In this appeal filed by Department, only ground taken is as under: "On facts and in circumstances of case, CIT(A) has erred in deleting penalty of Rs. 19,88,845 imposed under s. 271(l)(c) when it is clear that assessee has furnished inaccurate particulars of his income by not disclosing true and fair market value of perquisite enjoyed by him." appeal arises this way. assessee is individual deriving income by way of salary as director of company and income from other sources. In return filed for asst. yr. 1991-92, he declared income of Rs. 54,78,610. assessment was completed on income of Rs. 2,67,99,554. Several additions and disallowances were made in assessment framed under s. 143(3) of IT Act before arriving at total income and included therein was addition of Rs. 24,27,402 under head "Income from other sources" with following narration: "Benefits and perquisites enjoyed as director of Seven (P). Ltd. Co. in which assessee is director as well as person having substantial interest as beneficial owner". aforesaid addition was contested by assessee in appeal before CIT(A) who confirmed addition by order dt. 21st Dec., 1995. No further appeal seems to have been filed by assessee before Tribunal. Subsequently, penalty proceedings were initiated for concealment of income under s. 271(1)(c) read with s. 274 of Act on ground that assessee had concealed income to extent of Rs. 24,27,402. case of AO was like this. assessee was shareholder in number of closely held companies who jointly owned premises at No. 44, New Friends Colony, New Delhi. premises was purchased by eight companies from B.K. Nehru (HUF). assessee had substantial interest in these companies as defined in s. 2(32) of Act. premises was given on lease to HCL-HP Limited of which assessee was employee. employer company gave premises to assessee for his residence. assessee also has substantial interest in employer company. eight companies which jointly owned premises spent sum of Rs. 19,51,571 for construction and re-designing of premises and also spent Rs. 4,75,831 as lease rent for air-conditioning. These companies Were, however, not under any obligation to make any improvement to property because there was no demarcation or partition of premises defining shares of each of eight companies. premises was single bungalow bearing assessee s name-plate. amount spent by companies on reconstruction and redesigning of house and on lease rent for air- conditioning is perquisite under s. 2(24)(iv) read with s. 2(32) of Act in hands of assessee provided by companies which jointly owned same, in which assessee was not only director but also held substantial interest as beneficial owner. value of perquisite was to be taken at Rs. 23,77,397 as determined by CIT(A) and since assessee did not disclose same in return of income, he was liable for penalty for concealment of income. In this view of matter, AO levied penalty of Rs. 19,88,845 @ 120 per cent of amount of tax sought to be evaded. On appeal against levy of penalty, CIT(A) cancelled same. In doing so, he recorded following findings: "(a) AO has reached requisite satisfaction that assessee furnished inaccurate particulars of his income (para 7.9 of his order); (b) assessee was clearly made aware of charge against him that he was guilty of furnishing inaccurate particulars of income and assessee s plea that he was not aware of charges against him cannot be accepted; (c) question whether perquisite was rightly assessed in assessee s hand under s. 2(24)(iv) read with s. 2(32) of Act need not be gone into since CIT(A) has upheld addition in assessment proceedings (para 8.10 of his order); (d) However, it was duty of employer under s. 192 of Act to work out correct value of perquisites to be added to salary income of assessee. default was not that of assessee but of employer; (e) mere fact that amount was assessed in hands of assessee is not enough for purpose of levy of penalty and it is further required to be shown that there was conscious or deliberate concealment or furnishing of inaccurate particulars of income on part of assessee, as held by Supreme Court in case of K.C. Builders & Anr. vs. Asst. CIT (2004) 186 CTR (SC) 721: (2004) 265 ITR 562 (SC) and in present case it cannot be said so; arid (f) addition was made only on basis of information gathered from documents filed by assessee. Thus, assessee did not hide anything from Department nor did he file any inaccurate particulars consciously. requisite mens rea or guilty mind was absent." Having recorded above findings, CIT(A) proceeded to cancel penalty by observing as under: "In present case, I find that additions were made on basis of information gathered from documents/submissions filed by appellant during course of assessment proceedings only. Thus, circumstances clearly show that nothing (sic) hidden from Department and therefore, appellant cannot be held guilty of filing inaccurate particulars of income consciously, which has now been assessed in hands of appellant as "income from other sources". This fact approves that there was no mens rea or guilty mind on part of appellant and mere absence of explanation, which is not acceptable to Department, cannot be treated as wilful default of filing of inaccurate particulars on part of appellant. Keeping in view facts nar rated above, in my opinion, appellant was able to rebut presumption raised by statute by cogent, reliable and relevant