JUDGMENT : K.S. Jhaveri, J. 1. By way of this Appeal, the Appellant - Department has challenged the judgment and order dated 13.06.2008 of the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' in ITA No. 278/Ahd./2004 for the Assessment Year :1992-1993. 2. While admitting the matter on 27.08.2009, the following substantial question of law was framed by the Court for consideration:- "Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by the CIT(A) and thereby canceling the penalty imposed u/s. 271(1)(c) of the Act, when quantum additions stood confirmed?" 3. The facts of the case are as under:- "The assessee is a company engaged in the manufacturing and sale of cloth. In the above case, an order imposing minimum penalty u/s.271(1)(c) of the Act, i.e. Rs. 21,06,225/- was passed by the Assessing Officer on 28.03.2003 for furnishing inaccurate particulars. The assessee filed an Appeal before the CIT (Appeals) against the above order of the Assessing Order but the CIT (Appeals) confirmed the order of penalty. Aggrieved by the order of the CIT (Appeals), the assessee filed an Appeal before the Appellate Tribunal whereby the Appellate Tribunal deleted the penalty imposed u/s. 271(1)(c) of the Act." 4. Learned Counsel for the appellant - Department Mr. Nitin K. Mehta has submitted that the Tribunal has seriously committed an error in deleting the penalty imposed u/s. 271(1)(c) of the Act inasmuch as the decision to impose penalty was taken on account of submission of inaccurate particulars by the assessee. Therefore, it is submitted that both the Assessing Officer and CIT (Appeals) were justified in imposing penalty on the assessee as books of accounts were not produced. 5. On the other hand, learned Counsel for the respondent - assessee has submitted that the Assessing Officer had issued the notice to assessee and relevant part reads as follows:- "2. As revealed from the independent inquiries conducted by the DDIT, Calcutta with M/s. Rahul & Co., a share-broker through whom the transactions relating to purchase and sale of 10 lakh units had been entered into by you, M/s. Rahul & Co. had given loan of Rs. 20,40,000/- to you on 1-6-1991 which has been subsequently repaid by you in the month of July 1991. 3. had given loan of Rs. 20,40,000/- to you on 1-6-1991 which has been subsequently repaid by you in the month of July 1991. 3. However, on going through the details filed in Form No. 3C (Audit Report u/s. 44AB of the Act), no where the name of M/s. Rahul & Co., appeared in the said report and in the annexure attached to this report. This means that you have suppressed this amount and not entered in the books of accounts as maintained by you. Please state your reasons so to why this amount of Rs. 20,40,000/- should not be taxed in your hands u/s. 68 of the Act treating the same as unexplained cash credit in your hands." 5.1. It is submitted that the ITAT in Paragraph 10 of its judgment and order had observed the various entries qua the books of accounts of the assessee and ultimately, held in Paragraphs 12 to 13 as under:- "12. The assessee in this case has submitted the explanation. The explanation submitted by the assessee, in our opinion, proved that the assessee has discharged his onus and has rebutted the presumptions available to the Revenue under Explanation 1 to section 271(1)(c). From the admissions made by the learned AR and on page 73 and 69 of the paper book which represent the bank book of RB Rodda & Co., on the basis of which the show cause notice was given by the AO dated 7-3-95 to the assessee, we find that first the assessee has made the payment of the sum of Rs. 20,40,000/- on account of difference of purchase and sale of units and subsequently the assessee has received the payment from the same party. Under these facts and circumstances this view possible that the assessee had received the payment of Rs. 20,40,000/- out of the sum of Rs. 20,40,000/- paid by him. This explanation given by the assessee cannot be regarded to be a false explanation until and unless, in our opinion, the Revenue proves that the explanation given by the assessee is false. In our opinion, no penalty u/s. 271(1)(c) can be imposed on the assessee. Even this fact has also borne out of the show cause notice as well as observation made in para 6.5 of the assessment order that the assessee has received the sum of Rs. 20,40,000/- from RB Rodda & Co. In our opinion, no penalty u/s. 271(1)(c) can be imposed on the assessee. Even this fact has also borne out of the show cause notice as well as observation made in para 6.5 of the assessment order that the assessee has received the sum of Rs. 20,40,000/- from RB Rodda & Co. We have also gone through the decision of the Hon. Gujarat High Court in the case of National Textile v. CIT, 249 ITR 125 (Guj) on which the learned AR has vehemently relied. 