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2008] 305 ITR 29 [2007] 162 TAXMAN 317 (MP) HIGH COURT OF MADHYA PRADESH, INDORE BENCH Deputy Commissioner of Income-tax* v. Chirag Metal Rolling Mills Ltd. S.K. KULSHRESHTHA AND N.K. MODY, JJ. IT APPEAL NO. 35 OF 1999 AUGUST 31, 2006 Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment years 1989-90 and 1990-91 - Whether assessee is at liberty to show his bona fides in penalty proceedings; if assessee fails to show his bona fides, in that case penalty can be imposed by revenue - Held, yes - Whether where Tribunal deleted penalty under section 271(1)(c) holding that onus was on revenue to prove mala fide even when primary onus was on assessee to prove that there was no concealment in view of Explanation 1 to section 271(1)(c), matter was to be remanded back to Tribunal to pass fresh order after hearing parties keeping in view law laid down by Apex Court in matter K.P. Madhusudhanan v. CIT [2001] 251 ITR 99/ 118 Taxman 324 - Held, yes FACTS The assessee-company had made purchases in cash. The Assessing Officer made addition under section 40A(3) of the amounts surrendered by the assessee. On appeal, the Commissioner (Appeals) dismissed the appeal on the ground that these additions were made on account of surrender made by assessee during the course of assessment. Consequently, penalty under section 271(1)(c) had been levied. Commissioner (Appeals) cancelled the penalty. On revenue's appeal, the Tribunal dismissed the appeal holding that the onus was on the revenue to prove mens rea. HELD Explanation 1 to section 271 has been substituted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. According to which if a person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false or offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and all the facts relating to the same 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 purpose of clause (c) of this…

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