material. Therefore AO s action in imposing penalty under s. 271(1)(c) was not justified. Accordingly, penalty levied under s. 271(1)(c) amounting to Rs. 19,88,845 is deleted." It is against aforesaid order of CIT(A) that Department has come in further appeal before Tribunal. learned CIT Dr., Mr. R.L. Meena besides kly relying on penalty order, submitted that order passed by CIT(A) cancelling penalty is contradictory. He pointed out that assessee had made certain arrangements with companies which jointly owned premises in New Friends Colony and his employer-company with view to hoodwinking Department and understanding perquisites enjoyed by him and that this he could do because of substantial interest and consequent influence which he wielded over his employer-company as well as private limited companies which jointly owned premises. He further submitted that this aspect was overlooked by CIT(A) while cancelling penalty and made k plea for restoring same. learned counsel for assessee, on other hand, brought to our notice few facts. premises in question were taken on lease by assessee s employer company from seven private limited companies (not eight as mentioned by AO) which together held 16.75 per cent of shares in employer-company. property was leased by these companies to HCL- HPL which is employer company in year 1989 for period of five years at rent of Rs. 9,000 per month. He drew our attention to fact that assessee had declared perquisite value on account of premises being provided to h i m by his employer-company at Rs. 18,000 in return of income in accordance with formula prescribed by r. 3(a)(iii) r/w Expln. 2 thereto of IT Rules, 1962. He pointed out that addition of Rs. 24,27,402 was made not under head "Salary" but under head "Income from other sources". He further submitted that though assessee had not filed any further appeal to Tribunal against order of CIT(A) in quantum proceedings in which addition of perquisites was confirmed, that does not lead to conclusion that assessee concealed his income or furnished inaccurate particulars thereof and in course of penalty proceedings entire matter can be re-appraised since penalty proceedings and assessment proceedings are distinct and separate, findings given in assessment proceedings not being conclusive for purpose of levying penalty. He thus argued that CIT(A) has rightly cancelled penalty. In course of arguments, learned counsel for assessee submitted that AO has not recorded requisite satisfaction in assessment order to effect that assessee had furnished inaccurate particulars of his income and, therefore, penalty order is bad in law. In particulars of his income and, therefore, penalty order is bad in law. In making this submission, he sought to rely on r. 27 of Tribunal Rules which permitted respondent in appeal to defend order appealed against on ground decided against him in impugned order. According to him, CIT(A) was wrong in holding that AO had recorded requisite satisfaction in assessment order. He submitted that discussion in pp. 12 to 16 of assessment order, on which reliance has been placed by CIT(A) to conclude that AO has recorded requisite satisfaction, actually is only about unsustainability of assessee s claim that no perquisite or benefit under s. 2(24)(iv) arose out of expenditure incurring by private limited companies in improving property and from discussion it is not possible to discern that any satisfaction was reached by AO that assessee furnished inaccurate particulars of income or concealed his income by way of perquisites. We were taken through these pages in assessment order to drive home point. In reply, learned CIT Departmental Representative, in particular reference to r. 27 of IT Rules, drew our attention to very same pages to which our attention have been drawn by learned counsel for assessee and which were relied upon by CIT(A) and contended that CIT(A) was right in inferring that AO did record requisite satisfaction that assessee concealed his income by way of perquisites or furnished inaccurate particulars thereof. He submitted that satisfaction reached by AO was clearly discernible from these pages. He referred to judgment of Allahabad High Court in Sunil Kumar Malhotra vs. CIT & Anr. (1995) 129 CTR (All) 47 (1995): (1995) 215 ITR 586 (All) in this regard. We have carefully considered rival contentions. As seen from pp. 56 and 57 of paper book, assessee declared Rs. 24,600 as perquisite in return filed by him. Out of this amount, Rs. 18,000 represented perquisite arising on account of company leased accommodation which is premises at No. 44, New Friends Colony. Page 56 is certificate issued by employer company in which it was also said that rent paid was Rs. 9,000 per month and 10per cent of salary was, therefore, shown as perquisite on account of accommodation. Page 57 is certificate of TDS issued by company to assessee under s. 203 of Act. computation of perquisite on account of company leased accommodation is governed by r. 3 (a)(iii)(A) r/w Expln. 