TMI Blog1973 (4) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, Jaipur Bench, Jaipur, dated 24th February, 1972, praying that the Tribunal be directed to refer to this court some questions of law which arise in these cases. An identical question, which is framed in D. B. Income-tax References Nos. 142/72, 143/72 and 144/72, reads as under : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not guilty of fraud or gross or wilful neglect within the meaning of the Explanation to section 271(1)(c) of the Act ? " The question which has been raised in D. B. Income-tax Cases Nos. 145 and 146 of 1972 reads : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that non-maintenance of quantitative details and proper accounts by the assessee would not be tantamount to gross or wilful neglect and the resultant under-statement of the income by the assessee will not amount to concealment within the meaning of the Explanation to section 271(1)(c) ? " The question which has been raised in D. B. Income-tax Case No. 147 of 1972 is: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that non-ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and substituting a margin of profit different from that disclosed by the assessee. It is not possible to infer from these additions that the assessee was guilty of fraud or gross or wilful neglect which resulted in the difference between the income returned and the income assessed. Accordingly, we would cancel the penalties levied for these three years and allow the appeals ... " In D. B. Civil Income-tax Case No. 145 of 1972, the assessee is a registered firm which does "sarafa" business and in the course of which it manufactures and sells silver Ornaments. Ornaments also purchased from individuals are sold either in the same condition or after re-manufacturing them. For the assessment year 1968-69 the assessee filed a return of Rs. 21,289. The Income-tax Officer found that the assessee was not maintaining proper accounts and, therefore, assessed its income at Rs. 34,800, applying the gross profit rate at 6.25 per cent. on the estimated sale. The Income-tax Officer in the course of assessment proceedings initiated penal proceedings under section 271(1)(c) of the Act but as the minimum penalty exceeded Rs. 1,000, he referred the matter to the Inspecting Assistant Commissioner un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been on estimate basis. The same was on notional basis as it was found that quantitative tally was not available and the account books otherwise too were not much reliable. All this (sic) coupled with the circumstance that in the past, assessment has been made on an estimate basis and the assessee had also conceded in his declaration that the account version represented by the books was not trustworthy and of its own made an estimated addition of Rs. 6,000 in its income were justifiable inference to make additions during the assessment proceedings. However, they would not by themselves be enough to sustain the imposition of penalty specially when the addition is not too high. Such proceedings are of quasi-criminal in nature, and something more was required to show that the assessee consciously concealed the particulars of income or furnished inaccurate return. In our view negligence in the maintenance of proper accounts is not synonymous with the concealment of income as envisaged by section 271(1)(c). It is correct that the Explanation mentioned in this section as incorporated on April 1, 1964, placed the onus of proving that the failure to return the correct income did not arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation submitted by the assessee could not be treated totally out of mark. Further, the failure to maintain proper accounts cannot be treated as synonymous for concealment of income or furnishing inaccurate particulars in the return. It is correct that by virtue of the Explanation added to section 271 on September 14, 1964, the onus of proving the absence of fraud or gross or wilful neglect in the filing of the proper return in such circumstance rests with the assessee. However, the addition made in the profits on estimate basis, especially when the addition is not very high vis-a-vis the declared income, would not alone justify the levy of penalty. " The department made applications under section 256(1) of the Act to the Tribunal to refer the questions of law which it claimed arose in these six cases. The Tribunal by its consolidated order dated 24th February, 1972 rejected all the six application of the department. The Tribunal noticed the Explanation added to section 271 of the Act with effect from April 1, 1964, and observed by reference to Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax I that " when the finding is one of fact, the fact that it is itself an infe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the assessee was guilty or not guilty of fraud, gross or wilful neglect. The short question on which concentration was necessary at this stage was whether a question of law arises or not, in the circumstances, in each of these cases. Mr. N. M. Ranka, learned counsel for the assessee, in all the six cases urged that there was no statutory obligation to maintain books of account ; that the assessment in these cases was made under the proviso to sub-section (1) of section 145 of the Act where the account books were treated as complete and correct but as the income was not deducible due to the lack of the supporting data such as of stock register, the income was assessed on a basis of estimate and having regard to this circumstance the learned Members of the Tribunal held that no case of wilful or gross neglect was found against the assessee. The allegation of fraud finds no mention in the order of the Inspecting Assistant Commissioner and, therefore, the simple question which emerges for consideration is whether having regard to the Explanation and the presumption raised therein, if the Tribunal held that the presumption stood displaced in view of the circumstances of these c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points by reference to which it could be determined whether the question raised is one of law or not. They read: " (i) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66(1). (ii) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. (iii) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (iv) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact." The Tribunal has expressed the opinion that the questions raised are covered by the fourth proposition. Mr. Lodha's argument, however, is that it is the wrong approach on the question of burden of proof which raises a question of law. Probably the learned counsel hinted that it was the third proposition which was at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition of the penalty in these cases it was aware of the existence of the Explanation the purpose it served and its applicability to the cases in hand. The disparity between the incomes returned and the incomes assessed was less than 80 per cent. and they related to the assessment years which were governed by the Explanation. In fact the Tribunal has referred to the Explanation so many words. The Tribunal, however, felt satisfied that the presumption raised by the Explanation stood rebutted because the additions made to the incomes returned were merely estimated or notional and the difference was also not substantial and the Tribunal was not prepared to conclude fraud, wilful or gross neglect. The evidence which satisfied the Tribunal were the facts and circumstances of the cases which it had decided itself. The evidence may be direct or circumstantial or both. Mere statement of the assessee may be enough in some cases. What quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigid rule. Nor does it raise a question of law. No single fact but the cumulative impact of all the facts affords the answer. We have quoted the relevant excerpt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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