TMI Blog1993 (2) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... on July 11, 1983, showing a total income of Rs. 38,980. The assessment was completed on a total income of Rs. 59,540. During the assessment, the Income-tax Officer observed that the assessee claimed to have obtained a loan of Rs. 20,000 from Sri R. V. P. Ganapati Rao on different occasions. The Income-tax Officer examined the said Ganapati Rao who admitted to have advanced the loan and explained that this amount was saved out of commission which he had earned as commission agent. According to him, the amount was not kept in the bank because of an apprehension that, if the fact of his having the amount was known to his brother, he would have been forced/persuaded to use the amount in the business of his brother, which he did not want to do. The Income-tax Officer did not accept the explanation and treated the amount as income of the assessee from undisclosed sources by the application of section 68 of the Act. Proceedings under section 271(1)(c) of the Act were initiated in respect of the addition. The addition made by the Income-tax Officer was sustained by the Appellate Assistant Commissioner of Income-tax, Berhampur Range, Berhampur. In response to the notice under section 274 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed. On being moved by the Revenue, the reference as aforeindicated has been made. According to learned counsel for the Revenue, the approach of the Tribunal was erroneous. The Tribunal did not apply its mind to the questions raised before it and came to an abrupt conclusion about the justifiability of the Appellate Assistant Commissioner's order. No reason was indicated as to why the view of the Appellate Assistant Commissioner was confirmed. A presumptuous conclusion was arrived at, viz., that the Tribunal may not have approved the addition of Rs. 20,000 as income from undisclosed sources had the matter been carried before it. The onus has been wrongly placed on the Revenue and, therefore, the Tribunal was not justified in its conclusion. Learned counsel for the assessee, however, submitted that the question as raised is one of fact and not of law, and mere rejection of the explanation was not sufficient to attract levy of penalty. 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). The periods are (a) prior to April 1, 1964, (b) April 1, 1964, to March 31, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 disclosed by him." The question of onus is of primary and added importance in legal acrimony. In CIT v. Anwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 the 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 Finance Act, 1964, and the subsequent substituted Explanations makes it clear that the statute visualised the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 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 the 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 CIT v. Mussadilal Ram Bharose [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 assessee has offered an explanation but no material or evidence to substantiate it, he shall be deemed to have co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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