revenue is in appeal against order of Commissioner (Appeals), cancelling penalty of Rs. 18,460, levied under section 271(1)(c) of Income-tax Act, 1961 ('the Act') for assessment year 1975-76. 2. ITO found, during course of assessment, that assessee had not shown income from plying of two trucks, namely, DHG 2180 and PNO 4955. Therefore, he did not accept income returned at Rs. 24,700. He estimated income from plying of these two trucks at Rs. 34,300. In effect, he made assessment at Rs. 82,015 by order passed on 28-9-1978. Since there was wide gulf between income returned and income assessed, he initiated penalty proceedings and caused notice under section 271(1)(c) to be served o n assessee. Not being satisfied, assessee appealed to Commissioner (Appeals), who reduced estimate of income derived from truck plying to Rs. 24,260. assessee took this matter further in appeal before Tribunal. Tribunal brought down estimate of income derived from these two trucks to Rs. 11,000 only. ITO, about whom we have already indicated, had initiated penalty proceedings and passed order imposing penalty of Rs. 18,460. order was passed on 31-3-1981. According to ITO, assessee had not made any reply to several notices issued by him under section 271(1)(c). Therefore, he held that assessee had nothing to say in his defence, against charge that he had concealed part of his income, which was derived from plying of aforementioned two trucks. He had detailed in his order several notices which he had caused to be served on assessee in this respect. Therefore, he found him liable for concealment on facts and in circumstances of case. He derived further support for his finding from Explanation 1 to section 271(1)(c), which formed part of provision prior to amendment of Explanation in 1976. According to this Explanation, assessee was deemed to have concealed income if income returned by him fell short of 80 per cent of assessed income. There is no doubt that 80 per cent of income finally assessed by assessing authorities, was more than income returned. Therefore, in his view, Explanation also lent support to his finding that assessee was liable for concealment and he had concealed income derived from plying of trucks. Having reached this finding, as we have indicated above, he imposed penalty of Rs. 18,460 by order passed on 31-3-1981. 3. assessee not being satisfied with this levy, appealed before Commissioner (Appeals) and raised plea that he was not liable for concealment on facts and in circumstances of case. According to him, in voluntary disclosure, made by him on 31-12-1975, he had made disclosure of income for year in issue as well, with its accounting year having ended on 31-3-1975. Therefore, there was no concealment of income derived from these trucks. He had made voluntary disclosure particularly in respect of income form these two trucks. He also pointed out that plea of ITO, on which his finding was based, that he had made no replies to several notices issued by him was not correct. He also rebutted other plea that t h e aforesaid Explanation, which appeared in section 271(1)(c) prior to its amendment, was applicable to him. Commissioner (Appeals), on going through facts, was moved by plea of assessee that it was not correct that assessee had not made any reply to notice issued under section 271(1)(c) or to several opportunity notices made thereafter. In this connection, h e referred to two letters in particular, which had been submitted by assessee to ITO. These orders were dated 24-9-1978, 13-2-1981 and 31-3- 1981. On going through these letters in record, Commissioner (Appeals) was not left in any doubt that finding of ITO that assessee had not furnished any reply to various notices, issued by ITO, was not correct. He also turned down second plea of ITO that Explanation to section 271(1)(c) applied and supported finding of ITO that assessee was liable for concealment. He found that assessment having been completed on 28-9-1978, initiation of penalty proceedings being conterminous with finalisation of assessment, was at time when aforesaid Explanation did not form part of section 271(1)(c). amendment in year 1976 had deleted that Explanation. Therefore, when ITO initiated penalty proceedings, said Explanation was non-existent. Relying on decision of Punjab and Haryana High Court in CIT v. Raman Industries [1980] 121 ITR 405 that all procedural provisions are retrospective in nature, he found that reliance of ITO on aforesaid Explanation was misconceived. Since ITO had not considered replies, referred to above, it cannot be said that his finding that assessee was liable for concealment could be sustained. Accordingly, he cancelled penalty. 