would be in between Rs.2500 to Rs.3000/- per
S.FT.    I think that the lower value of Rs.2500 per S.FT.
as fair and reasonable.

This rate will be fair and reasonable for the share of
property belonging to Late Mr. Natwarlal Shroff & Late
Mrs. Sonabai Shroff as the title of their holding is clear
and Marketable.

I am appointed to give value of the share of the property
belonging to the Late Mrs. Sonabai Shroff i.e. 1/4th share
of the property.

As regards (valuation of) 1/4th share of Mr. Bhagwandas
Dwarkadas Shroff and 1/4th share of Mr. Madhavdas
Dwarkadas I am informed that there is suit pending in
courts regarding title to the property and tenancy rights.
Each of the other holders will fetch the reports of
valuation for their respective shares separately.

In  1981 the cost of construction may be taken at
Rs.275/- per S.FT.   Further, considering the Builder's
Profit Rs.700/- per S.Ft. and deducting both the  value of
cost of construction and the Builder's profits from the
above stated works out to Rs.1,525/- per S.FT of saleable
area.  Considering that it is a jointly owned property, I
take it as fair and reasonable.

As these rate the value of the share of the property
belonging to late Mr. Natwarlal Shroff comes to -

16536.5 x 1525.00 = Rs.2,52,18,165.05

Say    Rs.2,50,00,000.00 .(I)

Though the building itself is old and dilapidated, I
consider the scrap value of it at Rs.50/- per S.FT.  As the
Built up area is 16000 S.FT., the scrap value of structure
comes to Rs.8,00,000.00.  The value of the share of Late
Mr. Natwarlal Shroff of this scrap value is
Rs,8,00,000.00.  The value of the share of Late Mr.
Natwarlal Shroff of this scrap value is

=  Rs. 2,00,000.00 .(II)

Therefore value of the property belonging to Late Mr.
Nartwarlal Shroff works out to (I)+(II).

Rs.2,50,00,000.00+Rs.2,00,000.00 = Rs.2,52,00,000.00

I therefore value the share of the above property
belonging to Late Mr. Natwarlal Shroff at
Rs.2,52,00,000.00
(Rs. Two Crore Fifty Two Lakhs Only) as on 1/4/81"

4. As regard existence of sale instances, however, although a sheet was
said to have been attached thereto, no such thing was done.  As against
column 40, namely, 'if sale instances are not available or not relied upon,
the basis of arriving at the land rate',  it was stated :

"In addition to Sales Instances & "Accommodation
Times" are used."


The Valuer in his report, inter alia, stated :

"When I inspected the premises I found the
building in a dilapidated condition.  In fact part of the
building has collapsed.  I am informed that in 1981 the
building was in similar condition I am therefore inclined
to consider only the scrap value of the building and the
value of only land as the basis of my valuation."



5. In the year 1997 by reason of a consent decree passed in Suit No.3845
of 1997, 1/4th undivided share in Jekison Niwas was sold and possession was
transferred to M/s Layer Export Pvt. Ltd. against final payment.

6. The return filed by the Appellant on 30.09.1998 came up for scrutiny
before the First Respondent, who in exercise of its power under Section 55A
of the Income Tax Act, 1961 (for short, 'the Act') referred the matter for
valuation of the said 1/4th undivided share of the Appellant as on 01.04.1981
to the District Valuation Officer; whereupon the District Valuation Officer
submitted a report dated 29.06.2000 wherein the 1/4th undivided share of the
Appellant in the said property as on 01.04.1981 was determined at
Rs.1,14,92,907, the basis whereof is said to be as under :

"Name of Property Land along with Bungalow
known    as    "Jekinson Niwas"
220-Walkeshwar Road,
Mumbai-400 006

1
Land Area as per records
5250 sq. yds.       =
4389.63 sq. mt.
2
Land rate adopted @
Rs.12842/- sq. mt.
(897/- x 1.33 x
10.764)

3
Consideration of land
component
 Rs.5,63,71,628 (A)
4
Built-up Area
existing as on 1-4.81
(Gr.+I upper floor
bungalow structures)
 16,000 sq. ft.
5
Salvage/Scrap value
(16000 sq. ft @
Rs.100/- sq. ft.) as
adopted by the Regd.
Valuer
Rs.16,00,000/- (B)
6
Total consideration
(A)+(B)
Rs.5,79,71,628/-
7
1/4th share of the
above (6)
consideration as Fair
Market Value
Rs.1,44,92,907/-

Say Rs.144.93 lakhs"


7. For the aforementioned purpose the land rate was taken at Rs.897/- sq.
ft. on the basis of the following sale instances :

"
Sl.
No.
Date of
Sale
Name of Property
Consideration
Area
Rate
1
27.11.79
Land Survey No. 218
(Pt) Street No.25, 27,
27(A) at Narayan
Dhabolkar Rd. Off N.S.
Rd., Mumbai
Rs.3,15,00,000/
7114.08
sq. mt.
Rs.4428/-
sq. mt.
2
19.10.82
Flat No.302, 3rd floor at
Sanudeep CHS Ltd. Plot
No.631 (Pt) at Altamount
Road, Mumbai
Rs.68,00,000/-
346.60
sq. mt.
Rs.1823/-
sq. ft.


By comparing and considering the sale instances property with the subject
property after taking into account size-shape, time-gap, location-situation and also the
factors like physical, social legal and economical, the land FSI rate as on 1.4.81 is Rs.897
sq. ft is considered to be fair and reasonable."



8. As regard the Registered Valuer's Report, whereupon the Appellant
relied upon, the District Valuation Officer commented :

"8.0 Comments on Regd. Valuer's report :

The assessee have submitted Regd. Valuer Shri Uday D
Chande's report dated 25.6.96 valuing the subject
property 1/4th share as Rs.2,52,00,000/- as on 1.4.81.
The Regd. Valuer has simply adopted the rates published
in local paper (Accommodation Times).  These rates
cannot be considered as authentic.  The valuer has not
based his valuation on any actual sales instance.  As
such, the Regd. Valuer's report cannot be accepted."


9. The First Respondent having regard to the aforementioned valuation
report of the District Valuation Officer passed an order of assessment on
08.08.2000 holding :


" The cost of acquisition as on 1.4.1981 is therefore, adopted
at Rs.1,44,92,907/- as per the report of the Dist. Valuation
Officer-II, Mumbai.  Accordingly, the Long Term Capital Gain
is worked out as under :

Less:
 Cost of acquisition as on 1.4.81 as per the
Dept. Valuer's report as discussed is Rs.
1,44,92,907
Indexed cost = 1,44,907 x 331
                                  100    

Rs.8,00,00,000


Rs.4,79,71,522
     3,20,28,478
Less
Expenses incurred in relation to
sale of property :
Solicitor's fees     :    Rs.2,50,000
Brokerage             :    Rs.8,00,000
                                   --------------
  LONG TERM CAPITAL GAINS



Rs. 10,50,000
 -------------------
Rs.3,09,78,478
 ===========



The claim of the assessee for deduction of Rs.22,200/- being
expenses incurred on account of fees paid to Uday Chande is
not admissible as it cannot be said to be related to sale of
property.  Accordingly, the same is not allowed.

6. Subject to the above remarks, the total income of the
assessee is computed as under :

Property Income :                     Rs
As per statement                  64,664
Long term Capital Gains :  
As discussed above 3,09,78,478
Income from Other Sources :
Interest income as per Statement             30,31,364
---------------
TOTAL INCOME 3,40,59,506
Rounded off 3,40,59,510

7. Assessed accordingly.  Give credit for prepaid taxes.
Charge interest u/s 234B and 234C.  Initiate penalty
proceedings u/s 271(1)(c) of the Act.  Issue demand notice and
challan."



