ORDER
Pramod Kumar, A.M.:
This appeal filed by the revenue, is directed against Commissioner (Appeals)’s order for the assessment year 1990-91. Solitary grievance of the revenue is that “on the facts and in the circumstances of the case, Commissioner (Appeals) erred in cancelling the penalty under section 271(1)(c) of the Income Tax Act, when the assessee itself has accepted the assessment order giving rise to the penalty order.”
2. The issue in this appeal lies in a narrow compass of undisputed facts. The assessee derives income inter alia from letting of building and a part of assessee’s building was rented out to the Government of India. In the relevant previous year, rent payable by the Government of India was enhanced, with retrospective effect from 16-11-1985, and it was in this connection that the assessee received a sum of Rs. 10,96,737. The amount so received represented 80 per cent of the arrear rent from 16-11-1985 to 31-10-1989, and the balance amount of Rs. 2,96,628 was, as is the undisputed position in this case, payable by the Government after payment of revised municipal taxes. While the assessee offered Rs. 10,96,737 to tax in the previous year in which the sum was received, the assessee did not include the sum of Rs. 2,96,628 in its returned income. The assessing officer, in the backdrop of these facts, made an addition of Rs. 2,96,628 to assessee’s income under the head ‘income from house property’ by observing as follows :
“From the details of rental income filed, which has been credited in P&L a/c, the assessee deducted 20 per amounting to Rs. 2,96,628 and it is stated that it will be accounted for as and when received. This has also been mentioned in the audit note. Since the assessee is following mercantile method of accounting, this amount should have been shown as rental income as the assessee also credited enhanced rate of earlier years. Therefore, in view of the above facts, this rent of Rs. 2,96,628 has been added while computing the rental income”.
3. The assessee accepted the aforesaid addition of Rs. 2,96,628, and withdraw the appeal against the same.
4. Revenue was, however, not content with the addition alone and the penalty proceedings under section 271(1)(c) were also initiated. The assessing officer concluded that “the sum of Rs. 2,96,628, although not received by the assessee during the current year, has definitely accrued in view of the letter of the estate manager and the assessee has wilfully tried to evade tax by concealing particulars of its income to that extent, and, on such findings, I consider it as a fit case for imposition of penalty under section 271(1)(c)”. It was in this backdrop that the penalty of Rs. 1,60,179 was imposed on the assessee. On the matter being carried in appeal, Commissioner (Appeals) deleted the penalty by observing as follows:
“Under the circumstances, I do not think that in this case it can be said that the appellant has concealed its income or furnished any inaccurate particulars of income. I do not agree with the view of the assessing officer that since the appellant has not shown the sum of Rs. 2,96,628 on accrual basis, it calls for imposition of penalty under section 271(1)(c) of the Act. Following the accounting principle the appellant has done it correctly and it has not concealed or withheld any particulars so that penalty under section 271(1)(c) can be imposed on it. The penalty order imposing penalty amounting to Rs. 2,40,270 thus cannot be sustained in appeal and as such penalty order is cancelled.”
5. Revenue is aggrieved and in appeal before us.
6. We have had the benefit of hearing very elaborate and erudite submissions by both the learned representatives Shri Kumar for the revenue, and Shri Kothari, for the assessee. We have also had the benefit of perusing the orders of the authorities below, as indeed elaborate paper book and other material filed by the assessee, and deliberating upon factual matrix of the case as well as applicable legal position.
7. We find that Hon’ble jurisdictional High Court, in the case of Hamilton & Co. (P) Ltd. v. CIT (1992) 194 ITR 391 (Cal) were in seisin of a somewhat identical situation and it was in this context that their Lordships inter alia observed as follows :
Learned counsel for the assessee, has relied on the decision of the Supreme Court in Nalinikant Ambalal Mody v. S.A.L. Narayan Row, CIT (1966) 61 ITR 428 (SC), for the proposition that, merely on the ground that an income escapes taxation under a preceding head, such income cannot be computed as income from other sources.
The decision, in our opinion, supports his case. The expression “total income” in section 4 has to be understood as defined in section 2(45). Under the definition, the expression “total income” means “the total amount of income referred to in section 5 computed in the manner laid down in this Act,” that, is, computed under appropriate sections, viz., from sections 15 to 59. The rent received or receivable by the owner for the period of twelve months of every previous year is computable as the income from house property under sections 22 and 23. Any arrears of rent for a previous year received in a later previous year shall, under those sections, have to be computed as income from house property of the former previous year. This is the clear position arising from those provisions. In the instant case, the arrears of rent shall retain their character as income from house property. Such character is immutable. That being so, they have to be classified under the head “Income from house property”.