4. revenue is, therefore, in appeal before us. revenue has made two pleas to discredit finding of Commissioner (Appeals). One of pleas, advanced by departmental representative, was based on Supreme Court's decision in Brij Mohan v. CIT [1979] 120 ITR 1, which laid down that provision existing on date of filing of return shall apply in case of levying penalty. Therefore, departmental representative submitted that finding of Commissioner (Appeals) was incorrect that aforesaid Explanation did not apply. Return was filed by assessee on 3-1-1975, when, undoubtedly, aforesaid Explanation was part of statute and was in effect. His second contention was that if ITO had made mistake by not considering replies tendered by assessee because he missed them, Commissioner (Appeals) should have considered replies and then recorded finding whether assessee was liable for penalty or not. Therefore, he made submission that matter should be remanded back to Commissioner (Appeals) for considering replies tendered by assessee, which had not b e e n considered by ITO. counsel for assessee rebutted submissions made by departmental representative. 5. We have considered facts of case and it does not appear that we shall be justified in interfering with order passed by Commissioner (Appeals) in this respect. It is true that legal provision in existence on date of filing of return shall apply in respect of levy of penalty as brought out by their Lordships in Brij Mohan's case but that applies only to legal provisions which relates to right or obligation or liability of parties. In other words, it is substantive provisions, which have bearing on rights, liabilities and immunities of parties as on date of commission of offence will apply in preference to provision brought out in statute book subsequently. effect of judgment of Brij Mohan's case is in relation to substantive provisions only and not in relation to procedural provisions in respect of which nobody gets vested right except where, as indicated in case of Raman Industries, in case of those in effect which proceedings were started. Therefore, reliance of Commissioner (Appeals) on case of Raman Therefore, reliance of Commissioner (Appeals) on case of Raman Industries to reach finding that aforesaid Explanation to section 271(1)(c) was not part of statute when proceedings for penalty were initiated, was well conceived in law. On facts and in circumstances of case, ITO cannot possibly derive any support for his finding that assessee should be deemed to have concealed income because returned income fell short of 80 per cent of assessed income. We also do not favour submission made by departmental representative regarding consideration of letters by Commissioner (Appeals) which were not considered by ITO. Although we were inclined to remand issue back to Commissioner (Appeals) on basis of submissions made by departmental representative, we have realized only later that present proceeding relates to imposition of penalty and not to assessment of liability. Section 271(1)(c) enjoins upon that ITO 'in course of any proceedings is satisfied that any person has concealed . .' This in effect means that it is satisfaction of ITO acquired during course of proceedings, which is material and which forms basis for proceeding to levy penalty upon assessee. In other words, it is satisfaction of ITO acquired in proceedings which is insisted upon as sine quo non for proceeding for levy of penalty. We cannot, therefore, hold that satisfaction of ITO can be substituted by satisfaction of Commissioner (Appeals). It is true that Commissioner (Appeals) can interfere with exercise of discretion made by ITO. But that does not entitle him to sit in chair of ITO and exercise discretion himself. Primarily, it must be exercise of discretion by ITO himself which should form basis of penalty proceeding. Where it is lacking, it cannot be inferred that Commissioner (Appeals) can exercise that discretion. In this view of facts, we are not prepared to remit proceedings back to Commissioner (Appeals) so that he may consider replies made by assessee, which were placed before ITO but which he failed to consider. It may be that Commissioner (Appeals) reaches certain finding but we would not be justified in holding that, that would be based on satisfaction of ITO. Since we have held that provision contained in aforesaid Explanation was not applicable, we have to consider whether onus had been discharged by parties concerned. assessee in reply to notice issued under section 271(1)(c) had taken plea of disclosure of income in voluntary disclosure made by him which, according to him, was responsible for income earned from plying of two trucks not having been shown in return. Since provision contained in aforesaid Explanation did not apply, onus was on ITO to prove that Explanation of assessee was false and not made in good faith. ITO having been aware of plea as appears from his order, could not merely depend upon finding made in course of assessment nor upon fact that returned income fell below 80 per cent assessed income to reach finding that part of income was concealed. We repeat that our finding in this respect will not be available to support penalty order passed by him which depended upon satisfaction of ITO primarily or finally and not upon satisfaction of appellate authorities. 