2 thereto of IT Rules. It says that perquisite on account of rent free residential accommodation (unfurnished) shall ordinarily be sum equal to 10 per cent of salary due to assessee for period during which accommodation was occupied by him. There is nothing in assessment order to show that value computed by assessee on account of perquisite is not in accordance with aforesaid rule. What AO has done is to invoke provisions of s. 2(24)(iv) of Act and accordingly has treated amounts spent by private limited companies who were joint owners of property, in redesigning and in paying lease rent for air-conditioning, as assessee s income. This provision is as under: "Sec. 2(24)(iv): value of any benefit or perquisite, whether convertible into money or not, obtained from company either by director or by person who has substantial interest in company, or by relative of director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by director or other person aforesaid;" In response to proposal of AO, assessee submitted that he was not occupying property in capacity of director of private limited companies but was occupying same as employee of lessee company and, therefore, he cannot be said to have enjoyed any benefit or perquisite from t h e private limited companies. AO, however, rejected assessee s contention. He observed that once property was given in lease to HCL-HPL, those companies were no longer under any obligation not make any improvement to property, that property was independent house with large garden and well planned Courtyard, that enquiries showed that assessee s nameplate was affixed in granite in house which indicated that assessee was in control of premises, that expenditure incurred by private limited companies was for convenience of assessee who was director in all those companies and was also having substantial interest in them, that it was assessee who was enjoying benefits arising out of redesigning of house and air conditioning thereof and thus there can be no argument that expenditure had increased value of property which no argument that expenditure had increased value of property which resulted in benefit or perquisite to assessee under s. 2(24)(iv) of Act. No doubt view taken by AO has been upheld by CIT(A) and no further appeal was filed by assessee to Tribunal but from this fact alone it is not possible to hold that assessee concealed his income by way of perquisite or furnished inaccurate particulars thereof. It is now well-settled that t h e findings given in assessment proceedings, though constitute good evidence for purpose of penalty proceedings, they cannot constitute decisive o r clinching evidence for purpose of levying penalty for concealment of income. Reference in this connection may be made to leading judgments of Supreme Court on point in CIT vs. Khoday Eswarsa & Sons (1972) CTR (SC) 295: (1972) 83 ITR 369 (SC) and in Anantharam Veerasinghaiah & Co. vs. CIT (1980) 16 CTR (SC) 189: (1980) 123 ITR 457 (SC). Therefore, mere fact that assessee did not file any further appeal to Tribunal against assessment proceedings cannot be decisive of question that assessee concealed his income or furnished inaccurate particulars thereof. Much of discussion in pp. 12 to 16 of assessment order is about how entire transaction of lease of property to assessee s employer and incurring of expenditure on improvement of property by private limited companies which owned property would result in benefit or perquisite to assessee in terms of s. 2(24)(iv). As already noted, AO has not rejected assessee s plea that whatever perquisite he has received on account of company leased accommodation has already been shown in return in accordance with relevant IT Rule. salary income of Rs. 2,04,600 declared in return includes perquisite value of Rs. 18,000 arising on account of company leased accommodation. It is on very same facts disclosed by assessee that AO has taken view, in addition to bringing to tax perquisite in accordance with r. 3 as offered by assessee, that very same transaction also attracts provision of s. 2(24)(iv) of Act. It is not understood as to how these provisions can apply to case since it is not possible to perceive transaction as giving rise to benefit or perquisite obtained by assessee as director or person having substantial interest in seven private limited companies which owned property. They have spent monies on improvement of property and any consequent increase in value of property is to their account and they, as owners, alone will be entitled to enjoy benefits arising out of increase in value of property. assessee is merely residing in property as employee of lessee-company. Though this aspect of matter has been decided against assessee by CIT(A) in quantum proceedings, in penalty proceedings it is open to assessee to contend that even assessment of alleged perquisite under s. 2(24)(iv) is of doubtful validity. It is well-settled that in penalty proceedings, there has to be rehash or reappraisal of entire materials on record including question whether amount was rightly assessed in hands of assessee. Such principle is only natural corollary of fundamental principle that penalty proceedings are separate and independent of assessment proceedings and any findings given in assessment proceedings are not conclusive in penalty proceedings. If any authority is needed on this specific question, reference may be made to judgment of Bombay High Court in Jainarayan Babulal vs. CIT (1988) 69 CTR (Bom) 201: (1988) 170 ITR 399 (Bom) where argument was raised before High Court in penalty proceedings, on behalf of assessee that amount assessed as income fell outside relevant assessment year and, therefore, assessment itself is bad notwithstanding that assessment of income had become final and, therefore, no penalty could be