13. In the case of National Textile v. CIT, 249 ITR 125 (Guj) the question before the Hon'ble Gujarat High Court was about the levy of penalty u/s. 271(1)(c) in respect of the addition made u/s. 68 by recourse to explanation 1 below section 271(1)(c). In this case the Hon'ble Gujarat High Court while holding the imposition of penalty was not justified observed:- "In order to justify the levy of penalty, two, factors must coexist, (1) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus, i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to section 271(1)(c) has no bearing on factor No. 1 but has a bearing only on factor No. 2. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. If the assessee gives an explanation which is unproved but not disproved i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. Alternatively, treating the Explanation as dealing with both the ingredient (i) and (ii) above, where the circumstances do not lead to the reasonable and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no mens rea or guilty mind on his part. Even in this view of the matter the Explanation alone can not justify levy of penalty. Absence of proof acceptable to the Department cannot be equated with fraud or willful default." In our opinion, merely an addition has been made and confirmed by the Tribunal, that itself will not make the assessee liable for the penalty u/s. 271(1)(c). Merely the Tribunal has confirmed the addition does not mean that the assessee has concealed the income or has furnished inaccurate particulars of such income." 5.2. Learned Counsel for the respondent - assessee has relied on the following decisions of the Supreme Court:- "Commissioner of Income-tax v. Vegetable Products reported in [1973] 88 ITR 192 (SC) Commissioner of Income-tax v. Orissa Corpn. (P.) Ltd. reported in 159 ITR 78 and T. Ashok Pai v. Commissioner of Income-tax, Bangalore reported in 292 ITR 11;" 5.3. Reliance was also placed on a decision of this Court; "(I) in the case of National Textiles v. Commissioner of Income-tax reported in 249 ITR 145 and paragraphs 19 to 22 of the decision reads as under:- "19. In the quantum proceedings, the explanation of the assessee in relation to cash credits was not accepted and found to be false. The accountant was not produced and the explanation that relations with him are strained was also found to be an unjustifiable excuse. In the assessment, it was also taken into consideration that the assessee had tried to square up the credit entries to conceal the particulars of income. Only 2 credit entries were explained and regarding the remaining entries, there were no documents or evidence brought on record. The names of parties from whom the temporary loans were obtained were not furnished. 20. Only 2 credit entries were explained and regarding the remaining entries, there were no documents or evidence brought on record. The names of parties from whom the temporary loans were obtained were not furnished. 20. The question before us is whether the above mentioned facts which resulted in addition of the cash credits as income of the assessee in themselves, without any further evidence, are sufficient for imposition of penalty by recourse to Explanation 1 of section 271(1)(c) as it stood in the relevant assessment year or at the time when the penalty proceedings were initiated and concluded. We do not considered it necessary to go into the question as to whether the Explanation 1 below section 271(1)(c) is a provision of substantive law or procedural law and whether it is prospective or retrospective in operation. The Explanation is to the effect that where in respect of any fact or material for purposes of his assessment, an assessee offers an explanation which is found by the Assessing Officer or the Deputy Commissioner (Appeals) to be false or where the assessee is unable to substantiate his explanation, then the amount added to his income shall be deemed to represent his concealed income. The newly introduced Explanation 1 considerably reduces, but does not altogether remove the department's onus to prove concealment in assessment based on unexplained cash credit or unexplained investment and like. (See Addl. CIT v. Mangalsen Mohanal, [1982] 136 ITR 905 1 (All.)). There has not been any significant difference by the introduction of new Explanation 1 in place of original Explanation 1 with effect from 1-4-1976. The previous Explanation used the expression "deemed to have concealed the particulars of his income or furnish inaccurate particulars of such income for the purpose of clause (c) of this subsection". While the present Explanation 1 reads : "Such income shall be deemed to represent the income in respect of which particulars have been concealed." In effect, this makes explicit which was implicit in the previous Explanation - CIT v. Rupabani Theatres (P.) Ltd., [1981] 130 ITR 747 (Cal.). 