6. In this view of our finding, we decline to remit proceedings back to Commissioner (Appeals) for consideration of letters. We, therefore, decline to interfere with order of Commissioner (Appeals) cancelling penalty. 7. appeal is dismissed. Per Shri K. C. Srivastava, Accountant Member --- I have carefully perused order recorded by my brother learned Judicial Member. I regret that it will not be possible for me to agree with reasoning given and conclusion arrived at by him. 9. return of income was filed on 3-10-1975 declaring income of Rs. 24,600. assessment was completed on 28-9-1978 when penalty proceedings under section 271(1)(c) were initiated. income as assessed was reduced in appeals and finally assessed income came to Rs. 43,157. ITO noted that assessee had not disclosed income from two trucks Nos. DHG 2180 and PNO 4955. Though income from these two trucks was estimated by ITO at Rs. 22,300 and Rs. 18,000, respectively, estimate was reduced to Rs. 11,000 by Tribunal. ITO observed difference between returned and assessed income and proceeded to hold that income from these two trucks was concealed. He imposed penalty of Rs. 18,460. While doing so, he further observed that besides application of Explanation to section 271(1)(c), which was on statute book up to 1-4-1976, law for quantum of penalty would be law which was there at time of filing of return. 10. When matter came before Commissioner (Appeals), it was pleaded before him that penalty had been imposed under Explanation to section 271(1)(c) and this Explanation was there prior to 1-4-1976. According to contentions made before Commissioner (Appeals), proceedings having b e e n initiated on 18-9-1979, this Explanation to section 271(1)(c) was not applicable. Commissioner (Appeals) accepted this plea of assessee and held that order of ITO was void as he had invoked Explanation to section 271(1)(c) and that Explanation was not in force at time of initiation of proceedings. In this connection, he made reference to order of Punjab and Haryana High Court in case of Raman Industries. According to learned Commissioner (Appeals), procedural law had retrospective effect and governed proceedings pending at time of its enactment. According to learned Commissioner (Appeals), ITO should have proceeded to consider case of assessee under section 271(1)(c) read with new Explanation 1 added with effect from 1-4-1976. According to learned Commissioner (Appeals), this action of ITO went to root of matter and invalidated proceedings. He further held that order of ITO was bad in law as ITO did not take into consideration explanation given by assessee in response to show-cause notice. order of penalty was, therefore, quashed by him. 11. Now question of application of Explanation to section 271(1)(c) which had been introduced in 1964 and was on statute book up to 1-4-1976 and was substituted by certain other Explanations from that date has been considered by this Bench of Tribunal in great detail in case of Modern Textile & Finishing Mills [IT Appeal Nos. 103 and 104 (Asr.) of 1981]. In that case also Tribunal had considered similar view expressed by Commissioner (Appeals) and Tribunal had not agreed with his analysis of legal provision. After considering various case laws, Tribunal in that case recorded conclusion as under: " 8. We have considered facts of case and reasoning given by learned Commissioner (Appeals) for cancelling penalty order passed in this case. Commissioner (Appeals) has cancelled orders on ground that Income-tax Officer had initiated penalty proceedings with reference to Explanation to section 271(1)(c), which was no more in existence on date of initiation of such proceedings. In this connection, he referred to new Explanations which had been added with effect from 1-4-1976. For deciding this issue one has to determine law which would be applicable for purpose of imposition of penalty under section 271(1)(c) of Income-tax Act at relevant time. principles which governed application of law whether substantive or procedural, retrospectively or prospectively are to be determined differently for purposes of assessments distinct from penalty matters. There are various aspects regarding penalty matter and it will not merely depend on whether provision is substantive or procedural but also whether right and procedure are dealt with together and we will have to determine law applicable for different purposes. It is well-known principle of law that purely procedural matter is governed by law which applies when that process is started and when final order is passed. For example, question of limitation