10. Thus, in the said order, valuation of the land as made by the District
Valuation Officer was adopted and on the basis thereof long term capital
gain was determined to be Rs.3,09,78,478 by taking the valuation of the 1/4th
undivided share of the Appellant as Rs.1,44,92,907 as on 01.04.1981.  In
view of the said order of assessment, a show cause notice under Section 274
read with Section 271 of the Act was served to which a reply was filed by
the Appellant on or about 14.08.2000 claiming that there was no
concealment of income as all the details of property were submitted along
with the return of income and the difference in the matter of valuation of the
1/4th share of the appellant does not amount to concealment.  It was stated
therein :

"3. All the material facts in respect of the 1/4th share of
the  sale of property has been disclosed when the
return was filed.  It is the difference of opinion in
respect of value of the property as of 1.4.1981
between the Registered Valuer and Divisional
Valuation Officer with regard to value of the
property as of 1.4.1981 does not amount to
concealment.

4. The Valuation Report by the Divisional Valuer of
the department has been arrived at by using his
best judgment and perception.  The value
determined by him as of 1.4.1981 has been on the
basis of concepts and methods adopted by him,
without taking into account the objections and
suggestions made by the assessee.

The difference between the value as determined by
the Registered Valuer and Department's Divisional
Valuation Officer does not change the basis
character or the details of valuation, hence there is
no concealment whatsoever.  You are therefore
requested to drop the penalty proceedings initiated
u/s 271(1)(c) and oblige.

Our client for the sake of mental peace and in
order to co-operate with the Department does not
wish to go in to appeal and dispute the assessment
done by you.  He does not want to contest the
assessment completed by you.

He will pay the demand of Rs.94,97,657.00 as per
the demand notice and will show you the Challan
of having made the payment shortly.

*** *** ***

You are once against requested to decide the fate
of penalty U/s 271(1)(c) immediately as desired by
the assessee, since I am leaving the country for
good and intend to prefer an appeal against the
order of Penalty if passed."


11. The First Respondent, however, in his order dated 23.08.2000
purported to be in exercise of its power under Section 271(1)(c) of the Act,
held :

" The assessee, it would appear, has not filed an appeal
against the order under Section 143(3) of the Act and
hence the conclusions drawn as regards the computation
of total income in this case are  final .By no stretch of
imagination a property in a posh locality like
Walkeshwar, Mumbai would have resulted in loss after
substitution of indexed cost of acquisition.  The intention
of assessee in obtaining the valuation report is obviously
viewed in the context of assessee having returned loss
under the head Capital Gains In the circumstances,
the assessee is considered to have furnished inaccurate
particulars of income in respect of the amount added
under the head capital gains.  The amount of tax sought
to be evaded is worked out as per clause (a) to
Explanation 4 to Sec. 271(1)(c) of the Act at 20% of
Rs.3,43,90,478 i.e. Rs.68,78,095.  Accordingly, a
minimum penalty of Rs.68,78,095 is levied under Section
271(1)(c) of the Act."


12. The Appellant preferred an appeal thereagainst before the
Commissioner contending :

"..There is no concealment of particulars of income or
furnishing inaccurate particulars of such income nor there
is deemed income to represent the income in respect of
which particulars have been concealed."


13. The said  appeal was, however, dismissed by the Commissioner of
Income Tax by an order dated 13.11.2000 holding :

" To summarize differences between two reports
cannot be attributed universally to a single reason i.e.
difference of opinion.  I have already stated in case a
report is incorrect for any reason the assessee is expected
not to rely upon it because he cannot shift the burden of
concealment u/s 271(1)(c) to any other person who might
have helped him in the matter of preparation of the return
and drawing the statement of income.


It was further held :


" This is very strange way of valuing the land after first
arriving at the value of the building and deducting
therefrom the value of the superstructure instead of
directly calculating value of land with reference to sales
instances."

9. Secondly I find that the basis adopted by the
Registered Valuer to rely upon a newspaper is totally
unacceptable and does not conform to the accepted
principles of valuation.

10. As such the report is therefore unacceptable and at
clear variance with the accepted principles of valuation.
It is totally incorrect and wrong, if not outrageous.

11. I find the Departmental Valuer's report is based on
specific sales instances and computation of land value
which constituted the major portion of the report is based
on direct sales instances of land.  It is not a circuitous
method as adopted by the Registered Valuer."


14. The Appellant preferred an appeal before the Income Tax Appellate
Tribunal being aggrieved by and dissatisfied with the said order.  He also
affirmed an affidavit stating that he had honestly relied on the professional
advice of the Registered Valuer and  the Chartered Accountant and  had not
approached the Valuer for the purpose of obtaining the report at any
specified value in order to avoid paying taxes.  The Income Tax Appellate
Tribunal, however, dismissed the said appeal and confirmed the order of the
Commissioner of Income Tax by an order dated 10.08.2001, holding :

"It was also frankly admitted that the words "sales
instances" mentioned against Col. 40 of the report were
incorrectly mentioned.


It was further held :

"We are afraid that the above arguments cannot be
accepted what is enjoined upon the assessee is a duty to
make a correct and complete disclosure of his income
and not only of the material facts such as disclosure of
the details of the property and factum of sale thereof as in
the assessee's case.  As stated earlier the assessee
disclosed long term capital loss of Rs.34,12,000/- and
claimed carry forward thereof to the subsequent year as
against taxable long term capital gain of Rs.3,09,78,428/-
.  The disclosure made of the particulars of income in the
return under the head capital gain by the assessee is
certainly incorrect for which the impugned penalty is
exigible.  The assessee cannot take shelter under a report
of a registered valuer which is found by the revenue
authorities to have been prepared without due regard to
the accepted principles of valuation "
         

It was also held :

"Acceptance by the assessee of the value of his
share of property as on 1.4.1981 estimated in the DVO's
report for computation of capital gains is an important
factor to be noticed .In the case before us, the
difference in the valuation between the registered valuer
and the DVO arose on account of incorrect application of
the principles of valuation or non adherence thereto by
the registered valuer as against the valuation made by the
DVO as per accepted norms of valuation which
valucation has been accepted by the assessee.

As stated earlier, perusal of the orders of the
revenue authorities will make it abundantly clear that the
impugned penalty has been levied upon the assessee for
furnishing inaccurate particulars of income under the
main clause of sec.271(1)(c)."


15. Indisputably, the Appellant deposited a sum of Rs.68,78,095/- towards
penalty.  An appeal preferred by him before the High Court in terms of
Section 260A of the Act was dismissed in limine, stating :

"We are not persuaded by the submission of the
learned counsel for the assessee.  The revenue authorities
as well as the Income Tax Appellate Tribunal have
concurrently  held that the assessee furnished inaccurate
particulars.  This finding is based on the aspect that the
valuation report submitted by the assessee did not reflect
the correct cost of acquisition.  What is the market value
of the property as on 01.04.1981 is an aspect of the fact
and the value furnished by the assessee was held to be
factually incorrect.  If the computation of the long term
capital gains by the assessee was found to be wrong
obviously, the finding of the revenue authorities and the
Tribunal that the assessee furnished inaccurate particulars
cannot be faulted..."  


