Judgment :- ARIJIT PASAYAT, C.J. Pursuant to the direction given by this Court in O.P. No. 7138 of 1991S, the following question has been referred for opinion in terms of s. 256(2) of the IT Act, 1961 (in short the 'Act'), by the Income-tax Appellate Tribunal, Cochin Bench (in short 'the Tribunal') "Whether, on the facts and in the circumstances of the case and also in the light of the findings in the quantum appeal, the Tribunal was justified in setting aside the order of penalty ?" A brief reference to the factual aspects would suffice. Assessee is a partnership firm, which during the relevant period i.e., asst. yr. 1983-84 was having abkari contracts in and around Quilon. Premises of the firm, and the residence of its partners were searched by the Departmental authorities on 14th February, 1984. Certain incriminating materials were found, on the basis of which further investigations were carried out. Since the materials found by the Departmental authorities disclosed suppressions, assessee approached the Department for a settlement of the income-tax liability of the firm and its partners. Several rounds of discussions were held. It is to be noted that by the time of the search, return for the concerned asst. yr. 1983-84 had been filed. On 29th March, 1985, four of the partners wrote a letter to the AO agreeing for an addition of Rs. 41 lakhs, but indicated that they were agreeable for such addition only if penal provisions were not applied. From the letter dt. 29th March, 1985 it is evident that the partners agreed to accept Rs. 41 lakhs as additional profit for the concerned assessment year. The ITO wrote a letter to the assessee suggesting that it may file a revised return since the amount involved was substantial. Assessee filed a revised return adding Rs. 41 lakhs to the income already disclosed. Assessment was accordingly completed. Penalty proceedings were also initiated. Assessee preferred appeal questioning the correctness of the addition made as well as the penalty levied before the Tribunal, after the appeals before the Commissioner of Income-tax [in short 'the CIT(A)] were dismissed. So far as levy of penalty is concerned Tribunal did not consider the case of the assessee on merits, but proceeded on the ground that after having agreed not to initiate penalty proceedings it is not open to the Revenue to initiate penalty proceedings. So far as levy of penalty is concerned Tribunal did not consider the case of the assessee on merits, but proceeded on the ground that after having agreed not to initiate penalty proceedings it is not open to the Revenue to initiate penalty proceedings. The concept of promissory estoppel was pressed into service. The addition of Rs. 41 lakhs was upheld in the appeal relating to the quantum of addition. Learned standing counsel for the Revenue submitted that there was in fact no agreement as was presumed by the Tribunal. In any event, there cannot be an estoppel against a statute. Learned counsel for the assessee, on the other hand, submitted that the AO having agreed not to initiate penal proceedings, should not have imposed penalty merely on the ground that some amount was offered for addition. Reference is made to the letter of the assessee and the response of the ITO in this regardTribunal has proceeded to decide the matter by bringing in concept of promissory estoppel. So far as the plea relating to promissory estoppel is concerned, as indicated above, great emphasis is laid on the practice relating to earlier years and it is submitted with emphasis that sudden withdrawal of the benefit is barred by the principles of promissory estoppel. The principle of promissory estoppel is that where one party has by his word or conduct made to the other a clear and unequivocal promise or representation which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have been taken place between the parties. The doctrine of promissory estoppel is now well established one in the field of administrative law. The foundation for the claim based on the principle of promissory estoppel in public law was laid by Lord Denning in 1948 in Robertson vs. Minister of Pensions : 1949 1 K.B. 227. Prof. De Smith in his "Judicial Review of Administrative Action" (4th Edn. The foundation for the claim based on the principle of promissory estoppel in public law was laid by Lord Denning in 1948 in Robertson vs. Minister of Pensions : 1949 1 K.B. 227. Prof. De Smith in his "Judicial Review of Administrative Action" (4th Edn. at p. 103) observed that "the citizen is entitled to rely on their having the authority that they have asserted." Doctrine of 'Promissory estoppel' has been evolved by the Courts, on the principles of equity, to avoid injustice 'Estoppel' in Black's Law Dictionary, is indicated to mean that a party is prevented by his own acts from claiming a right to the detriment of other party who was entitled to rely on such conduct and has acted accordingly. Sec. 115 of the Indian Evidence Act is also, more or less, couched in a language which conveys the same expression'Promissory estoppel' is defined as in Black's Law Dictionary as 'an estoppel which arises when there is a promise which promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of promise, and which does induce such action or forbearance, and