is purely procedural law. As regards quantum of penalty, it is now settled law that it must be determined with reference to law prevailing on day when act of concealment was committed, i.e., date on which return concealing income was filed. This matter has been finally settled in Brij Mohan's case referred to above. Here, however, we are concerned with question of application of section 271(1)(c) read along with its Fxplanation as it stood prior to 1-4-1976 and changes made in it with effect from that date. Though at present, there is no reported decision of any High Court on questions of application of Explanations, which have been added with effect from 1-4-1976, we have before us for guidance several decisions on scope of application of Explanation to section 271(1)(c) from 1-4-1964. Kerala High Court had held in Hajee K. Assainar v. CIT [1971] 81 ITR 423, that Explanation which was introduced from 1-4-1964 could apply only to penalties relating to assessment year 1964-65 onwards. As against this, Orissa High Court in case of CIT v. K.C. Behera [1976] 103 ITR 479 expressed view that Explanation would be applicable in case where initiation of proceedings for imposition of penalty took place on or after 1-4- 1964. This decision of Orissa High Court has been kly relied upon by learned counsel for assessee. As against these views we have got decision of more than one High Court, which has taken view that Explanation to section 271(1)(c) introduced with effect from 1-4-1964 could be applicable to cases where return of income was filed after 1-4-1964 irrespective of any assessment year. This view was taken by Gauhati High Court in case of Rajputana Stores v. IAC [1975] 99 ITR 499. This view was reiterated by that High Court in case of F. C. Agarwal v. CIT [1976] 102 ITR 408 and in case of CIT v. Gajanand Shyamlal [1978] 111 ITR 816. This question was considered by Allahabad High Court in case of CIT v. Data Ram Satpal [1975] 99 ITR 507 where it was held that penalty proceedings are not part of assessment proceedings and law which will apply to penalty proceedings will be law as it stands on date on which default is committed. It was further held that if anyone files incorrect return after 1-4-1964 it is liable to be dealt with according to amended provisions regardless of year to which return relates. question was again considered in case of CIT v. Ram Achal Ram Sewak [1977] 106 ITR 144 (All.) where it was held that Explanation to section 271(1)(c) was not attracted in that case as original return was filed before 1-4-1964. Similar view was taken by that High Court in case of CIT v. S. Devendra Singh [1977] 108 ITR 314 where it was held that material date with reference to which law applicable should be determined is date of filing of that return. matter was again considered in case of Addl. CIT v. Jiwan Lal Shah [1977] 109 ITR 474 (All.) and same view as reiterated. 9. question of application of Explanation to section 271(1)(c) came up for consideration of Honourable Calcutta High Court in case of CIT v. Champalal Jain [1978] 112 ITR 809 and it was held that where return was filed after introduction of Explanation to section 271(1)(c) that Explanation would be applicable to penalty proceedings irrespective of assessment year. same view was taken in case of CIT v. Bankim Chandra Dutt [1979] 118 ITR 456 (Cal.). 10. above discussion would show that in fact there are two different 10. above discussion would show that in fact there are two different views and third view expressed by Kerala High Court in case of Hajee K. Assainar cannot be considered to be good law in view of decision of Supreme Court in case of Brij Mohan. view taken by Orissa High Court in case of K.C. Behera would support contention of assessee that material date was date of initiation of penalty proceedings and not date of filing of return. However, preponderance of judicial opinion on this question is in favour of view that material date is date o f filing of return. This view also appears to be acceptable for another reason. Though Explanation to section 271(1)(c) laid down rule of evidence it also created concept of deemed concealment in certain circumstances. In same way, Explanations which have been added with effect from 1-4- 1976 considerably expanded concept of concealment before that date is now treated as concealment for purpose of imposition of penalty under section 271(1)(c). Where statute has effect of expanding legal concept and matter relates to penalty such concept would become applicable if commission of offence takes place after provisions came into force. Considering nature of Explanations which have been added it cannot be held to be purely procedural and they would not be applicable merely on ground that some proceedings were pending on 1-4-1976. 