16. Mr. Anil B. Dewan, the learned Senior Counsel appearing on behalf
of the Appellant, would contend that the First Respondent in the order of
assessment, did not record his satisfaction that the assessee had concealed
the particulars of his income or   furnished inaccurate particulars which were
conditions precedent for initiating penalty proceeding under Section
271(1)(c) of the Act.  The show cause notice also was issued in a standard
form without deleting therefrom inappropriate words and paragraphs and it
showed total non-application of mind on the part of the Assessing Officer.  It
was contended that the penalty proceeding had been initiated on all possible
grounds although in the order of assessment the only ground taken was the
alleged furnishing of inaccurate particulars of income.  The Commissioner
of Income Tax as also the Income Tax Appellate Tribunal while passing the
impugned orders having failed to record any finding in their respective
orders that there had been any conscious act on the part of the Appellant in
furnishing the inaccurate particulars with intention to evade tax, the penalty
orders are vitiated in law.  The assessee having furnished all material facts
and furthermore having appointed a registered valuer recognized for the
purpose of valuation of property specifically under the provisions of the
Wealth Tax Act, cannot be said to have the requisite mens rea which is the
sine qua non for imposition of penalty.  It was argued that whereas the
registered valuer relied upon the figures mentioned in the Accommodation
Times, the Departmental Valuation Officer relied upon two sale instances,
one of the year 1979 (rate approximately Rs.500/- per sq. ft.) and another of
the year 1982 (rate  Rs.1,823/- per sq. ft.) and arrived at a  figure of Rs.897/-
per sq. ft. without any objective basis.  Valuation being based on estimate
and, thus, being a matter of opinion can always vary.  The Appellant having
availed the services of an expert, could not have gone into the correctness
thereof as has been observed by the Commissioner of Income Tax in his
impugned order.  In view of the fact that the explanation offered by the
assessee was bona fide, no penalty proceeding could have been initiated.

17. Mr. Gopal Subramanium, the learned Additional Solicitor General
appearing on behalf of the Respondents, on the other hand, would take us
through the legal history of the provision of section 271(1)(c) of the Act; and
furthermore draw our attention to the fact that neither the sheet showing the
sale instances had been annexed with the return nor the particulars thereof
had been furnished; and even no copy of the Accommodation Times had
been annexed, wherefrom it could be inferred that deliberate attempt had
been made on the part of the Appellant in providing inaccurate particulars.
It was submitted that the show cause notice issued by the authority will have
to be read with the order of assessment and so read it would appear that the
notice was issued upon due application of mind.  It was submitted that the
factors governing concealment of income and furnishing of inaccurate
particulars overlap with each other and as such it may not be possible for the
authority while issuing notice to specify whether it is a concealment of
income or furnishing of inaccurate particulars.  Existence of mens rea is no
longer an essential element for initiating the penalty proceeding having
regard to the amendments made in the Act.

18. Before adverting to the rival contentions, we may notice the legal
history of the provisions of Section 271(1)(c) of the Act.  In the Income Tax
Act, 1922, the provision for penalty was provided in Section 28(1)(c) which
dealt with the matter relating to imposition of penalty in the following terms
:
"28. Penalty for concealment of income or improper
distribution of profits. (1) If the Income Tax Officer,
the Appellate Assistant Commissioner or the Appellate
Tribunal in the course of any proceedings under this Act,
is satisfied that any person

(c)  has concealed the particulars of his income or
deliberately furnished inaccurate particulars of such
income "              


19. Interpreting the said provision some of the High Courts were of the
opinion that the burden of proof and the onus lay upon the department to
establish that the assessee was guilty of concealment of the particulars of
income and even if the assessee had given a false explanation, the same by
itself would not prove that the receipt necessarily constituted income of the
assessee.  However, some High Courts opined differently, holding that the
penalty proceeding is included in the expression 'assessment" and the true
nature of penalty had been held to be additional tax.

20. The said question came up for consideration before this Court in
Commissioner of Income Tax, West Bengal vs. Anwar Ali [(1970) 2 SCC
185], wherein it was held :


" The section is penal in the sense that its consequences
are intended to be an effective deterrent which will put a
stop to practices which the Legislature considers to be
against the public interest. It is significant that in C.A.
Abraham case this court was not called upon to
determine whether penalty proceedings were penal or of
quasi-penal nature and the observations made with regard
to penalty being an additional tax were made in a
different context and for a different purpose. It appears to
have been taken as settled by now in the sales tax law
that an order imposing penalty is the result of a quasi-
criminal proceedings: (Hindustan Steel Ltd. v. State of
Orissa7). In England also it has never been doubted that
such proceedings are penal in character; Fattorini
(Thomas) (Lancashire) Ltd. v. Inland Revenue
Commissioner "



21. In Commissioner of Income Tax, Ahmedabad v.  Gokuldas
Harivallabhas, [34 ITR 98], as regard onus of proof, it was opined :

"That the assessee has concealed the particulars of
his income or deliberately furnished inaccurate
particulars of such income and, therefore, the Department
must establish that the receipt of the amount in dispute
constitutes income of the assessee."


22. As regard the question as to whether a finding given in the order of
assessment  that particular receipt is income after rejecting the explanation
given by the assessee as false, would prima facie be sufficient for
establishing in proceedings under Section 28 that the disputed amount  was
the assessee's income, it was observed :

"6 It must be remembered that the proceedings under
Section 28 are of a penal nature and the burden is on the
Department to prove that a particular amount is a revenue
receipt.  It would be perfectly legitimate to say that the
mere fact that the explanation of the assessee is false
does not necessarily give rise to the inference that the
disputed amount represents income.  It cannot be said
that the  finding given in the assessment proceedings for
determining or computing the tax is conclusive.
However, it is  good evidence.  Before penalty can be
imposed the entirety of circumstances must reasonably
point to the conclusion that the disputed amount
represented income and that the assessee had consciously
concealed the particulars of his income or had
deliberately furnished inaccurate particulars."  


23. Vaidialingam, J. followed the said dicta in  Commissioner of Income
Tax v. M/s Khoday Eswarsa & Sons [(1971) 3 SCC 555], in the following
terms :

"19. From the above it is clear that penalty proceedings
being penal in character, the Department must establish
that the receipt of the amount in dispute constitutes
income of the assessee. Apart from the falsity of the
explanation given by the assessee, the Department must
have before it before levying penalty cogent material or
evidence from which it could be inferred that the assessee
has consciously concealed the particulars of his income
or had deliberately furnished inaccurate particulars in
respect of the same and that the disputed amount is a
revenue receipt. No doubt the original assessment
proceedings, for computing the tax may be a good item
of evidence in the penalty proceedings; but the penalty
cannot be levied solely on the basis of the reasons given
in the original order of assessment."


24. When the law stood thus, the new Income Tax Act in 1961 was
enacted wherein Section 271(1)(c) was couched in the following language :
"271.  Failure to furnish returns, comply with notices,
concealment of income, etc. (1) If the Income-tax
Officer or the Appellate Assistant Commissioner in the
course of any proceedings under this Act, is satisfied that
any person

(a)
(b)

(c) has concealed the particulars of his income or
deliberately furnished inaccurate particulars of such
income,
he may direct that such person shall pay by way of
penalty, -
(i)
(ii)
(iii) in the cases referred to in clause (c), in
addition any tax payable by him, a sum which shall not
be less than twenty per cent, but which shall not exceed
one and a half times the amount of the tax, if any, which
would have been avoided if the income as returned by
such person had been accepted as the correct income."  

25. An amendment thereto was carried out in the year 1964, where by and
whereunder the word 'deliberately' occurring in clause (c) of Section 271 (1)
was omitted and an explanation was inserted thereto; as a result whereof the
said provision reads thus :

"271.  Failure to furnish returns, comply with notices,
concealment of income, etc. (1) If the Income-tax
Officer or the Appellate Assistant Commissioner in the
course of any proceedings under this Act, is satisfied that
any person
(a)
(b)

(c) has concealed the particulars of his income or
furnished inaccurate particulars of such income.

