TMI Blog1995 (11) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that there was concealment, penalty cannot be sustained under section 271(1)(c) of the Income-tax Act, 1961, is correct in law ? " We have heard learned counsel for the parties. The facts as appearing from the statement of case are that, during the course of assessment, the Income-tax Officer rejected the books of account maintained by the assessee as, according to him, it was not possible to arrive at a correct result of the business from the books of account maintained by the assessee, and assessed the income of the assessee by estimating the gross profit at the rate of 15 per cent. on estimated sales of Rs. 8,75,000 and made additions of Rs. 93,000. The contentions were sustained by the Appellate Assistant Commissioner. However, the Income-tax Appellate Tribunal while sustaining the order rejecting the books of account modified the assessment order by reducing the gross profit rate from 15 per cent. to 12 per cent. and reducing the estimated sales to Rs. 8,00,000 from Rs. 8,75,000 and reduced the total additions from Rs. 93,000 to Rs. 57,644. During the course of assessment proceedings, the Income-tax Officer has also initiated penalty proceedings under section 271(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be answered in the affirmative. It is true that the Explanation referred to above which was inserted by the Finance Act, 1964, provides that where the total income returned is less than 80 per cent. of the total income assessed, the assessee shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of that income or furnished inaccurate particulars of such income within the meaning of section 271(1)(c) of the Act. The Explanation provides for raising a rebuttable presumption in favour of the Revenue and is merely a rule of evidence. It is also true that the burden is on the assessee to prove that there has been no such gross or wilful neglect on his part in furnishing the correct income. It is equally true that this burden cast on the assessee is not of the same nature which rests on the prosecution in a criminal case for proving the guilt of the accused, but is a burden akin to that in civil litigation where it depends upon preponderance of probabilities. If is also not necessary that any positive evidence be produced by the assessee before he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch lies upon the Revenue in establishing that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. It is a burden akin to that in a civil case where the determination is made on preponderance of probabilities. It is also not necessary that any positive material should be produced by the assessee in order to discharge this burden which rests upon him, The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings, irrespective of whether it is produced by him or by the Revenue. The only question to which the income-tax authority has to address itself is, whether on the material on record in the penalty proceedings, can it be said on a preponderance of probabilities that the failure to return the total assessed income has not arisen on account of any fraud or any gross or wilful neglect on the part of the assessee. If the answer to the question is in the affirmative, the legal fiction enacted in the Explanation cannot arise and the Revenue must fail in its attempt to impose penalty on the assessee." The aforesaid view was reiterated by this court again in Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not happily worded, the order of the Tribunal must be held to be erroneous, particularly when the Tribunal has recorded succinctly the contentions raised by the assessee in this regard and allowed its appeal. At best, it can be said to be an opinion unhappily worded on this aspect of the matter. In this connection, we may usefully refer to the observations made by P. N. Bhagwati C. J. in the case of S. P. Bhatt [1974] 97 ITR 440 (Guj), where in the like circumstance, it was said (page 447) : " Here, it is significant to note that the difference between the returned income and the total assessed income was entirely due to the fact that the Income-tax Officer estimated the profits supposed to have been earned by the assessee. The Income-tax Officer found it difficult to accept the figure of profit appearing from the books of account maintained by the assessee because no quantitative stock account was maintained, a majority of sales were not supported by vouchers and the gross profit disclosed in the books of account appeared to him to be low. It was not the case of the Income-tax Officer that any particular entries in the books of account were false or any particular items of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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