21. The provisions of section 68 permitting the Assessing Officer to treat unexplained cash credit as income are enabling provisions for making certain additions, where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer. 21. The provisions of section 68 permitting the Assessing Officer to treat unexplained cash credit as income are enabling provisions for making certain additions, where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer. However, the addition made on this count would not automatically justify imposition of penalty under section 271(1)(c) by recourse only to Explanation 1 below section 271(1)(c). 22. In order to justify the levy of penalty, 2 factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. It is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on factor No. (i) but it has bearing only on factor No. (ii). The explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If an assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the department because there will be no material to show that the amount in question was the income of the assessee." (II) The decision of this Court in the case of BTX Chemicals (P.) Ltd. v. Commissioner of Income-tax reported in 288 ITR 196 and Paragraphs 25 and 29 of the said decision reads as follows:- "25. So far as the deletion of penalty referable to the deduction of Rs. 1,00,112 on account of loss to its stock by fire and its plea that the claim of double deduction in that behalf was simply a bona fide mistake resulting from the clerical mistake or due to oversight of the Chartered Accountant is concerned. Mr. So far as the deletion of penalty referable to the deduction of Rs. 1,00,112 on account of loss to its stock by fire and its plea that the claim of double deduction in that behalf was simply a bona fide mistake resulting from the clerical mistake or due to oversight of the Chartered Accountant is concerned. Mr. Vyas submitted that the assessee's own conduct would have spoken of its bona fide or good faith had the assessee rectified or even agreed to rectify the said mistake as and when the same was pointed out to it by the ITO. But the insistence of the assessee in re-agitating the said claim in appeal to the CIT(A) despite knowing or having reasons to believe the same to be false and untrue insisting upon its acceptance as true by the authorities concerned, the assessee had certainly exhibited the conduct contumacious and dishonest. Mr. Vyas, therefore, submitted that the penalty was wrongly deleted by the Tribunal in relation to disallowance of loss of Rs. 1,00,112. He has, therefore, submitted that the questions referred to by the Tribunal at the instance of the assessee and the revenue should be answered in favour of the revenue and against the assessee. 29. As far as question of law referred to us by the Tribunal at the instance of revenue is concerned, we are of the view that the Tribunal has rightly decided this issue. The Tribunal as a matter of fact, found that the double claim for an amount of Rs. 1,00,112 was made due to some bona fide mistake on the part of the assessee. No sooner an entry was made in the trading account of this year, it was to affect the opening stock in the next year, and hence it could have been easily found out and would not have resulted in any advantage to the assessee. We, therefore, confirm the order of the Tribunal on this issue and hold that the penalty relatable to the disallowance of loss of Rs. 1,00,112 is rightly deleted by the Tribunal." 6. Heard learned Counsel for the respective parties. Considering the ratio laid down in the above decisions and in the facts of the present case, we are of the view that the assessee is not found to be guilty of concealment or misappropriation but was found to be negligent in furnishing the accurate facts. Heard learned Counsel for the respective parties. Considering the ratio laid down in the above decisions and in the facts of the present case, we are of the view that the assessee is not found to be guilty of concealment or misappropriation but was found to be negligent in furnishing the accurate facts. Therefore, the entries which were made by the assessee were not found to be acceptable. The explanation with regard to the same surfaces at Paragraphs 12 and 13 of the findings of the Tribunal which have been reproduced hereinabove. Therefore, we are in complete agreement with the findings of the Tribunal. Consequently, we answer the question raised in this Appeal in favour of the assessee and against the Department. The Appeal stands disposed of accordingly.