"Explanation.- Where the total income returned by any
person is less than eighty per cent of the total  income
(hereinafter in this Explanation referred to as the correct
income) as assessed under section 143 or section 144 or
section 147 (reduced by the expenditure incurred bona
fide by him for the purpose of making or earning any
income included in the total income but which has been
disallowed as a deduction), such person shall, unless he
proves that the failure to return the correct income did
not arise from any fraud or any gross or willful neglect
on his part, be deemed to have concealed the particulars
of his income or furnished inaccurate particulars of such
income for the purposes of clause ( c) of this sub-
section."

26. While the things stood thus, the Government of India appointed a
Committee of Experts headed by Justice Wanchoo, the former Chief  Justice
of India, and in his report, it was observed  :

"2.75. Several persons who appeared before us urged the
need  for deleting the Explanation to clause (c) of sub-
section (1) of section 271 of the Income Tax Act, 1961,
for various reasons.  The primary objection against this
Explanation is that it is being invoked indiscriminately
and penalty proceedings are initiated in all cases where
the income shown in the return is less than eighty per
cent of the assessed income.

This Explanation was introduced in order to cast on the
assessee the burden of proving that the omission to
disclose true income did not proceed from any fraud, or
gross or willful neglect.  A similar Explanation was also
introduced in the Wealth-tax Tact, 1957.  This was sequel
to the recommendation made by the Direct Taxes
Administration Enquiry Committee (1958-59), based on
a similar provision in the United Kingdom law.  We
understand that in a number of cases that came up on
appeal, the appellate authorities were not inclined to
uphold the penalties imposed on the basis of this
Explanation, since they were of the view that the
Department will still under obligation to prove the
concealment.  The difference between the assessed
income and the returned income can be due to a variety
of reasons some technical, like estimate of gross profit
and others purely arithmetical and in our opinion,  it
would not be correct to initiate proceedings in every case
where the difference exceeds twenty per cent.  In the
United Kingdom itself, the provision on which this
Explanation was based has not been dropped.  In any
event, if past experience is any indication, we feel that
the Explanation has failed to serve any useful purpose.
On the other hand, it has resulted in unwarranted
harassment to the taxpayers, and too much of paper work
caused by indiscriminate initiation of penalty
proceedings and consequent appeals.

We recommend that Explanation to clause (c) of sub-
section (1) of section 271 of the Income-tax Act, 1961,
and also Explanation I to clause (c) of sub-section (1) of
section 18 of the Wealth Tax Act, 1957, may be deleted.

2.76.  While we are of the view that penalties should not
be draconian, we also strongly feel that those who are
tempted to resort to concealment of income should not be
allowed to get away with tenuous legal interpretations.
We would recommend the following changes in the
Income Tax Act in this regard :

(a) Presumption of concealment where explanation
found false Several officers of the Department invited
our  attention to the Supreme Court's decision in the case
of Commissioner of Income-tax, West Bengal v. Anwar
Ali (76 ITR 696).  It has been held by the Court that
penalty for concealment of income cannot be imposed
merely because the explanation given by an assessee is
found to be false.  While this decision was given in the
context of clause (c) of sub-section (1) of section 28 of
the Indian Income Tax Act, 1922, it is not reasonably
certain that it would not apply to penalties under the
Income Tax Act, 1961.  We would, therefore,
recommend as a measure of abundant caution, that an
Explanation to sub-section (1) of section 271 of the
Indian Income Tax Act, 1961, may be inserted to clarify
that where a taxpayer's explanation in respect of any
receipt, deposit, outgoing or investment is found to be
false, the amount represented by such receipt, etc., shall
be deemed to be income in respect of which particulars
have been concealed or inaccurate particulars have been
furnished within the meaning of clause  (c) of sub-section
(1)  of section 271 of the Income Tax Act, 1961."      

27. In the year 1975 by reason of Section 61 of the Taxation Laws
(Amendment) Act, 1975, Explanation to Section 271(1)(c) was deleted and
four Explanations were inserted with effect from 01.04.1976.  Section 271(c)
reads as follows :

"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

(a)

(b)

(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, -

Explanation 1.- Where in respect of any facts
material to the computation of the total income of any
person under this Act, or

(A) such persons failed to offer an explanation
or offers an explanation which is found by the Income
Tax Officer or the appellate Assistant Commissioner to
be false, or

(B) such person offers an explanation which he
is not able to substantiate,
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 concealed :

Provided that nothing contained in this explanation
shall apply to a case referred to in Clause (B) in respect
of any amount added or disallowed as a result of the
rejection of any explanation offered by such person, if
such explanation is bona fide and all the facts relating to
the same and material to the computation of his total
income have been disclosed by him.

Explanation 2 .
Explanation 3 .

Explanation 4.  For the purpose of clause (iii) of this sub-
section, the expression "the amount of tax sought to be
evaded".

(a) in any case where the amount of income in
respect of which particulars have been concealed or
inaccurate particulars have been furnished exceeds the
total income assessed means the tax that would have been
chargeable on the income in respect of which particulars
have been concealed or inaccurate particulars have been
furnished had such income been the total income;

(b) in any case to which Explanation 3 applies,
means the tax on the total income assessed;

(c) in any other case, means the difference
between the tax on the total income assessed and the tax
that would have been chargeable had such total income
been reduced by the amount of income in respect of
which particulars have been concealed or inaccurate
particulars have been furnished."

28. The provision which is relevant for the purpose of this case, namely,
Assessment year 1998-99, 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 -  

(a) [omitted]

(b)  

(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, -

(i) [omitted]

(i)

in the cases referred to in clause (c), in addition to tax, if
any, 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 Commissioner (Appeals) or the Commissioner 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 concealed.

Explanation 2 .
Explanation 3 .

Explanation 4.- For the purposes of clause (iii) of this
sub-section, the expression "the amount of tax sought to
be evaded",-

(a) in any case where the amount of income in respect
of which particulars have been concealed or inaccurate
particulars have been furnished has the effect of reducing
the loss declared in the return or converting that loss into
income, means the tax that would have been chargeable
on the income in respect of which particulars have been
concealed or inaccurate particulars have been furnished
had such income been the total income;

(b) in any case to which Explanation 3 applies, means
the tax on the total income assessed;

(c) in any other case, means the difference between
the tax on the total income assessed and the tax that
would have been chargeable had such total income been
reduced by the amount of income in respect of which
particulars have been concealed or inaccurate particulars
have been furnished."  

28. Explanation 1, therefore, is applicable to the facts of the case.
29. The correctness of the orders passed by the Assessing Officer,
Commissioner of Income Tax as also the Income Tax Appellate Tribunal
must be judged in the aforementioned context.

30. We have noticed hereinbefore that the main contention raised on
behalf of the revenue justifying the levy of penalty against the Appellant,
inter alia, is that although as against Item No.38 of the report, a sheet was
purported to have been attached but in fact the same had not been done and
furthermore no land rate was adopted for valuation and as against Item
No.40 in addition to the Accommodation Times, which was a local
newspaper, no other sale instance was taken, and even a copy thereof had
not been furnished; nor the sale instances had been mentioned.  The
explanation of the assessee was that in the instant case, Explanation to
Section 271(1)(c) was never invoked.

31. Section 271(1)(c) of the Act is in two parts.  Whereas the first part
refers to concealment of income, the second part refers to furnishing of
inaccurate particulars thereof.  In the instant case, the penalty has been
levied upon the Appellant under the second part of Section 271(1)(c) of the
Act.  One of the questions which arises for consideration is as to whether
Explanation 1 is applicable in respect of both the parts or in respect of the
first part only.

32. Let us also assume that later part of clause (c) of Section 271(1) did
not invite any investigation into whether it was done deliberately or willfully
or not; but let us leave final consideration of this nicety of application
thereof in a more appropriate case and apply the element of deliberation in
the fact of the present case.

