TMI Blog1987 (9) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the affirmative, whether the levy of penalty could be justified in terms of the Explanation to section 271(1)(c) of the Income-tax Act, notwithstanding the fact that the said Explanation was not invoked by the Department while levying the penalty in question?" The facts in a nutshell which are necessary for answering the aforesaid two questions are that during the assessment year 1973-74, the assessee filed a return declaring a total income of Rs. 4,678. However, the assessment was completed on a total income of Rs. 49,403. The explanation given by the assessee except with regard to Rs. 20,000 was accepted. With regard to the sum of Rs. 20,000, the finding of the Tribunal in the assessment proceedings was that the assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 690 (SC), Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67 (P H) and 56 ITR 799 (M) (sic.).". The Tribunal also pointed out that the unexplained cash in the possession of the assessee cannot, in all cases, be said to be his income. It is only a deemed income which may be brought to tax and unless the Department shows that this amount was actually earned by the assessee during the accounting year in question, it would not be proper to levy penalty on the ground of alleged concealment. It is thus apparent that the Tribunal, in allowing the appeal filed by the assessee and setting aside the penalty, was of the view that the burden lay on the Department to prove that the amount was actually earned by the assessee during the accounting year in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this subsection." The Explanation so added by the Finance Act, 1964, remained operative till March 31, 1976, when the Taxation Laws (Amendment) Act, 1975, came into force, Explanations I to 4 were substituted with effect from April 1, 1976, for the Explanation as originally enacted by the Finance Act, 1964. Since the assessment year in the instant case was 1973-74, section 271 as it stood after its amendment by the Finance Act, 1964, and before its amendment by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he levy of penalty by the Appellate Assistant Commissioner. It is thus clear that even in this case, reliance was not placed on the Explanation added in section 271 by the Finance Act, 1964. It is, therefore, apparent that virtually, the Tribunal, in its appellate order, placed reliance on the decision of the Supreme Court in CIT v. Anwar All [1970] 76 ITR 696 and other cases which interpreted the law as it stood prior to the Explanation being added to section 271(1) by the Finance Act, 1964. The effect of the aforesaid Explanation being added to section 271(1) as also the effect of the word "deliberately" being omitted from clause (c) of section 271(1) were specifically considered by a Full Bench of the Punjab and Haryana High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1974] 94 ITR 505.(P H) does not lay down the law correctly." A similar view in regard to the effect and import of the Explanation added in section 271(1) by the Finance Act, 1964, has been taken by Division Bench of the Allahabad High Court in the case of Addl. CIT v. Mangalsen Mohanlal [1982] 136 ITR 905. A Division Bench of the Patna High Court also took a similar view in Addl. CIT v. Prasadi Sao Rajendra Prasad [1984] 145 ITR 504, and the same view was taken even by this court in CIT v. Bherulal Shrikishan [1984] 145 ITR 805. The view taken by the Full Bench of the Punjab and Haryana High Court in the case of Vishwakarma Industries [1982] 135 ITR 652 has been approved by the Supreme Court in the case of CIT v. Mussadilal Ram Bharose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary. Our answer to the questions referred to us, therefore, is that on the facts and in the circumstances of the case and in view of the Explanation added to section 271(1) by the Finance Act, 1964, and the deletion of the word "deliberately" from clause (c) of section 271(1), the deemed income of Rs. 20,000 added to the total income of the assessee in the assessment year in question could be considered for the purposes of levy of penalty in view of the presumption which was to be drawn by virtue of the said Explanation unless the Tribunal was of the opinion that the said presumption had been rebutted by the assessee as contemplated by the said Explanation. In the circumstances of the case, however, there shall be no order as to cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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