TMI Blog1973 (9) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... The notice was in respect of two entries of cash credits amounting to Rs. 10,000 each in the assessee's accounts to be treated as the income from some undisclosed source. In response to the notice the assessee filed returns on 23rd August, 1965, wherein he did not include the income under these two entries of cash credits amounting to Rs. 20,000. Assessment was completed on 20th of December, 1965. The entries relating to Rs. 20,000 which the assessee concealed in the returns were assessed as the income of the assessee. This amount had appeared in the accounts of a firm styled as Messrs. Harnarayan Prabhudayal of Calcutta. Penalty proceedings were initiated under section 271(1)(c) on the very day, that is, 20th of December, 1965. A penalty of Rs. 12,900 was imposed by the Inspecting Assistant Commissioner of Income-tax under section 271(1)(c) read with the Explanation on November 18, 1967. The assessee filed an appeal before the Tribunal against the order imposing penalty. The Tribunal allowed the appeal and cancelled the penalty and directed refund of penalty if the amount had already been recovered. The entire reason why the Tribunal allowed the appeal occurs in parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any proceedings under this Act, is satisfied that any person--... (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,--....... (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as correct income. " By section 40 of the Finance Act, 1964 (Act No. 5 of 1964), section 271 (1)(c) was amended with effect from April 1, 1964. In section 271(1)(c) the word " deliberately " was omitted. An Explanation was added at the end of section 271(1) which runs thus : " Explanation.--Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) was assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the old Act was served on the firm calling upon it to submit a return of its income. The return had to be field within 36 days of the service of the notice. It was not filed. Further notices were served on two occasions. The firm filed a return on 18th of November, 1961, showing an income of Rs. 3,55,566. The Income-tax Officer completed the assessment on 23rd November, 1964, computing the total income of the firm at Rs. 4,75,368. On the same day the Income-tax Officer issued a notice under section 271 read with section 274 of the Act calling upon the firm to show cause why an order imposing a penalty should not be passed on account of its failure to furnish the return in time. After considering the explanation submitted by the assessee the Income-tax Officer made an order on November 19, 1966, under section 271(1)(c). In that case while the assessment proceeding was pending the assessee challenged the constitutionality of section 297(2)(g) and section 271(2) of the Act. The constitutionality of section 297(2)(g) and section 271(2) was attacked as being hit by article 14 of the Constitution. Section 297(2)(g) ran thus : " 297. (2) Notwithstanding the repeal of the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 14 was examined. An answer could not be given by their Lordships on a wrong exposition of law that the section was not discriminatory. Mr. Mohanti fairly concedes that if this decision is taken as laying down the law on the point in issue, then clearly the amended section 271 after April 1, 1964, would have application to this case, and consequently the Tribunal would have invoked the Explanation. The learned standing counsel placed reliance on Commissioner of Income-tax v. Bhan Singh Boota Singh in support of his contention that the penalty provisions become operative on the date on which the false return is filed and that they will not be governed by the law which was in force on the first day of the assessment year. In this case the returns were filed on 9th April, 1964, and by then the Explanation had come into force. The ultimate result of the case would not make any difference whether the date of the return or the date of the satisfaction is to be taken into consideration. We are unable to agree with this decision as laying down the correct law to the extent it says that the penalty provisions become operative on the date on which the false return is filed. Those prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Explanation was to get over the difficulty created by decisions which placed the burden of proving concealment of the particulars of the income on the revenue as was done in Anwar Ali's case. The Explanation now places the burden of proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect of the assessee. The object of the Explanation is to create a presumption in favour of the revenue in a certain contingency. That is to say, where the total income returned is less than 80 per cent. of the total income assessed, the presumption would apply. The presumption is a rebuttable one and can be displaced by the assessee by proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. It is to be noted that the penalty proceeding continues to be penal in nature even after the introduction of the Explanation. The quantum of proof necessary to discharge the onus by the assessee would be as in a civil case, that is, by preponderance of probabilities. After applying the Explanation the taxing authorities would take into consideration all the facts and circumstances, pros and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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