33. However, according to the assessee the omission to annex the sheet as
mentioned against column No. 38 as also to enclose a copy of the
'Accommodation Times" was a clerical error and no significance could have
been attached thereto inasmuch no sale instance was relied upon by the
Valuer and, thus, by reason thereof no inaccurate particulars thereof can be
said to have been furnished.  It is not a case where the Appellant is alleged to
have concealed the income as the authorities proceeded on the basis that the
penalty was to be levied upon the Appellant only on the ground of furnishing
inaccurate particulars.

34. We are not oblivious that some decisions point out that the principles
of Mens Rea may have application only in certain categories of cases Some
of which are::
  In Sherras v. De Rutzen (1895) 1 QB 918, it was suggested that Mens
Rea is an essential ingredient in every offence except in three cases;
i) Cases not criminal in any real sense but which in the public
interest are prohibited under a penalty, e.g. Revenue Acts;
ii) Public Nuisances
iii) Cases criminal in form but which are really only a summary
mode of enforcing a civil right.
  In 85, Corpus Juris Secundum, Paragraph 1023, it is stated :
"A penalty imposed for a tax delinquency is a civil
obligation, remedial and coercive in it's nature,
and is for different from the penalty for a crime or
a fine or forfeiture provided as punishment for the
violation of criminal or penal laws."
In Director of Enforcement v. MCT M Corp. Pvt. Ltd. [(1996) 2 SCC
471] it was suggested that what applies to "tax delinquency" equally holds
good for the "blame worthy" conduct for the contravention of the provision
of FERA.  In Addl. CIT v. Dargapandarinath Taljayya and Co. (1977) 107
ITR 850, it was suggested that Section 271(1)(a) does not take in mens rea
which forms part of Section 276 C which creates offence of willful failure.
This was the view taken in Gujarat Travancore Agency v. CIT (1989) 177
ITR 455 (SC)
In Lim Chin Aik v. The Queen (1963) Appeal Cases 160, notices that
where "public welfare offences" are concerned, there was a presumption of
strict liability and the presumption of mens rea was displaced.  In Ummali
Umma v. Inspecting Assistant Commissioner of Income Tax [64 ITR 669
(Kerala)], it was stated :
"I cannot say that the penalty imposed under
Section 28 of the repealed Act or under Section
371 of the Act was or is imposed on the basis that
it was or is an offence.  For the offence
punishment was or is prescribed such as
imprisonment, fine or both.  The imposition of
penalty on the basis of an act or omission by an
assessee is not because the act or omission
constitutes an offence, but because that act or
omission would constitute an attempt at evasion.
Therefore, penalty is exacted not because an act or
omission is an offence but because it is an attempt
at evasion of tax on the part of the assessee."


  Stallybrass in (1936) The Law Quarterly Review at page 66 suggests
that :
"In the case of modern statutory offences the
maxim has no general application and the statutes
are to be regarded as themselves prescribing the
mental element which is a pre-requisite to a
conviction.  The learned author suggests that much
of the confusion can be avoided if reference to
mens rea in modern statutory offences is avoided."


35. Thus, it appears that there is distinct line of authorities which clearly
lay down that in considering a question of penalty, mens rea is not a relevant
consideration.  Even assuming that when the statute says that one is liable
for penalty if one furnishes inaccurate particulars, it may or may not by itself
be held to be enough if the particulars furnished are found to be inaccurate is
anything more needed but the question would still be as to whether reliance
placed on some valuation of an approved valuer and, therefore, the
furnishing of inaccurate particulars was not deliberate, meaning thereby that
an element of mens rea is needed before penalty can be imposed, would
have received serious consideration in the light of a large number of
decisions of this Court.

36. The question, however, in a case of this nature, would be whether it
was a fit case where discretionary jurisdiction was properly exercised or not.      

37. The legal history of Section 271(1)(c) of the Act traced from the 1922
Act prima facie shows that explanations were applicable to both the parts.
However, each case must be considered on its own facts.  The role of
explanation having regard to the principle of statutory interpretation must be
borne in mind before interpreting the aforementioned provisions.  Clause  (c)
of sub-section (1) of Section 271 categorically states that the penalty would
be leviable if the assessee conceals the particulars of his income or furnishes
inaccurate particulars thereof.  By reason of such concealment or furnishing
of inaccurate particulars alone, the assessee does not ipso facto become
liable for penalty.  Imposition of penalty is not automatic.  Levy of penalty
not only is discretionary in nature but such discretion is required to be
exercised on the part of the Assessing Officer keeping the relevant factors in
mind.  Some of those factors apart from being inherent in the nature of
penalty proceedings as has been noticed in some of the decisions of this
Court, inheres on the face of the statutory provisions.  Penalty proceedings
are not to be initiated, as has been noticed by the Wanchoo Committee, only
to harass the assessee. The approach of the assessing officer in this behalf
must be fair and objective.
38. Clause (iii) of sub-section (1) of Section 271 again provides for a
discretionary jurisdiction upon the assessing authority inasmuch as the
amount of penalty may not be less than the amount of tax sought to be
evaded by reason of such concealment of particulars of his income, but it
may not exceed three times thereof.  The factors which are material for the
purpose of computation of total income as is sought to be emphasized in
Explanation-1,  refer to computation of income on the part of the assessee
which is directly relatable to  : (a) failure to offer an explanation and/ or
offering an explanation which is false; and (b)  which he is not able to
substantiate and fails to prove that such explanation is bona fide.

 39. Only in the event the factors enumerated in clauses (A) and (B) of
Explanation-1 are satisfied and a finding in this behalf is arrived at by the
Assessing Officer, the legal fiction created thereunder would be attracted.

40. For the purpose of invoking Clause (iii) of sub-section (1) of Section
271, the expression "amount of tax sought to be evaded" is set out in
Explanation 4.  This sub-clause would be attracted when a finding is
arrived at that some amount of tax was sought to be evaded by the assessee
as envisaged by Clause (a) thereof.  Explanation appended to Section 271
(1)(c) is an exception to the general rule.  It raises a legal fiction by reason
whereof a presumption is raised against an assessee as a result whereof the
burden of proof shifts from the department to the assessee.  Legal fiction,
however, as is well-known must be given its full effect when the conditions
precedent therefor are satisfied and not otherwise.  [Ashok Leyland Ltd. v.
State of T.N. and Another, (2004) 3 SCC 1]

41. What would be the scope of such 'explanation' has been considered
by this Court in S. Sundaram Pillai, etc. v. V.R. Pattabiraman [AIR 1985 SC
582] wherein object of the explanation is stated in the following terms :

"53. Thus, from a conspectus of the authorities
referred to above, it is manifest that the object of an
Explanation to a statutory provision is
"(a) to explain the meaning and intendment of the Act
itself,
(b) where there is any obscurity or vagueness in the
main enactment, to clarify the same so as to make it
consistent with the dominant object which it seems to
subserve,
(c) to provide an additional support to the dominant
object of the Act in order to make it meaningful and
purposeful,
(d) an Explanation cannot in any way interfere with or
change the enactment or any part thereof but where some
gap is left which is relevant for the purpose of the
Explanation, in order to suppress the mischief and
advance the object of the Act it can help or assist the
Court in interpreting the true purport and intendment of
the enactment, and
(e) it cannot, however, take away a statutory right
with which any person under a statute has been clothed
or set at naught the working of an Act by becoming an
hindrance in the interpretation of the same.""

[See also Swedish Match AB and Another v. Securities & Exchange
Board of India and Another, (2004) 11 SCC 641]

42. If the ingredients contained in the main provisions as also the
explanation appended thereto are to be given effect to, despite deletion of the
word 'deliberate', it  may not be of much significance.