If it is not chargeable in the year of receipt as income from house property, the rent relating to earlier provisions years cannot be taxed under the residuary head giving a go-by to the mandatory computation provisions relating to income from house property. That is not permissible. The charging section and the computation provisions do not envisage taxation as income from house property of more than the annual rent, that is the rent for a period of twelve months. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. This principle has been laid down by the Supreme Court in CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC).
There being no provisions to bring to charge the arrears of rent in the previous year in which they were received, it must be held that the additional or extra rent from house property attributable to preceding years of account cannot be taxed under the head “Income from other sources”.
Hon’ble jurisdictional High Court, in a relatively recent judgment dated 7-4-1999, in the case of Hope India Ltd. v. CIT (1999) 238 ITR 740 (Cal), have inter alia observed as follows :
“6. As indicated hereinbefore the Tribunal below has relied upon, for arriving at aforementioned finding on the Division Bench, decision of this court in Hamiton (P) Ltd. (supra). In that case the question raised was in the following terms.
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the additional extra rent attributable to preceding years of account which could not be taxed under section 22 of the Act should, instead, be taxed under the head ‘Income from other sources”
7. It is now a well settled principle of law that a decision is an authority for what it decides and not what can logically be deduced therefrom. The main question which was required to be determined in the aforementioned case was as to whether any additional or extra rent attributable to preceding years would be entitled to tax under head “income from other sources.” The questions which have been raised in the instant case had, therefore, not been raised in the case at all. The learned Judges, however, upon considering the provision of sections 22 and 23 of the Income Tax Act held :
“The receipt of arrears of rent cannot, by any stretch of imagination, be said to have shed their character as rent from property and to have ceased to be liable to tax as income from house property. The simple case is that the rent of a past year increased retrospectively shall be the annual rent of such past year or years but not the annual rent of the year in which it is received consequent upon subsequent increase.
This portion squarely fits in with the scheme of taxation of “Income from house property”, section 22 says that the measure of income from house property is its annual value. The annual value is to be determined in accordance with the provisions of section 23. Sub-s. (1) of section 23, by virtue of the amendment with effect from the assessment year 1976-77, has two limbs, clause (a) and clause (b). Clause (a) says that the annual value is the sum for which the property might reasonably, be expected to be let from year to year; clause (b) covers a case where the property is let and the annual rent is in excess of the sum for which the property might reasonably, be expected to be let from year to year. To our mind, this clause (b), a later insertion by the Taxation Laws (Amendment) Act, 1976, is meant to cover a case where the rent for a year actually received by the owner is in excess of the lawful rent which is known as fair rent or standard rent under the various rent control legislations. It does not cover a case where a person receives in a year of account rent for a period larger than the year of account.”
To this extent, their Lordships quoted with approval the decision in Hamilton’s case (supra) but the point of departure was made in the following context :
“Upon taking into consideration the Explanation appended to section 23(1) as inserted by reason of Taxation Laws (Amendment) Act, 1975, as also upon consideration of the circulars issued by the Board, it was further held :
‘But the legal position is that such arrears of rent are the annual rent or part of annual rent of the year or years to which the arrears relate by virtue of -the definition of the annual rent in Expln. 1 below section 23 and not really the income of the year of receipt under the head ‘income from other sources’.
There cannot by any doubt that certain observations had been made in the said decision but such observations, in our considered opinion, must be understood to have been rendered in the fact situation of that case. Those observations were not required to be made keeping in view the questions raised in the said reference and, thus, the same even does not partake to the character of obiter dictum.”
Their Lordships then, and after elaborately surveying judicial precedents in this regard, came to the following conclusion :
The word ‘earned’ even though it does not appear in section 4 of the Act has been very often used in the course of the judgments by learned Judges both in the High Court as well as the Supreme Court (Vide CIT v. Ahmedbhai Umarbhai & Co. (1950) 18 ITR 472 (SC) and CIT v. K.R.M. T.T. Thiagaraja Chetty & Co. (1952) 24 ITR 525 (SC). It has also been used by the Judicial Committee of the Privy Council in Commissioners of Taxation v. Kirk. The concept however cannot be divorced from that of income accruing to the assessee. If income has accrued to the assessee it is certainly earned by him in the sense that he has contributed to its production or the parenthood of the income can be traced to him. But in order that the income can be said to have accrued to or earned by the assessee it is not only necessary that the assessee must have contributed to its accruing or arising by rendering services or otherwise but he must have created a debt in his favour. A debt must have come into existence and he must have acquired a right to receive the payment. Unless and until his contribution or parenthood is effective in bringing into existence and a debt or a right to receive the payment or in other words a debitum in praesenti, solvendum in futuro it cannot be said that any income has accrued to him. The mere expression “earned” in the sense of rendering the services etc. by itself is of no avail.”
