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The Allhabad High Court in the case of CIT v. Saran Khandsari Sugar Works (120TAX319) held that no penalty can be imposed by an assessing officer where the assessee so agree to a higher assessment on the condition that no penalty would be imposed. In this regard the High Court followed their earlier ruling in the case of CIT v. Mansa Ram and Sons (106ITR307). It is very unfortunate to note that the same Court in a later decision in the case of Biland Ram Hargan Dass v. CIT (171 ITR 390) distinguished from the principle laid down in Mansa Ram case (as per supra). In the later decision the Court held that that mere surrender or acceptance of an amount as income by the assessee at a subsequent stage is not necessarily proof of bona fide inadvertence or omission earlier. In fact the Delhi and the AP High Court too held that in such a case there is no escape from the penalty.

It is thus advisable that no surrender of income shall be made before the assessing or appellate authority as that does not help or mitigate any loss that may result otherwise.

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