43. The expression "conceal" is of great importance.  According to Law
Lexicon, the word "conceal" means:

"to hide or keep secret.  The word "conceal" is con+celare which implies to hide.  It means to hide or
withdraw from observation; to cover or keep from
sight; to prevent the discovery of; to withhold
knowledge of.  The offence of concealment is,
thus, a direct attempt to hide an item of income or
a portion thereof from the knowledge of the
income tax authorities."

  In Webster's Dictionary, "inaccurate" has been defined as:
"not accurate, not exact or correct; not according
to truth; erroneous; as an inaccurate statement,
copy or transcript."

44. It signifies a deliberate act or omission on the part of the assessee.
Such deliberate act must be either for the purpose of concealment of income
or furnishing of inaccurate  particulars.

  45. The term 'inaccurate particulars' is not defined.  Furnishing of an
assessment of value of the property may not by itself be furnishing of
inaccurate particulars.   Even if the explanations are taken recourse to, a
finding has to be arrived at having regard to clause (a) of Explanation 1 that
the Assessing Officer is required to arrive at a finding that the explanation
offered by an assessee, in the event he offers one, was false.   He must be
found to have failed to prove that such explanation is not only not bona fide
but all the facts relating to the same and material to the income were not
disclosed by him.  Thus, apart from his explanation being not bona fide, it
should have been found as of fact that he has not disclosed all the facts
which was material to the computation of his income.

46. The explanation, having regard to the decisions of this Court, must be
preceded by a  finding as to how and in what manner he furnished the
particulars of his income.  It is beyond any doubt or dispute that for the said
purpose the Income Tax Officer must arrive at a satisfaction in this behalf.
[See Commissioner of Income Tax v. Ram Commercial Enterprises Ltd.,
246 ITR 568 and Diwan Enterprises v. Commissioner of Income Tax, 246
ITR 571]

47. It is furthermore of some significance that the Commissioner in its
order dated 30.11.2000 made a terse comment that the assessee cannot shift
the burden of concealment to any other person, meaning thereby, the
registered valuer.  He, furthermore, made a comment that the registered
valuer had adopted a strange way of valuing although no reason, far less
than sufficient or cogent reason, has been assigned in support thereof.  The
said comments were unwarranted.

48. Primary burden of proof, therefore, is on the revenue.  The statute
requires satisfaction on the part of the assessing officer.  He is required to
arrive at a satisfaction so as to show that there is primary evidence to
establish that the assessee had concealed the amount or furnished inaccurate
particulars and this onus is to be discharged by the department.  [See D.M.
Manasvi v. Commissioner of Income Tax, Gujarat,-II  [(1973) 3 SCC 207]

49. While considering as to whether the assessee has been able to
discharge his burden, the assessing officer should not begin with the
presumption that he is guilty.

50. Once the primary burden of proof is discharged, the secondary burden
of proof would shift on the assessee because the proceeding under Section
271(1)(c) is of penal nature in the sense that its consequences are intended to
be an effective deterrent which will put a stop to practices which the
Parliament considers to be against the public interest and, therefore, it was
for the department to establish that the assessee shall be guilty of the
particulars of income.  [See Anwar Ali (supra) and M/s Khoday Eswarsa
(supra)].

51. The order imposing penalty is quasi-criminal in nature and, thus,
burden lies on the department to establish that the assessee had concealed his
income.  Since burden of proof in penalty proceedings varies from that in the
assessment proceeding, a finding in an assessment proceeding that a
particular receipt is income cannot automatically be adopted, though a
finding in the assessment proceeding constitute good evidence in the penalty
proceeding.  In the penalty proceedings, thus, the authorities must consider
the matter afresh as the question has to be considered from a different angle.
[See Anantharam Veerasinghaiah & Co. v. C.I.T., Andhra Pradesh, 1980
Supp SCC 13].

52. The Appellant herein in the penalty proceedings had produced
relevant particulars to show that they were materials in support of the report,
although a part of which was not annexed with the report.

53. Before, thus, a penalty can be imposed, the entirety of the
circumstances must reasonably point to the conclusion that the disputed
amount represented income and that the assessee had consciously concealed
the particulars of his income or had furnished inaccurate particulars thereof.

54. We have noticed hereinbefore that the quantum of penalty has been
increased from time to time under the 1922 Act.  Maximum penalty which
could be imposed was only 20% of the tax sought to be evaded whereas, in
terms of the provisions as it stands now, the penalty can be imposed to the
extent of three times of the tax sought to be evaded.

55. It is now a well-settled principle of law that more stringent the law,
more strict construction thereof would be necessary.  Even when the burden
is required to be discharged by an assessee, it would not be as heavy as the
prosecution.  [See P.N. Krishna Lal and Others v. Govt. of Kerala and
Another, 1995 Supp (2) SCC 187]

56. It is one thing to say that the valuation based on a newspaper is totally
unacceptable, but it is another thing to say that by reason of the return, the
assessee furnished inaccurate particulars.  The question which was inter alia
required to be posed was whether the method adopted by the registered
valuer was wholly unknown to law or was contrary to all modes of
valuation.  Whether the particulars sought to have been concealed were
necessary for the purpose of arriving at a correct valuation or otherwise
misleading?  Whether the method of valuation adopted by the registered
valuer resulted in a grossly unfair valuation which could not have been done
by any reasonable person?  Was the methodology adopted totally wrong?

57. The methods of valuation, as we know, may be different.  A registered
valuer is supposed to know as to which method or mode should be adopted
for the purpose of valuing particular land or a building having regard to a
large number of factors involved therein.  The tax on capital gains does not
envisage that the valuation given must be true and exact market value.  Even
the market value of a property may be found to be different having regard to
the locale thereof.  There was no direct sale instance.  The sale instances
relied upon by the District Valuer were of 1979 and 1982.

58. In Union of India v. Pramod Gupta (Dead) By LRs. and Others
[(2005) 12 SCC 1], this Court observed:

"24. While determining the amount of
compensation payable in respect of the lands
acquired by the State, the market value therefor
indisputably has to be ascertained. There exist
different modes therefor.
25. The best method, as is well known, would be
the amount which a willing purchaser would pay to
the owner of the land. In absence of any direct
evidence, the court, however, may take recourse to
various other known methods. Evidences
admissible therefor inter alia would be judgments
and awards passed in respect of acquisitions of
lands made in the same village and/or
neighbouring villages. Such a judgment and award,
in the absence of any other evidence like the deed
of sale, report of the expert and other relevant
evidence would have only evidentiary value."

It was further observed:

"78. We have earlier noticed that one of the modes
of computing the market value may be based on a
judgment or award in respect of acquisition of
similar land, subject of course to such increase or
decrease thereupon as may be applicable having
regard to the accepted principles laid down
therefor and as may be found applicable."


59. This Court therein noticed a large number of decisions where different
principles of arriving at a market value have been noticed but it has also
been noticed that even while determining market value under the Land
Acquisition Act, some guess-work may be inevitable.

60. It is furthermore interesting to note that this Court in D.M. Manasvi
(supra) categorically opined that it would be the satisfaction of the Income
Tax Officer in the course of the assessment proceedings regarding the
concealment of income which would constitute the basis of foundation of the
proceedings for levy of penalty.  It was furthermore observed :


"It may also be observed that what is contemplated by
Sections 271 and 274 of the Act is that there should be,
prima facie, satisfaction of the Income Tax Officer or the
Appellate Assistant Commissioner in respect of the
matters mentioned in sub-section (1) before he hears the
assessee or gives him an opportunity of being heard. The
final conclusion on the point as to whether the
requirements of clauses (a), (b) and (c) of Section 271(1)
have been satisfied would be reached only after the
assessee has been heard or has been given a reasonable
opportunity of being heard."