11. Apart from above decision of Punjab and Haryana High Court in case of CIT v. Bhan Singh Boota Singh [1974] 95 ITR 562 is very clear on point. In this case, question for consideration was application of Explanation to section 271(1)(c) in respect of penalty for assessment year 1963-64 where return of income had been filed on 9-4-1964. Their Lordships clearly held that if return had been filed before 1-4-1964 amended law and Explanations would have no application to it. However, where return is filed after coming into force of new law, those provisions held that law applicable would be law, which was in force when concealment took place. If this was position regarding Explanation to section 271(1)(c) which came with effect from 1-4-1964, similar consideration would apply to changed law which came into force from 1-4-1976. reliance by assessee on decision of Punjab and Haryana High Court in case of CIT v. Mela Ram Jagdish Raj & Co. [1981] 132 ITR 897 is misconceived as this case related to question of jurisdiction of IAC and it was held that it has to be determined according to law in force at time of initiation of proceedings and not on date of reference to IAC as we have already discussed above principles of law regarding question of jurisdiction would not be applicable to question of either quantum of penalty or concept of concealed income as expanded in Explanation to main section of section 271(1)(c). 12. In view of above discussion, we hold that learned Commissioner (Appeals) erred in holding that penalty orders passed in this case were illegal. law applicable for this purpose would be law which was in force on date of filing of returns. Moreover, we agree with departmental representative that learned Commissioner (Appeals) should not have cancelled penalty orders without considering whether penalties were imposable under main provisions of section 271(1)(c). mention of Explanation to section 271(1)(c) does not mean that main provisions have not been applied and it is necessary to give finding whether penalty was imposable under main provisions itself. For this reason as well order of Commissioner (Appeals) cannot be upheld particularly in view of fact that in respect of some additions of same nature in past penalties had been held to be leviable. " 12. above order passed on 6-2-1982 and has been consistently followed by this Bench in several other cases. Only recently this Bench had followed this decision in case of Partap Steel Rolling Mills (P.) Ltd. [IT Appeal No. 195 (Asr.), of 1981]. While coming to above conclusion, Bench had taken into consideration all case laws including decision of Punjab and Haryana High Court in case of CIT v. Bhan Singh Boota Singh [1974] 95 ITR 562. Bench had further considered decision of Punjab and Haryana High Court in case of CIT v. Mela Ram Jagdish Raj & Co. [1981] 132 ITR 897, which had followed decision in case of Raman Industries. Tribunal had held that reliance on ratio in this case was misconceived as this case related to question of jurisdiction of IAC and it was to be determined in accordance with law in force at time of was to be determined in accordance with law in force at time of initiation of proceedings. 13. It may be mentioned that before us revenue had relied upon above order of Tribunal as well as decision of Punjab and Haryana High Court in case of Bhan Singh Boota Singh. Unfortunately, there is no discussion in order recorded by learned Judicial Member which may show reasons for departing from view taken by this Bench in case of Modern Textile & Finishing Mills and several other cases. On this issue, question of law has also been referred by us to Hon'ble High Court. In view of detailed decision given in case of Modern Textile & Finishing Mills, I see no reason to depart from that view. I would, therefore, hold that Commissioner (Appeals) erred in coming to conclusion that in this case Explanation to section 271(1)(c), which was on statute book up to 1-4-1976, was not applicable. I further hold that Explanation was applicable as return of income had been filed on 3-10-1975. Commissioner (Appeals) has considered whole order invalid only on this ground. In my opinion, there he was in error. 14. Even if for argument's sake he was of view that Explanation to section 271(1)(c) was not applicable to this case, it was duty of Commissioner (Appeals) to give finding about charge of concealment of income as penalty had been imposed under provisions of section 271(1)(c) and that provision continued to be same even at time of imposition of penalty. Explanation which was on statute book was rule of evidence and gave circumstances under which there was some presumption of concealment. If particular rule of evidence is not applicable, it would not mean that whole proceedings are vitiated and Commissioner (Appeals) should have given clear finding whether under law which he considered to be applicable penalty was leviable or not. This Commissioner (Appeals) has not done. 15. Commissioner (Appeals) found that certain explanation has been given by assessee. two explanations referred to in his order are, in fact and in substance, only one explanation though repeated. As in this case, there was presumption of concealment in eyes of law and it was necessary for Commissioner (Appeals) to consider substance of those explanations and to hold whether that presumption stood rebutted by submissions or materials placed by assessee. In not considering this aspect of matter, Commissioner (Appeals) definitely erred. scope of Explanation to section 271(1)(c) had been considered by Full Bench of Punjab and Haryana High Court in case of Vishwakarma Industries v. CIT [1982] 135 ITR 652. It was held by Hon'ble High Court that by adding Explanation burden of proof had been shifted to assessee. It was further held that once Explanation is held to be applicable to case of assessee, it straightway raised three legal presumptions, namely: (i) that amount of assessed income is correct income and it is in fact income of assessee himself; (ii) that failure of assessee to return correct assessed income was due to fraud; or (iii) that failure of assessee to return correct assessed income was due to gross or wilful neglect on his part. This was, therefore, held to be rule of evidence and presumption should be rebutted by assessee. burden of discharging onus was to be discharged by preponderance of evidence. High Court did not accept that in spite of above Explanation ratio of CIT v. Anwar Ali [1970] 76 ITR 696 (SC) was still applicable. Their Lordships overruled their earlier decision in case of Addl. CIT v. Karnail Singh V. Kaleran [1974] 94 ITR 505 (Punj. & Har.). 16. In view of above legal position, it is necessary to give finding whether presumptions raised under law have been rebutted by Explanation given by assessee. Commissioner (Appeals) has not considered it necessary to go into this matter. I am of view that without giving this finding he could not have deleted penalty under section 271(1)(c). I, therefore, hold that this is case where Explanation to section 271(1)(c) [as existing on date of filing of return] was applicable and there was presumption of concealment. I further hold that matter should go back to Commissioner (Appeals) for giving clear finding regarding rebuttal of such presumption on basis of material on record and explanations of assessee. I would, therefore, allow departmental appeal for statistical purposes. THIRD MEMBER ORDER Per Dr. V. Balasubramanian, Vice President --- In assessment made on 28-9-1978 ITO included sum of Rs. 34,300 being income from two trucks DHG 2180 and PNO 4955, which assessee had not shown in his return. On matter going on appeal income from these two trucks was fixed by Tribunal at Rs. 11,000. Treating assessee as having concealed income from trucks, ITO started penalty proceedings and by his order dated 31-3-1981 levied penalty of Rs 18,460. On appeal, Commissioner (Appeals) cancelled penalty holding penalty order to be bad in law. Inter alia, he held that ITO did not follow procedure for levying penalty laid down in Act with effect from 1-4-1976 but procedure 'which was no longer on statute book as on date on which penalty proceedings were initiated and, therefore, imposed penalty for wrong reason'. He also held that ITO had passed order without taking into account explanations filed by assessee. final decision of Commissioner (Appeals) is as under: " For aforementioned reasons, I quash order under section 271(1)(c) imposing penalty of Rs. 18,460 on assessee. " 2. Before Tribunal, learned Judicial Member confirmed order of Commissioner (Appeals). According to him, who went on basis that penalty was levied on basis of Explanation to section 271(1)(c), ITO was not satisfied that assessee has concealed income. Any satisfaction which Commissioner (Appeals) could have on point could not be substituted for satisfaction of ITO. assessee's explanation for alleged omission had not been considered by ITO. He also held that Commissioner (Appeals)'s finding that Explanation to section 271(1)(c) was not part of statute when penalty proceedings were initiated was well conceived in law. 3. learned Accountant Member, on contrary, held that Commissioner (Appeals) could not have deleted penalty under section 271(1)(c). Explanation to section 271(1)(c) as existing on date of filing of return was applicable in case and there was presumption of concealment. Since Commissioner (Appeals) had not adjudged on rebuttal of this presumption, according to learned Accountant Member, matter was to go back to Commissioner (Appeals) for 'a clear finding regarding rebuttal of such presumption on basis of material on record and explanations of assessee'. 