imposed, it was held by Bombay High Court, accepting contention, as below: "In CIT & Anr. vs. Anwar Ali (1970) 76 ITR 696 (SC), Supreme Court confirmed what had been held in CIT vs. Gokuldas Harivallabhdas (1958) 34 ITR 98 (Bom). proceedings under s. 28(1)(c) are penal in character. It could not b e said that finding given in assessment proceedings for determining or computing tax was conclusive. It was, however, good evidence. Before penalty could be imposed, entirety of circumstances must reasonably point to conclusion that disputed amount represented income and that assessee had consciously . concealed particulars of his income or had deliberately furnished inaccurate particulars." similar view has been taken specifically on above question by Kerala High Court in CIT vs. T. Govindankutty menon (1989) 178 ITR 509 (Ker) I n this case, additions of Rs. 85,500 were sustained by Tribunal in assessment proceedings. However, penalty levied for this addition under s. 271 (1)(c) was cancelled by Tribunal on making reappraisal of evidence adduced by assessee in assessment proceedings. Affirming decision of Tribunal, Kerala High Court held that "we are of view that it was open to CIT (A) as also Tribunal to advert to materials or evidence available during assessment proceedings afresh and make independent or closer o r more intelligent analysis. That was so done in this case to come to conclusion that assessee has discharged onus cast on him under explanation to s. 271(1)(c) of IT Act." In light of above stated legal position, assessment of amount itself being in doubt, no penalty can be imposed on assessee for concealing his income or furnishing inaccurate particulars thereof. In any case, issue raised by AO is highly debatable and involves question of interpretation of s. 2(24)(iv) in light of facts of case. It is not in dispute t h t all facts relating to ownership of property, lease, assessee s interest in private limited companies which owned property, expenditure incurred by them in improvement of property etc. were furnished by assessee without demur and it is only from those facts that AO took view that in addition to value of perquisite under r. 3 as declared by assessee, assessee was also assessable under s. 2(24)(iv). It is also well-settled when all facts are furnished by assessee and legal contention to effect that view taken by AO is not tenable on those facts, merely because assessee s objection is not upheld and AO proceeds with view taken by him, it does not follow that assessee concealed income assessed on basis of AO s view or furnished inaccurate particulars thereof. Reference may be made in this connection to ITO & Ors. vs. Burmah Shell Oil Storage & Distributing Co.(1987) 163 ITR 496 (Cal) and CIT vs. Late G.D. Naidu (1986) 51 CTR (Mad) 256: (l987) 165 ITR 63 (Mad). It may also be noted that in Addl. CIT vs. Delhi Cloth & General Mills Co. Ltd. (1984) 42 CTR (Del) 188: (1986) 157 ITR 822 (Del) , Hon ble Delhi High Court has taken view that merely because assessee s claim that Court has taken view that merely because assessee s claim that expenditure is revenue in nature is not accepted in assessment proceedings it does not follow that assessee concealed his income or furnished inaccurate particulars in relation to said expenditure. This principle is also applicable to present case where CIT(A) has also found (para 8.14 of his order) that all facts and relevant documents were disclosed by assessee to AO and nothing important or relevant was withheld from him. We also agree with this finding of CIT(A) and applying principle laid down in afore cited cases hold that even on this ground penalty was rightly cancelled by CIT(A). Turning now to question of satisfaction being recorded by AO, we permit assessee to invoke r. 27 of Tribunal Rules to defend ultimate decision of CIT(A) on ground of satisfaction not being recorded by AO, ground which was rejected by CIT(A). There is no observation in pp. 1 2 to 16 of assessment order to suggest that AO had reached requisite satisfaction. All that AO has stated in these pages is that amount spent by private limited companies to improve property must be treated as benefit or perquisite obtained by assessee in his capacity as director or person having substantial interest in those companies within meaning of s. 2(32) of Act. However, there is no recording of requisite satisfaction to effect that assessee concealed his income to extent of t h e perquisite of Rs. 24,57,402 or furnished inaccurate particulars thereof in relation thereto. Mere mention in end of assessment order that penalty proceedings under s. 271(1)(c) have been initiated separately does not meet requirement of opening words of s. 271(1) as held by Hon ble Delhi High Court in CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321: (2000) 246 ITR 568 (Del) and Diwan Enterprises vs. CIT & Ors. (2001) 167 CTR (Del) 324: (2000) 246 ITR 571 (Del). In these cases, it has also been held that omission to accord requisite satisfaction in assessment order is jurisdictional defect which cannot be cured. CIT(A) was, therefore, wrong in holding, in para 7.9 of his order, that AO had recorded requisite satisfaction in assessment order. For aforesaid reasons, we agree with ultimate conclusion of CIT(A) that penalty was not justified. We confirm his decision and dismiss appeal filed by Department. *** ASSISTANT COMMISSIONER OF INCOME TAX v. SHIV NADAR