61. It may be true that the legislature has attempted to shift the burden
from revenue to the assessee.  It may further be correct that different views
have been expressed as regard construction of statutes in the light of the
changing legislative scenario, but the tenor of a penal proceeding remains
the same.

62. At this juncture, we may examine the question as to the effect of the
amendments carried out in Section 271(c) of the Act and for the said purpose
we may notice a few decisions of this Court.

63. In Sadhu Singh vs. District Board [(1969) RCR 156] while upholding
the notification of exemption granted in favour of the District Board, before
this Court a distinction was sought to be made that whereas in the Madras
Act which was applicable in the case of P.J. Irani vs. State of Madras
[(1962) 2 SCR 169], the expression used was "unreasonable eviction of
tenants"; in the Punjab Act, the expression used was "eviction of tenants".
But this Court found no distinction between the two Acts as one of the
objects of the Acts was eviction of unreasonable tenants and the expression
"unreasonable" thus was held to be read in the title of the Rent Act.

64. It is interesting to note that this Court  in The Workmen of M/s
Firestone Tyre & Rubber Co. of India P. Ltd. v. The Management and
Others [AIR 1973 SC 1227], despite insertion of Section 11A in the
Industrial Disputes Act, 1947 by reason of the Industrial Disputes
(Amendment) Act, 1971, held :


" At the time of introducing Section 11-A in the Act,
the legislature must have been aware of the several
principles laid down in the various decisions of this Court
referred to above. The object is stated to be that the
Tribunal should have power in cases, where necessary, to
set aside the order of discharge or dismissal and direct
reinstatement or award any lesser punishment "

65. The omission of the word "deliberate", thus, may or may not be of
much significance but what is material is its application.

66. Section 271(1)(c) remains a penal statute.  Rule of strict construction
shall apply thereto.  Ingredients of imposing penalty remains the same.  The
purpose of the legislature that it is meant to be deterrent to tax evasion is
evidenced by the increase in the quantum of penalty, from 20% under the
1922 Act to 300% in 1985.

67. 'Concealment of income' and 'furnishing of inaccurate particulars'
are different.  Both concealment and furnishing inaccurate particulars refer
to deliberate act on the part of the assessee.  A mere omission or negligence
would not constitute a deliberate act of suppressio veri or suggestio falsi.
Although it may not be very accurate or apt but suppressio veri would
amount to concealment, suggestio falsi would amount to furnishing of
inaccurate particulars.

68. The authorities did not arrive at a finding that the consideration
amount fixed for the sale of property was wholly inadequate.  The
authorities also do not show that what are the inaccurate particulars
furnished by the Appellant.  They also do not state that what should have
been the accepted principles of valuation.  We, therefore, do not accept the
submissions of the learned Additional Solicitor General that concealment or
furnishing of inaccurate particulars would overlap each other, the same
would not mean that they do not represent different concepts.  Had they not
been so, the Parliament would not have used the different terminologies.

 69. We have noticed hereinbefore that even the Wanchoo Committee laid
emphasis on the fact that explanation appended to Sub-section (1) of Section
271 should be inserted to clarify that where a tax payer's explanation in
respect of any receipt, deposit, outgoing or investment is found to be false,
the amount represented by such receipt, etc. shall be deemed to be income in
respect of which particulars have been concealed or inaccurate particulars
have been furnished.  What was, therefore, necessary to be found out in
respect whereof the assessing officer was required to arrive at a satisfaction
was 'falsity' in furnishing of explanation by the assessee.  Explanation 1,
therefore, categorically states that such explanation must either be false or
not otherwise substantiated.  Even in explanation 4, the expression
"evaded" finds place.
70. In Commissioner of Income Tax v. Mussadilal Ram Bharose [(1987)
2 SCC 39], this Court while holding that the onus would lie on the assessee
to discharge the same, in the case, the difference between the income
returned and income assessed was less than 80%, meaning thereby, a
rebuttal presumption arose against the assessee, opined :

"10. It is clear that if the Income Tax Officer and the
Appellate Assistant Commissioner were satisfied that the
assessee had concealed the particulars of his income or
furnished inaccurate particulars of such income, he can
direct that such person should pay by a penalty the
amount indicated in sub-clause (ii) of clause (c) of
Section 271(1) of the Act. Before the amendment,
difficulty arose and it is not necessary to trace the history,
under the law as stood prior to the amendment of 1964,
the onus was on the revenue to prove that the assessee
had furnished inaccurate particulars or had concealed the
income. Difficulties were found to prove the positive
element required for concealment under the law prior to
amendment; this positive element had to be established
by the revenue. To obviate that difficulty the Explanation
was added. The effect of the Explanation was that where
the total income returned by any person was less than 80
per cent of the total income assessed, the onus was on
such person to prove that the failure to file the correct
income did not arise from any fraud or any gross or
wilful neglect on his part and unless he did so, he should
be deemed to have concealed the particulars of his
income or furnished inaccurate particulars, for the
purpose of Section 271(1). The position is that the
moment the stipulated difference was there, the onus that
it was not the failure of the assessee or fraud of the
assessee or neglect of the assessee that caused the
difference shifted on the assessee but it has to be borne in
mind that though the onus shifted, the onus that was
shifted was rebuttable. If in an appropriate case the
Tribunal or the fact-finding body was satisfied by the
evidence on the record and inference drawn from the
record that the assessee was not guilty of fraud or any
gross or wilful neglect and if the revenue had not
adduced any further evidence then in such a case the
assessee cannot come within the mischief of the section
and suffer the imposition of penalty. That is the effect of
the provision."
.
71. The said decision was followed in Commissioner of Income Tax,
Madras  v. K.R. Sadayappan [(1990) 4 SCC 1].

72. In the proceedings under the Income Tax Act, there would be cases
and cases of imposition of tax; capital gains being only one of them.  It is not
disputed that the registered valuers are appointed in terms of the provisions
of the Wealth Tax Act, 1957.  Sections 16A thereof provides for reference to
Valuation Officer.
73. In terms of sub-section (2) of Section 16A, the Valuation Officer may
serve a notice upon the assessee.  Sub-section (4) thereof empowers the
Valuation Officer to serve a notice on the assessee intimating the value
which he proposes to estimate and giving the assessee an opportunity to state
when he is of the opinion that the value of the asset is higher than the value
declare in the return made by him.  The Valuation Officer in terms of Wealth
Tax Act, therefore, is conferred with a statutory power.
74. Section 34AB occurring in Chapter VIIB of the Act provides for
registration of valuers.  For the purpose of such a registration, the valuer
must possess the qualifications prescribed in that behalf.  Certain conditions
are also imposed in terms of the Act while registering such valuation.

75. Rule 8A lays down the qualifications of registered valuers.  Rule 13 of
the said rules provides that a registered valuer can be deregistered if the
circumstances so warrant.
76. It is in the aforementioned premise, provisions of the Act, the
imposition of tax relating to 'capital gain' are required to be taken into
consideration. Section 48 of the Act, inter alia, provides that the income
chargeable under the head "capital gains" shall be computed by deducting
full value of the consideration received or accruing as a result of transfer of
capital assets the following amounts, namely, the cost of the acquisition of
the assets and cost of any improvement  thereto.  The second proviso
appended to the said section provides for indexed cost.  Such methodology
for valuing the property for the purpose of  capital gains by way index cost is
taken recourse to having regard to the rate of inflation in mind.
Explanations (iii) and (v) of the second proviso appended thereto also play
an important role which are as under :
"(iii) "indexed cost of acquisition" means an amount
which bears to the cost of acquisition the same proportion
as Cost Inflation Index for the year in which the asset is
transferred bears to the Cost Inflation Index for the first
year in which the asset was held by the assessee or for
the year beginning on the 1st day of April, 1981,
whichever is later;"
"(v) "Cost Inflation Index", in relation to a previous year,
means such Index as the Central Government may,
having regard to seventy-five per cent of average rise in
the Consumer Price Index for urban non-manual
employees for the immediately preceding previous year
to such previous year, by notification in the Official
Gazette, specify, in this behalf."

