ARIJIT PASAYAT, C.J.

Pursuant to direction given by this Court in O.P. No. 17983 of 1993, following question has been referred under s. 256(2) of the IT Act, 1961 (in short 'the Act'), by the Income-tax Appellate Tribunal, Cochin Bench (in short 'the Tribunal') for opinion of this Court

"Whether the Tribunal was right in law and fact in cancelling the penalty under s. 271(1)(c) of the IT Act ?"

Factual position as indicated in the statement of case is as follows: Originally, assessee had filed a return of income for the concerned assessment year, i.e., 1981-82, declaring a total income of Rs. 23, 560 on 10th October, 1981, and assessment was completed under s. 143(1) on 25th January, 1984. On 28th January, 1996, there was a search in the premises of the assessee under s. 132 of the Act. On 8th December, 1987, assessee filed a return showing a sum of Rs. 1, 00, 000 as income under the head 'Other sources', in addition to the income already assessed. As there was no scope for filing a revised return after completion of assessment, AO ignored the return but nevertheless issued a notice under s. 148 of the Act. A return was filed in response to it. In the reassessment there was an addition to the extent of Rs. 1, 03, 250 as against Rs. 1, 00, 000 returned by the assessee as "income from other sources". The AO initiated penalty proceedings under s. 271(1)(c) of the Act. Assessee submitted his explanation stating that since prior to the service of notice under s. 148, a revised return had been filed admitting an additional income of Rs. 1, 00, 000 and he had agreed to the addition of Rs. 1, 03, 250, there was no scope for initiation of penalty proceedings. The AO did not accept the explanation and levied penalty. On appeal, the CIT(A), Calicut, affirmed the conclusions of AO. He held that the return which was filed offering additional income was not voluntary and assessee was forced to admit the additional income in view of the detection of the deposits by the AO in the course of the assessment proceedings for the asst. yr. 1982-83, and even if the return was filed voluntarily, as claimed, that did not absolve the assessee of the liability to penaltyIn second appeal, Tribunal held that the return was filed before detection of any concealment and that since there was an agreed addition, the question of assessee being required to explain the sources of investments or credits did not arise. Therefore, penalty levied was cancelled. Reliance was placed on a decision of the apex Court in Sir Shadilal Sugar and General Mills Ltd. vs. CIT 1987 64 CTR (SC) 199 : 1987 168 ITR 705 (SC) : TC 50R.300

Since the application under s. 256(1) of the Act was not entertained by the Tribunal, prayer for reference was made in the original petition, and as aforesaid direction was given

Senior standing counsel for the Revenue submitted that the approach of the Tribunal is erroneous and factual aspects have not been appreciated in the proper perspective. Learned counsel for the assessee, on the other hand, submitted that on analysing the factual position, Tribunal has arrived at its conclusion and, therefore, no question of law arises

Tribunal seems to have proceeded on the footing that whenever there is an agreed addition, there can be no levy of penalty as the assessee is not expected to explain sources of investments or credits. On a bare reading of the decision of the apex Court in Sir Shadilal Sugar and General Mills case (supra) on which Tribunal has relied, this proposition is not culled out. There is no general principle laid down in the said case that whenever addition is made on an amount offered by assessee to be added, there cannot be any levy of penalty, or that assessee is not required to explain sources. The actual position in law is that merely because the assessee had agreed to the assessment, that cannot automatically bring in levy of penalty. If the assessee offers an explanation, the Revenue authorities have to consider the accepta