TMI Blog2000 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 271(1)(c) ?" The factual position, as borne out from the statement of case, is as follows : For the assessment year 1986-87, the assessee, a partnership firm, filed its return of income on April 22, 1987, admitting a total income of Rs. 6,76,890. The Assessing Officer completed the assessment determining total income at Rs. 7,90,170 including Rs. 93,000 as income under the head "Other sources". The assessee, in the course of its business, received rice mostly from suppliers from Andhra Pradesh, who sent the goods either directly or by raising hundis. When hundis were raised, the assessee honoured them by making payment through local banks. When goods were sent directly, payments were made either by demand draft or by telegraphic transfers through local banks. During the course of assessment proceedings, the Assessing Officer noticed that some of the demand drafts purchased and telegraphic transfers made by the assessee were not entered in its cash book on the dates on which they were purchased or made, as the case may be. The payments were found to have been accounted by the assessee's suppliers on the respective dates. The assessee purchased a demand draft of Rs. 50,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a few friends and proper entries were not made in the books of account. It was observed that if in reality the assessee had taken hand loans, it would not have been difficult to identify such persons and to produce them for examination. The assessee's explanation was, therefore, clearly untenable and the assessee accepted it to be "unexplained investment" and offered for addition of Rs. 93,000 by its letter referred to above. Applying Explanation 1(B) of section 271(1)(c), penalty of Rs. 37,975 i.e., the minimum penalty leviable, was levied. In appeal before the Commissioner of Income-tax (Appeals), Calicut (in short "the CIT(A)"), the assessee contended that it had agreed for addition of the amount in question as it was not able to prove the credits and since the assessment has been completed on agreed basis, penalty was not leviable. The Commissioner of Income-tax (Appeals) did not accept this contention. In second appeal before the Tribunal, the stand of the assessee was that since an addition was made on agreement, penalty under section 271(1)(c) was not leviable. Reference was made to a decision of the apex court in Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Explanation appended to section 271(1)(c). In case an explanation is offered, the Assessing Officer has to examine it and find out whether the assessee has been able to establish that there was no concealment. The presumption that arises in view of the introduction of the Explanation is a rebuttable presumption that there was concealment of income ; if the materials placed in support of the explanation are acceptable, then presumption would not stand. As observed by the apex court in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 and CIT (Addl.) v. Jeevan Lal Sah [1994] 205 ITR 244, if the returned income is less than 80 per cent. of the assessed income, a presumption is raised against the assessee that it is guilty of fraud or wilful neglect as a result of which it was concealed income. But, this presumption can be rebutted. The same can be done by placing on record materials relevant and cogent. It is for the fact finding body to judge the relevancy and sufficiency of the materials. At this juncture, it is necessary to refer to the legislative history so far as section 271(1)(c) is concerned. There are three stages of amendment of section 271(1)(c) till the period with wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner. Explanation 1.---Where in respect of any facts material to the computation of the total income of any person under this Act,--- (A) such person fails to offer an explanation or offers an explanation which is found by the Income-tax Officer or the Appellate Assistant Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed : Provided that nothing contained in this Explanation shall apply to a case referred to in clause (B) in respect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation ; to cover or keep from sight ; to prevent discovery of ; to withhold knowledge of". There may be cases where the facts may attract both the offences, and in some cases there may be overlapping of the two offences. If in the facts and circumstances of a particular case and on the materials before it, the Tribunal reaches a conclusion that concealment was not proved, it is a question of fact and no question of law arises from such order. Similarly, whether the burden in a given case has been discharged on a set of facts or not is a question of fact. Where a finding of fact arrived at by the Tribunal is based on no material or is perverse or is based on irrelevant, extraneous or inadmissible considerations or is arrived at by application of wrong principles of law, a question of law arises. Where the Tribunal fails to arrive at its own conclusion of fact after due and proper consideration of the entire materials for and against the assessee and cancels penalty, a question of law arises. Similar is the case where the conclusions of the Tribunal suffer from infirmity on account of relevant materials and evidence being ignored. A conspectus of the Explanation added by the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift the burden of proof from the Revenue on to the assessee. 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, and no question of law arises. As observed earlier, the initial burden is on the assessee. Once the initial burden is discharged, the assessee would be out of mischief unless further evidence is adduced. It is plain on principle that it is not the law that the moment any fantastic or unacceptable explanation is offered, the burden placed would be discharged and the presumption rebutted. As pointed out by the apex court in Mussadilal Ram Bharose's case [1987] 165 ITR 14, the burden placed upon the assessee is not discharged by any fantastic explanation. It must be an explanation acceptable to the fact-finding body. The position on and after April 1, 1976, is clear that where, in respect of any item of credit, the assessee has offered an explanation which the Taxing Officer has considered to be false or the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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