4. two Members, thus, having differed, points of difference have been referred to me as Third Member in following form: " 1. Whether, on facts and in circumstances of case, Explanation inserted by Finance Act, 1964, which was substituted by other Explanation with effect from 1-4-1976 would be applied to these proceedings which had been initiated by issue of notice under section 271(1)(c) on 28-9- 1978? 2. Whether, on facts and in circumstances of case, order of Commissioner (Appeals) cancelling penalty imposed under section 271(1)(c) was to be upheld or matter should be restored to Commissioner (Appeals) for giving his fresh findings?" 5. parties were heard and facts gone into in detail. learned counsel for department pointed out that penalty was levied both on substantive provisions of section 271(1)(c) as well as Explanation thereto. Explanation, as understood by ITO, was relevant in context of case and assessee's explanations for omission not being available, ITO correctly levied penalty. Stressing points made out in ITO's order as well as those obtaining in learned Accountant Member's order, learned counsel pointed out that penalty had been correctly levied. Even if explanations to show-cause notice filed by assessee were not treated as having been considered by ITO, they were definitely considered by Commissioner (Appeals) and to this extent assessee's grievance did not exist. law enforceable before 1-4-1976 was applicable and penalty levied on that basis was, therefore, according to learned counsel, to be sustained. 6. For assessee it was pointed out that as validly explained by assessee in his replies, there was no factual concealment. In fact none of authorities pointed out that there was any factual concealment. Reliance was placed only on Explanation to section 271(1)(c) and that too as rule of evidence and procedural law not only to levy high quantum of penalty on assessee but also to make him liable to levy itself. It is pointed out that assessee's explanations were never considered in first place. Both for purpose of making out factual case of concealment and for attracting deeming provisions of Explanation, assessee's explanations to show- cause notice had to be considered. This had not been done by ITO. levy of penalty, therefore, was not justified. 7. I have considered case. reading of order of ITO and also orders of other authorities leaves me with no doubt that no allegation of direct factual concealment of income or furnishing of inaccurate particulars has been made. Resort has been made only to Explanation to section 271(1)(c) for levy of penalty and dispute apart from other things relates to actual provisions of Explanation which was applicable to case. Even so as facts above mentioned indicate, Commissioner (Appeals) as well as two learned members of Tribunal have noted that assessee had sent i n three replies to show-cause notice. ITO had not taken into account any one of these. In fact he had gone on basis that there was no reply to show-cause notice leading to inevitable conclusion that assessee had no explanation to offer. If this be so, it leads to two direct consequences. In first place both on basis of statute section 274 of Act and principles of natural justice no penalty can be levied unless assessee has been given opportunity to present his case. It is true that show-cause notice has been issued to assessee. He has also replied to them not once but thrice. ITO, however, did not take into account any one of these replies. In fact he proceeded on basis that no reply was received. Both statutory provisions regarding granting of opportunity and principles of natural justice require that opportunity given should be real opportunity. Not only should party opportunity given should be real opportunity. Not only should party know what to answer, but he must also be able to furnish answer, which should be considered before deciding matter. widest limits of principles of natural justice reinforced statutorily in present case by section 274 could be gathered from Supreme Court decision in Smt. Maneka Gandhi v. Union of India AIR 1978 SC 597. In this case assessee had no opportunity to present his case. As matter of law, therefore, levy of penalty is not justified and penalty order has to be cancelled. argument was made by learned counsel for department that insofar as Commissioner (Appeals) had opportunity to look into replies of assessee, assessee must be deemed to have been given requisite opportunity at least at that stage. Whether granting of opportunity, at initial stage is necessary or granting of same at any subsequent stage would be sufficient has also been considered in Smt. Maneka Gandhi's Case. Applying principles laid down therein it cannot be held that assessee had opportunity. This argument of departmental representative, therefore, cannot be upheld. 