TMI Blog1987 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... er rejected its account books on the ground that sales and expenses were not verifiable and the margin of profit shown was low. It may not be inappropriate, in view of the contentions urged before us, to refer to the order of the Inspecting Assistant Commissioner for the assessment year 1965-66 under section 271(1)(c) read with section 274(2) of the Act. For the assessment year 1965-66, the Income-tax Officer, as noted by the Inspecting Assistant Commissioner, rejected the book result showing sales of country liquor at Rs. 5,82,234 and the profit margin at 4% for lack of verifiability of sales and expenses and low margin of profit. The Income-tax Officer estimated the sales at Rs. 7,60,000, being Rs. 6,50,000 in Lakhibagh shop and Rs. 1,10,000 in Magra shop, and adopted the net profit rate at 8% thereby computing the profit at Rs. 60,800 and the total income was computed at Rs. 60,936 after addition of Rs. 136 for interest receipts. On appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. As the total income returned was less than 80% of the correct income computed, the case fell within the ambit of the Explanation to section 271 (1) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere placed in the cases of other liquor contractors and that, in the circumstances, the rate of net profit for both the shops should be 7% on estimated sales of Rs. 6,25,000 for Lakhibagh shop and of Rs. 1,00,000 for the Magra shop. In view of this order, the income finally determined for the assessment year was Rs. 50,750. It is the case of the appellant that 80% of the income finally assessed is Rs. 40,600 which is much higher than the income returned at Rs. 30,138. However, on behalf of the assessee, it was contended that the assessee did not conceal the particulars of income nor furnish inaccurate particulars thereof, that the income returned was based on the books of account maintained in the regular course of business, that the assessee could only declare the income as reflected in the books of account, that the difference between the returned income and the assessed income did not arise from any fraud or gross or wilful neglect on the part of the assessee and that it could not be considered in the circumstances that the assessee came within the mischief of the Explanation to section 271(1)(c) of the Act. After reviewing certain other cases, the Tribunal was of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was of the view that no question of law arose in this case. The High Court opined in the impugned judgment that the finding of the Tribunal that the assessee acted honestly notwithstanding the defective nature of the account books maintained by him was a finding of fact. In the premises, the reference application was dismissed. As mentioned hereinbefore, this appeal arises from the said decision of the High Court. After amendment by the Finance Act, 1964, section 271 of the Act along with the Explanation reads as follows: " 271. Failure to furnish returns, comply with notices, concealment of income, etc.-(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person-... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he I 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 20% 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 return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buttable. If in an appropriate case, the Tribunal or the fact-finding body was satisfied by the evidence on the record and inference drawn from the record that the assessee was not guilty of fraud or any gross or wilful neglect and if the Revenue bad not adduced any further evidence, then, in such a case, the assessee cannot come within the mischief of the section and suffer the imposition of penalty. That is the effect of the provision. Our attention was drawn to several decisions to which, out of deference to Shri Manchanda who argued before us on behalf of the Revenue, we shall refer. Vishwakarma Industries v. CIT [1982] 135 ITR 652 (P H) is a decision of the Full Bench of the Punjab and Haryana High Court where Sandhawalia C.J., speaking for the Full Bench, observed that the object and intent of the Legislature in omitting the word " deliberately " from clause (c) of section 271(1) of the Income-tax Act, 1961, and adding an Explanation thereto by the Finance Act, 1964, was to bring about a change in the existing law regarding the levy of penalty so as to shift the burden of proof from the Department on to the assessee in the class of cases where the returned income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the High Court found that the assessee had not given any explanation. So, on the facts found, the inference of the Tribunal that the amounts had been added and the evidence had been found unsatisfactory was not correct. Penalty was exigible in that case and the High Court found that the Tribunal was wrong in cancelling the penalty. As mentioned hereinbefore, it depends upon the facts and circumstances of each case. If a party comes within the mischief of the Explanation, then there is a presumption against him and the onus to discharge the presumption lies on the assessee, but being a presumption, it is a rebuttable one, and if on appropriate materials the Tribunal has rebutted that presumption, no question of law can be said to arise. The Full Bench of the Andhra Pradesh High Court in CIT v. H. Abdul Bakshi Bros. [1986] 160 ITR 94, again reiterated that the presumption spelt out becomes a rule of evidence. Presumptions raised by the Explanation to section 271(1)(c) are rebuttable presumptions. The initial burden of discharging the onus of rebuttal is on the assessee. Once that initial burden is discharged, the assessee would be out of the mischief unless further evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in law is clear. If the returned income is less than 80% of the assessed income, the presumption is raised against the assessee that the assessee is guilty of fraud or gross or wilful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent, It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body, bearing the aforesaid principles in mind, comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. No question of law arises. In this case, the Tribunal has borne in mind the relevant principles of law and has also judged the facts on record. It is not a case that there was no evidence or there was such evidence on which no reasonable man could have accepted the explanation of the assessee. In that view of the matter, in our opinion, the Tribunal rightly rejected the claim for reference under section 256(1) and the High Court correctly did not entertain the application for reference under section 256(2) of the Act. The appeal, therefore, fails and is accordingly dismissed with costs. Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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