such promise is binding if injustice can be avoided only by enforcement of promise.' These definitions in Black's Law Dictionary which are based on decided cases, indicate that before the rule of 'Promissory estoppel' can be invoked, it has to be shown that there was a declaration or promise made which induced the party to whom the promise was made to alter its position to its disadvantage In this backdrop, let us travel a little distance into the past to understand the evolution of the doctrine of 'Promissory estoppel' Dixon J., an Australian jurist, in Grundt vs. The Great Boulder (Ptv.) Gold Mines Ltd. 1938 59 CLR 641, laid down as under It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. Although substantially such a statement is correct and leads to misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were desorted that led to it." The principle, set out above, was reiterated by Lord Denning in Central London Properties Ltd. vs. High Trees House Ltd. 1947 KB 130, when he stated as under"A promise intended to be binding, intended to be acted upon, and in fact acted upon is binding ......." Lord Denning approved the decision of Dixon, J. (supra) in Central Newhury Car Auctions Ltd. vs. Unity Finance Ltd. 1956 3 All ER 905. Apart from propounding the above principle on judicial side, Lord Denning wrote out an article, a classic in legal literature, on "Recent Developments in the Doctrine of Consideration", Modern Law Review, Vol. 15, in which he expressed as under "A man should keep his word. All the more so when the promise is not a bare promise but is made with the intention that the other party should act upon it. Just a contract is different from tort and from estoppel, so also in the sphere now under discussion promises may give rise to a different equity from other conduct The difference may lie in the necessity of showing 'detriment'. Where one party deliberately promises to waive, modify or discharge his strict legal rights, intending the other party to act on the faith of promise, and the other party actually does act on it, then it is contrary, not only to equity but also to good faith, to allow the promisor to go back on his promise. It should not be necessary for the other party to show that he acted to his detriment in reliance on the promise. It should be sufficient that he acted on it." This principle has been evolved by equity to avoid injustice. It is neither in the realm of contract nor in the realm of estoppel. It should not be necessary for the other party to show that he acted to his detriment in reliance on the promise. It should be sufficient that he acted on it." This principle has been evolved by equity to avoid injustice. It is neither in the realm of contract nor in the realm of estoppel. Its object is to interpose equity shorn of its form to mitigate the rigour of strict law. In Union of India vs. Indo Afgan Agencies AIR 1968 SC 718, it was inter alia observed as follows "We are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set up no person may be deprived of his authority of law, if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the law common or statute-the Courts will be competent to and indeed would be bound to protect the rights of the aggrieved citizens."It was further held in its summing up thus "Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, not claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen." In Century Spinning & Manufacturing Co. Ltd. vs. Ulhasnagar Municipal Council 1970 3 SCR 854, this doctrine of promissory estoppel against public authorities was extended thus "This Court refused to make a distinction between a private individual and a public body so far as the doctrine of promissory estoppel is concerned." In Motilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar Pradesh & Ors. 1979 2 SCR 641, the doctrine of promissory estoppel was applied to the executive action of the State Government and also denied to the State of the doctrine of executive necessity as a valid defence. It was held that in a republic governed by rule of law, no one high or low, is above the law. 1979 2 SCR 641, the doctrine of promissory estoppel was applied to the executive action of the State Government and also denied to the State of the doctrine of executive necessity as a valid defence. It was held that in a republic governed by rule of law, no one high or low, is above the law. Every one is subject to the law as fully and completely as any other and the Government is no exception. The Government cannot claim immunity from the doctrine of promisory estoppel. Equity will, in a given case where justice and fairness demands, prevent a person from exercising on strict legal rights even where they arise not in contract, but on his own title deed or in statute. It is not necessary that there should be some pre-existing contractual relationship between the parties. The parties need not be in any count of legal relationship before the transaction from which the promissory estoppel takes its origin. The doctrine would apply even where there is no pre-existing legal relationship between the parties, but the promise is intended to create legal relations and effect a legal relationship which will arise in future. It was further held that it is indeed pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned. The former is equally bound as the latter. Therefore, the Government cannot claim any immunity from the doctrine of promissory estoppel and it cannot say that it is under no obligation to act in a manner, i.e. fair and just or that it is not bound by the considerations of honesty and good faith. In fact, the Government should be held a high standard of rectangular rectitude while dealing with citizens. Since the doctrine of promissory estoppel is an equitable doctrine, it must yield where the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the promise and enforce the promise against the Government. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the promise and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government should be held bound by the promise made by it. But the Government must be able to show that in view of the fact as has been transpired, public interest would not be prejudiced. Where the Government is required to carry out the promise the Court would have to balance, the public interest in the Government's carrying out the promise made to the citizens, which helps citizens to act upon and alter his position and the public interest likely to suffer if the promises were required to be carried out by the Government and determine which way the equity lies. It would not be enough just to say that the public interest requires that the Government would not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. In order to resist its liability the Government would disclose to the Court the various events insisting its claim to be except from liability and it would be for the Court to decide whether those events are such as to render it equitable and to enforce the liability against the GovernmentIt is equally settled law that the promissory estoppel cannot be used compelling the Government or a public authority for having regard to the facts as they have transpired that it would be inequitable to held the Government or public authority to carry out a representation or promise which is prohibited by law or which was devoid of the authority or power of the officer of the Government or the public authority to make. Doctrine of promissory estoppel being on equitable doctrine, it must yield place to the equity, if larger public interest so requires, and if it can be shown by the Government or public authority for having regard to the facts as they have transpired that it would be inequitable to hold the Government or public authority to the promise or representation made by it. The Court on satisfaction would not, in those circumstances raise the equity in favour of the persons to whom a promise or representation is made and enforce the promise or representation against Government or the public authority. These aspects were highlighted by the apex Court in Vasantkumar Radhakishan Vora vs. The Board of Trustees of the Port of Bombay AIR 1991 SC 14, STO & Anr. vs. Shree Durga Oil Mills & Anr. 1997 (7) SCALE 726 and Dr. Ashok Kumar Maheshwari vs. State of U.P. & Anr. 1998 (2) Supreme 100 It is the settled position in law that there cannot be estoppel against a statute. There is no provision in the statute which permits a compromise assessment. The above position was indicated by the apex Court in Union of India vs. Banwari Lal Agarwal 1999 156 CTR (SC) 300 : 1999 238 ITR 461 (SC). It cannot be laid down as the principle of universal application that whenever an assessment has been completed by accepting the offer of an assessee, no penalty can be imposed. It has not been so, observed by the apex Court in Sir Shadilal Sugar & General Mill Ltd. vs. CIT 1987 64 CTR (SC) 199 : 1987 168 ITR 705 (SC) : TC 50R.300, as Tribunal held. Its conclusion has been arrived at by a clear misappreciation of the ratio laid down in the said caseIt is for the Department to consider the explanation offered by the assessee in respect of an amount which was offered to be taxed. It is not automatic that whenever an amount has been offered by the assessee, penalty is to be levied. Therefore, in the penal proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including a particular item of income in its return, though it may have offered the amount to be taxed subsequently. Therefore, in the penal proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including a particular item of income in its return, though it may have offered the amount to be taxed subsequently. If such an explanation is offered, the Department has to examine its acceptability and record a finding as to whether the explanation is acceptable or not. Only if the explanation is not found acceptable, the question of penalty will arise. In other words, the explanation of the assessee has to be considered on merits. Tribunal has not kept this aspect in view Learned counsel for the parties suggested that the matter may be remitted back to the Tribunal for consideration of the explanation of the assessee already filed and if any to be filed. Though scope of reference jurisdiction is limited, we accept the suggestion and remit the matter back to the Tribunal for fresh consideration on merits. It is open to the parties to place such materials in addition to those already produced, for disposal of the matter The reference is answered accordingly.