Mere agreement to addition of undisclosed income does not amount to concealment of income for the purpose of levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.

K. A. THANIKKACHALAM J.

Pursuant to the direction of this court on October 27, 1981, in TCP. No. 143 of 1981, the Tribunal referred the following two questions for the opinion of this court:

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding and had valid materials to hold that no penalty under section 271(1)(c) could be levied in the assessee's case on the ground that there was no material to show that the assessee had offered the credits of Rs. 15, 000 for assessment as his undisclosed income ?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in not considering and pronouncing upon the grounds Nos. 4 and 5 raised in the grounds of appeal filed by the Department?"

The assessee filed his return for the assessment year 1973-74 admitting loss of Rs. 41, 689. The Income-tax Officer noticed that there were two cash credits totalling Rs. 15, 000 during the financial year ended on March 31, 1973. The Income-tax Officer enquired regarding the source, but the assessee agreed to the addition of the above sum as income from undisclosed sources. The Income-tax Officer also initiated penalty proceedings under section 271(1)(c) of the Act in respect of the above addition. The assessee replied to the penalty notice that he had readily agreed to the addition of Rs. 15, 000 and hence the penalty should not be levied. On appeal, before the Appellate Assistant Commissioner, the assessee submitted that the entries of the sum of Rs. 15, 000 in the capital account were made by mistake by the accountant, who was new to the job, that the assessee had made gifts of Rs. 10, 000 and Rs. 5, 000 each to his brother and wife and the accountant by mistake had recorded the same as cash credits instead of gifts. The assessee further argued that the tax effect was only Rs. 337 and that there was no mens rea, that he had not admitted that it was his concealed income, but only agreed to the addition of Rs. 15, 000 in the assessment. The Appellate Assistant Commissioner agreed with the assessee that the Income-tax Officer has not established that it is the concealed income of the assessee and held that no penalty is leviable, relying on the decision of the Supreme Court in the case of CIT v. Anwar Ali 1970 (76) ITR 696, 1970 AIR(SC) 1782, 1970 (2) SCC 185, 1971 (1) SCR 446, 1970 UPTC 594. Aggrieved, the Department preferred a second appeal before the Tribunal. The Tribunal was of the view that on the basis of the agreed addition alone penalty under section 271(1)(c) cannot be levied. The Tribunal relied upon the decision in the case of Anwar Ali 1970 (76) ITR 696, 1970 AIR(SC) 1782, 1970 (2) SCC 185, 1971 (1) SCR 446, 1970 UPTC 594 (SC). The Tribunal further pointed out that apart from the fact that the assessee agreed for the assessment of undisclosed income, the Department has not brought on record any material to point out that there is any concealment on the part of the assessee. Thus, the Tribunal agreed with the Appellate Assistant Commissioner in cancelling the penalty levied under section 271(1)(c) of the Act.

Before us, learned standing counsel appearing for the Department submitted that the fact that the assessee had agreed for the assessment of undisclosed income itself would be sufficient for the levy of penalty under section 271(1)(c) of the Act. In order to support this contention, reliance was placed upon a decision of this court rendered in the case of CIT v. Krishna and Co. 1979 (120) ITR 144, 1979 (13) CTR 24, 1979 (13) CTR(Mad) 24. In the above decision, this court applied the principle laid down by the Bombay High Court in the case of Western Automobiles (India) v. CIT 1978 (112) ITR 1048and held that in a case where the assessee himself has admitted that the amount represented his own income, no further evidence would be necessary to show that it was the amount which represented his income and it represented his concealed inco