8. Even as matter of fact while issue of show-cause notice would start proceedings, ITO cannot come to any factual conclusion about concealment unless he had seen assessee's explanations. assessee may have valid reason for not indicating any particular income in his return or furnishing any particular type of particulars. Unless ITO looks into it, even as matter of fact, he cannot come to conclusion about concealment. By holding erroneously that assessee has not cared to reply to show-cause notice and by not looking into replies, ITO, thus, has made unjustified presumption that assessee had no explanation to offer. Both as matter of law and fact, therefore, levy of penalty is not justified and if penalty is levied, it has to be cancelled. These defects go to root of matter. To question as to whether there was concealment or not under provisions of section itself or Explanation thereto, would be subsequent enquiries. Insofar as very basis, legal as well as factual, for levy of penalty does not exist in present case, in my opinion, subsequent issues do not arise for consideration at all. In this view of matter, in my view, first question referred to me would be purely academic and decision in abstract. It is only after basic requirements of levy are justified, can one think of Explanation to section 271(1)(c), if at all it be relevant. Being abstract not relevant to issue on hand, I am, therefore, not answering question 1 referred to me. 9. second point of difference referred has itself two parts: (i) whether Commissioner (Appeals) was correct in cancelling penalty imposed under section 271(1)(c), and (ii) whether matter should be restored to Commissioner (Appeals) for giving fresh findings. As far as first question is concerned, in view of basic failure of ITO to give opportunity to assessee before levying penalty, penalty has to be cancelled and I have to hold that Commissioner (Appeals) was correct in cancelling penalty. On this point, therefore, I would agree with learned Judicial Member though not for reasons stated by him. 10. second point is whether matter should be restored to Commissioner (Appeals) for giving his fresh findings. Whereas learned Judicial Member has agreed with Commissioner (Appeals), learned Accountant Member has suggested that matter must go back to Commissioner (Appeals) for considering question of rebuttal with regard to section 271(1)(c), Explanation. Insofar as I have not answered question 1 referred to me, application of section 271(1)(c) Explanation being academic, I cannot agree with learned Accountant Member that matter should go back to Commissioner (Appeals) for giving any fresh findings on question o f 'rebuttal of presumption' with regard to Explanation to section 271(1)(c). There, however, remains important point as to levy of penalty itself. Decisions in Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC) and CIT v. National Taj Traders [1980] 121 ITR 535 (SC) indicate that in certain circumstances, even though there is failure of authorities to follow mandatory requirements, appellate authorities can remit matter back to original authorities for purpose of pursuing matter from stage where invalidity sets in. On account of manner in which matter has been dealt with by original Bench of Tribunal this question has not been considered by Bench. learned counsel for assessee has pointed out that insofar as mandatory requirements of law have not been complied with, order of ITO requires to be cancelled. According to learned counsel appellate authority can deal to be cancelled. According to learned counsel appellate authority can deal with penalty order only by enhancing penalty, reducing penalty or altogether cancelling it. In present case, last action should be taken. There was, no scope for remitting matter back to ITO to proceed from stage in which invalidity set in. It is also pointed out that at any rate time limit for levying penalty having passed by remitting matter back to ITO, period of limitation cannot be extended. For department, learned counsel has pointed out that ITO's order had merged with that of Commissioner (Appeals). Reference is made to decision in Kashmir Vastralaya v. CIT [1978] 112 ITR 630 (Pat.). ratio of Supreme Court decision in case of Guduthur Bros., therefore, clearly supports his case that matter should be remitted to ITO for proceeding from stage from which, according to him, not invalidity but mere irregularity set in. 11. As would be clear points of difference referred to me for decision set out above do not involve consideration of question whether in view of initial irregularity which goes to root of levy of penalty, penalty being cancelled, matter should be remitted back to ITO for further proceedings. I have as Third Member no jurisdiction to decide this question. In view of my decision as above, matter may, if permissible, be agitated before original Bench which heard appeal, to which this will now go back for decision according to law. *** INCOME TAX OFFICER v. NIRANJAN SINGH CHADDHA