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TMI Blog1987 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... cted 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 Act. In pursuance of the notice under section 274 read with section 271 of the Act for default under section 271 (1)(c), the assessee showed cause. It was urged on behalf of the assessee before the Inspecting Assistant Commissioner that the returned income was based on the books of account and excise registers maintained by the assessee-firm, but the income was estimated. It was further urged that the failure to return the correct income, if any, did not arise from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that like the cases referred to in the Tribunal's order, the assessee had maintained certain types of books of account and it appeared that it had honestly believed that the same were sufficient for the true ascertainment of its profits and from the facts disclosed, it could not be said that it had been grossly or wilfully negligent in filing such a return of income as it did and as such there was no fraud. In conformity with the other orders referred to by the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 returned by such person had been accepted as the correct income. Explanation.-Where the total income returned by any person is less than 80% of the total income (hereinafter in this Explanation referred to as the correct income) as 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 included in the total income but which has been disallowed as a deduction), such person shall, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee was less than 80% of the assessed income. The learned Chief justice noted that the significant thing about the change made in clause (c) of section 271(1) was the designed omission of the word " deliberately " therefrom, whereby the requirement of a designed furnishing of inaccurate particulars of income was obliterated. According to the learned Chief justice, the language of the Explanation indicated that for the purposes of levying penalty, the Legislature had made two clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 evidence was adduced. Here there was none. Similarly, the Full Bench of the Patna High Court in the case of CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292, had occasion to consider this. The High Court reiterated that the onus to discharge the presumption raised by the Explanation was on the assessee and it was for him to prove that the difference did not arise from any fraud or wilful neglect on his part. The court should come to a clear conclusion whether the assessee had discharged th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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