77. Yet again Section 55(2)(b) refers to 'any other capital asset' in the
following terms :
"(b) in relation to any other capital asset,--]
(i) where the capital asset became the property of the
assessee before the 1st day of April, [1981], means the
cost of acquisition of the asset to the assessee or the fair
market value of the asset on the 1st day of April, [1981],
at the option of the assessee;
(ii) where the capital asset became the property of the
assessee by any of the modes specified in sub-section(1)
of section 49, and the capital asset became the property
of the previous owner before the1st day of April, [1981],
means the cost of the capital asset to the previous owner
or the fair market value of the asset on the 1st day of
April, [1981], at the option of the assessee ;
(iii) where the capital asset became the property of the
assessee on the distribution of the capital assets of a
company on its liquidation and the assessee has been
assessed to income-tax under the head "Capital gains" in
respect of that asset under section 46, means the fair
market value of the asset on the date of distribution:

78. Section 55A of the Act provides for reference to Valuation Officer.  A
bare perusal of the said provision will clearly go to show that the reference
to a Valuation Officer is optional.  The said provision is for the purpose of
making an estimate.  Such reference is made, if in the opinion of the
Assessing Officer the value of the assets as claimed by the assessee in
accordance with the estimate made by a registered valuer is less than its fair
market value.  Clause (b) of Section 55A refers to any other case which goes
to show that the assessee had two options, namely, to get the value of the
assets prepared through index value or take any other known mode of
valuation.

79. The assessee could get the valuation done through any other mode of
index value, or the assessee could have engaged any other valuer other than
a registered valuer also.  In the instant case, the assessee had chosen to
obtain the opinion of a registered valuer.

80. The registered valuer has arrived its opinion on certain basis.  He
while making the valuation report, disclosed all the particulars.  He disclosed
that he had chosen to the index value method.  He did not rely upon any sale
instance.  He might have referred to the valuation of the property as
mentioned in a local newspaper.   But it is not in dispute that he did not
furnish any inaccurate particulars.  It is true that he has not enclosed the
sheet showing sale instance but nothing turns out thereupon as he had not
relied upon any sale instances.

81. There can be a genuine difference of opinion between two experts.
The District Valuer, as noticed hereinbefore, having regard to the sale
instances of 1979 wherein the value of the land was fixed at Rs.500/- per sq.
ft., took notice of the fact that the valuation in terms of another sale instance
of 19.10.1982 wherein the land was valued at about Rs. 1823/- per sq. ft.  A
valuation was to be arrived at on 01.04.1981.  He picked up a figure of
Rs.897/- per sq. ft.   No reason had been assigned in support thereof.  No
other or further sale instances had been given.  We do not know as to
whether any other sale instances were available.  He merely stated that such
valuation had been arrived at after taking into account the time size-shape,
time gap, location-situation and also the factors like physical, social, legal
and economical.  Some other officer could have picked up holes in the said
report.  On the other hand, the opinion of the registered valuer, as would
appear from the report, was that he had taken into consideration the value of
the shop as Rs.1525/- per sq. ft.

82. A duty may be enjoined on the assessee to make a correct disclosure
of income but if such disclosure is based on the opinion of an expert, who is
otherwise also a registered valuer having been appointed in terms of a
statutory scheme, only because his opinion is not accepted or some other
expert gives another opinion, the same by itself may not be sufficient for
arriving at a conclusion that the assessee has furnished inaccurate
particulars.
83. It is of some significance that in the standard proforma used by the
Assessing Officer in issuing a notice despite the fact that the same postulates
that inappropriate words and paragraphs were to be deleted, but the same
had not been done.  Thus, the Assessing Officer himself was not sure as to
whether he had proceeded on the basis that the assessee had concealed his
income or he had furnished inaccurate particulars.  Even before us, the
learned Additional Solicitor General while placing the order of assessment
laid emphasis that he had dealt with both the situations.

84. The impugned order, therefore, suffers from non-application of mind.
It was also bound to comply with the principles of natural justice.  [See
Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, Kerala State,
(2000) 2 SCC 718]

85. We have, however, noticed hereinbefore that the Income Tax Officer
had merely held that the assessee is guilty of furnishing of inaccurate
particulars and not of concealment of income; which finding was arrived at
also by the Commissioner of Income Tax and the Income Tax Appellate
Tribunal.

86. In  K.C. Builders and Another v. Assistant Commissioner of Income
Tax [(2004) 2 SCC 731], this Court formulated the following questions for
consideration :.

"8. On the above pleadings and facts and
circumstances of the case, the following questions of law
arise for consideration by this Court:
(a) Whether a penalty imposed under Section
271(1)(c) of the Income Tax Act and prosecution under
Section 276-C of the Income Tax Act are simultaneous?
(b) Whether the criminal prosecution gets quashed
automatically when the Income Tax Appellate Tribunal
which is the final court on the facts comes to the
conclusion that there is no concealment of income, since
no offence survives under the Income Tax Act thereafter?
(c) Whether the High Court was justified in
dismissing the criminal revision petition vide its
impugned order ignoring the settled law as laid down by
this Court that the finding of the Appellate Tribunal was
conclusive and the prosecution cannot be sustained since
the penalty after having been cancelled by the
complainant following the Income Tax Appellate
Tribunal's order no offence survives under the Income
Tax Act and thus the quashing of the prosecution is
automatic?
(d) Whether the finding of the Income Tax Appellate
Tribunal is binding upon the criminal court in view of the
fact that the Chief Commissioner and the assessing
officer who initiated the prosecution under Section 276-
C(1) had no right to overrule the order of the Income Tax
Appellate Tribunal? More so when the Income Tax
Officer giving the effect to the order cancelled the
penalty levied under Section 271(1)(c)?
(e) Whether the High Court's order is liable to be set
aside in view of the errors apparent on record?

In K.C. Builders  (supra), this Court noticed the dictionary meaning of
the explanation and held :

"4. The respondent assessing authority treated the
difference between the income as per original return and
revised income as concealed income. The Assistant
Commissioner of Income Tax levied penalties under
Section 271(1)(c) of the Income Tax Act, 1961
(hereinafter referred to as "the Act") for all the aforesaid
four assessment years. Accordingly, penalty proceedings
were initiated. The first appeal against the order of
penalties levied for concealment of income against the
appellants were confirmed by the CIT (Appeals). As per
the directions of the Chief Commissioner of Income Tax,
four complaints were filed in the Court of the Additional
Chief Metropolitan Magistrate, Egmore, Chennai for
offences under Sections 276-C(2), 277 and 278-B of the
Act and Sections 120-B, 34, 193, 196 and 420 of the
Indian Penal Code."
87. The learned Additional Solicitor General, however, submitted that
although on the facts of the case the decision rendered is correct but the view
of the court that unless there is some evidence to show or some
circumstances found from which it can be gathered that the omission was
attributable or the part of the assessee to conceal his income so as to evade
income tax thereon may not correct.  As at present advised, we do not intend
to go into the said question; as in the facts and circumstances of the case,
there are enough material to show that the action on the part of the appellant
may not be said to be such which would attract the penal provision under
Section 271(1)(c) of the Act.    
88. For the reasons aforementioned, the impugned judgment cannot be
sustained.  It is set aside accordingly.  The appeal is allowed.  However, in
the facts and circumstances of this case, there shall be no order as to costs.