Unfortunately the decision of the apex court in Sassoon (supra) had not been considered in Hamilton’s case (supra) nor probably in the fact of the said case was required to be considered.
8. In this view of the matter, the legal position staring at us is that until the time Hon’ble jurisdictional High Court’s decision in the case of Hope India Ltd. (supra) there was no support for taxability of the impugned amount in the hands of the assessee. An assessee cannot be expected to have the clairvoyance of knowing future judicial developments and, as the law stood in the time of filing of return and in view of the Hon’ble Calcutta High Court’s judgment dated 1-10-1991, in Hamilton’s case (supra), the impugned amount of Tent arrears receivable was not taxable. As we make this observations, we are not adjudicating upon taxability of the rent arrears of Rs. 2,96,628, nor that question can be raised or decided at this stage of appeal in the penalty matter, but our concern is confined to the broad question as to whether an addition of this nature can be sufficient basis for imposition of penalty under section 271(1)(c). In other words, to put a question to ourselves, could it be said that merely because assessee has himself offered an amount for taxation, there was no need on assessing officer’s satisfaction, as a sine qua non to imposition of penalty under section 271(1)(c), that the amount so offered is indeed in the nature of income. The answer, to our understanding, is emphatically in negative.
9. The very foundation of penalty under section 271(1)(c) is assessing officer’s ‘satisfaction’ that the assessee has ‘concealed the particulars of his income’ or of assessee’s having furnished ‘inaccurate particulars of income’. As a natural corollary to this proposition, unless the particulars, which are found to be concealed or which are found to have been furnished inaccurately, can be said to be pertaining to an ‘income’, penalty under section 271(1)(c) does not come to play. We may also mention that one of our distinguished colleague, in the case Assistant Commissioner v. Smt. Geeta Devi (2003) 79 ITD 347 (Del) has observed that, “In my considered view, it cannot be held as an inflexible rule that when an assessee agrees to an addition to his total income, he makes an admission which would be itself warrant the imposition of penalty. Even in such cases the department has to prove by independent evidence, in addition to the evidence already brought on record from various sources during the assessment proceedings, that the amount represented the concealed income of the assessee.” In the present case, at no stage did the revenue address itself to this basic requirement of law. The assessing officer has proceeded on the premises that concealment penalty is an automatic consequence of an addition being agreed by the assessee something which, in our considered view, is devoid of any legally sustainable basis. We may, in this regard, also refer to the view taken by our learned colleagues of Agra bench, vide order dated 17-10- 2001, and in the case of Hari Om Kumar Umesh Chhdra v. Income Tax Officer, that once the explanation furnished by the assessee is bona flde, no penalty under section 271(1)(c) can be imposed even under Expln. 1 to section 271(1)(c). In the present case, as can be clearly made out from uncontroverted facts of the case and the settled legal position, the explanation for not including the amount in income cannot be said to lack bona fildes. The very basis of imposition of penalty in the instant case, therefore, was not legally sound.
10. In any event, it is not in dispute that the assessee had given an appropriate disclosure about the facturn of these rent arrears in the documents accompanying the income-tax return itself and in view of the legal position then prevailing, the amount was not taxable in nature. On these facts, in our considered view, the assessee had reasonable explanation for not including the Jimpugned amount in its taxable income, and, therefore, it was not a fit case for imposition of penalty. It is also noteworthy that the assessee’s claim for taxability of impugned amount in the year of receipt at best sought to shift the assessment year in which the amount is taxable but then, as held by Hon’ble Gujarat High Court in the case of CIT v. Manilal Tarachand (2002) 254 ITR 630 (Guj) where the dispute in the assessment between the assessee and department was regarding the year in which a particular amount is taxable, it cannot be a fit case for either concealment Of income of for furnishing of inaccurate particulars. Respectfully following the law laid down by Their Lordships, we have to hold that for this reason also, it was not a fit case for imposition of penalty. For the detailed reasons set out above, we are of the considered view that the Commissioner (Appeals) was justified in deleting the impugned penalty, and, accordingly, we decline to interfere in the matter.
11. In the result, appeal is dismissed.