JUDGMENT V.G. Sabhahit, J.—This appeal is filed by the Revenue being aggrieved by the order passed by the Income Tax Appellate Tribunal, Bangalore Bench (hereinafter called "the Tribunal") in I. T. A. No. 43/Bang/2000, wherein the Tribunal by order dated December 23, 2005, has directed the Assessing Officer to cancel the order of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter called as "the Act"). This appeal has been admitted on February 28, 2007. 2. Though four substantial questions of law have been framed in the appeal memorandum, having regard to the contentions urged by the learned Counsel appearing for the parties in this appeal, the only substantial question of law that arises for determination in this appeal is whether the order cancelling the penalty imposed under Section 271(1)(c) of the Act without giving a finding about the satisfactory cause shown by the assessee is perverse and arbitrary and calls for interference in this appeal. In the return filed by the assessee for the assessment year 1994-95 deduction was claimed in respect of contribution to the pension scheme for Rs. 13,82,078 and interest on penalty charges levied for excess consumption of electricity. However, on consideration of the return after issuing notice under Section 143(2) of the Act, the assessee appeared and assessment was completed by disallowing the said deduction. Thereafter, penalty proceedings were initiated under Section 271(1)(c) of the Act. The Assessing Officer on considering the cause shown by the assessee passed the assessment order. Accordingly, being aggrieved by some of the deductions that were disallowed, the assessee preferred appeal in I. T. A. No. 34/HPT/CIT (A) HBL/97-98/BGM/97-98 before the Commissioner of Income Tax (Appeals) and the appellate authority by order dated September 23, 1999, held that the assessee had furnished inaccurate particulars of income within the meaning of Section 271(1)(c) read with Explanation 1 by claiming unfounded deductions and he was liable to pay penalty under Section 271(1)(c) read with Explanation 4(a) thereto. Hence, penalty proceedings were initiated and the Commissioner of Income Tax (Appeals), Hubli by order dated December 22, 1999, held that the explanation offered by the assessee could not be accepted regarding the deductions which had been claimed of its contribution to the pension scheme and interest on penal charges levied for excess consumption of electricity, in view of the fact that payment of pension had not been made under the provisions of Section 43B and accordingly imposed penalty with reference to the total income of Rs. 43,80,610 as referred to above. Being aggrieved by the said order passed by the appellate authority, the assessee preferred I. T. A. No. 43/Bang/2000 which was clubbed with other appeals and the Tribunal by order dated December 23, 2005, partly allowed the appeal and directed the Assessing Officer to cancel the order of penalty imposed by the impugned order. Being aggrieved by the said order of the Tribunal in so far as it relates to cancellation of the order of penalty, this appeal is filed by the Revenue under Section 260A of the Act contending that the Tribunal has not at all applied its mind as to whether the cause shown could be accepted for exemption of penalty under Explanation 1 to Section 271(1)(c) of the Act and in the absence of non-consideration of the same, the order of the Tribunal is perverse and arbitrary and the finding of the Tribunal is based upon assumptions and presumptions. 3. We have heard the learned Counsel appearing for the appellant and the learned Counsel for the respondent and we answer the substantial question of law in the affirmative in favour of the Revenue and hold that the matter is liable to be remitted to the Tribunal for fresh consideration of the case for the following reasons: 4. It is clear from the perusal of the provisions of Section 271(1)(c) of the Act that if the Commissioner of Income Tax (Appeals) or the Assessing Officer in the course of any proceeding is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, penalty can be imposed. It is clear from the perusal of the provisions of Section 271(1)(c) of the Act that if the Commissioner of Income Tax (Appeals) or the Assessing Officer in the course of any proceeding is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, penalty can be imposed. However, under Explanation 1 such penalty can be imposed only if the person fails to offer an explanation or offers an explanation which is found by the Commissioner of Income Tax (Appeals) to be false or offers an explanation which he is not able to substantiate and fails to prove such explanation is bona fide and all the facts relating to the same and material to computation of total income have been disclosed by him. Unless there is a finding in that regard as to whether the cause shown in response to the notice for imposition of the penalty is acceptable it is found that the cause shown cannot be accepted, found to be false or the cause is not substantiated or the explanation is not bona fide, penalty can be imposed and wherefore it is necessary to consider the cause shown by the assessee in response to the notice under Section 271(1)(c) of the Act. Mere perusal of the order passed by the Tribunal would clearly show that the Tribunal has proceeded on the basis in paragraph 12 of its order impugned in this appeal that imposition of penalty under Section 271(1)(c) is not automatic and they do not find any material in support of the observation of the Assessing Officer that the assessee had furnished inaccurate particulars of income. At best it may be a case of wrong claim made by the assessee which was rejected by the authorities below. The said observations clearly show that the Tribunal has not at all applied its mind to the cause shown by the assessee. In the present case, it is not the Assessing Officer but it is the appellate authority who initiated the proceedings under Section 271(1)(c) of the Act and the Tribunal proceeds on the basis that the Assessing Officer has imposed penalty and directed the Assessing Officer to cancel the order of penalty. In the present case, it is not the Assessing Officer but it is the appellate authority who initiated the proceedings under Section 271(1)(c) of the Act and the Tribunal proceeds on the basis that the Assessing Officer has imposed penalty and directed the Assessing Officer to cancel the order of penalty. In any view of the matter since the conditions required to be considered under Explanation 1 to Section 271(1)(c) before imposing penalty as to the satisfaction and otherwise of the cause shown in the absence of any finding after consideration of the cause shown by the assessee that the explanation is found to be false or is not substantiated or is not bona fide or penalty could not have been set aside and imposition of penalty ordered to be cancelled by the Tribunal and wherefore, the impugned order passed by the Tribunal is perverse and arbitrary and cannot be sustained in the eye of law and the Tribunal being the final authority on the question of fact as this Court cannot consider the question of fact, it is appropriate that the matter is remitted to the Tribunal for fresh disposal of the appeal in accordance with law. Accordingly, we pass the following order: 5. The appeal is allowed. We answer the substantial question of law in favour of the Revenue. The order passed by the Tribunal dated December 23, 2005 in I. T. A. No. 43/Bang/2000 is restored and remitted to the file of the Tribunal for fresh disposal of the appeal in accordance with law.