TMI Blog1986 (7) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... 71. The income was shown as Rs. 5,420. The assessee did not appear before the Income-tax Officer and, therefore, he was assessed ex parte. The income assessed was Rs. 10,452. Thus, a sum of about Rs. 5,000 was added as income from undisclosed sources. The assessee appealed. The Appellate Assistant Commissioner held that this addition could not be made and thus allowed the appeal. On further appeal by the Department before the Tribunal, the Income-tax Officer's order was restored. This assessment order has now become final. Thereafter proceedings for imposition of penalty were commenced under section 271 of the Income-tax Act, 1961 (" the Act ") by the Income-tax Officer. The assessee appeared and offered his explanation. It was submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee applied to the Tribunal for a reference before this court but his prayer was turned down. Thereupon, the assessee came to this court under section 256(2) of the Art. This court allowed the prayer and directed the Tribunal to state the case and refer the aforesaid question to this court for decision. Shri B. L. Nema, learned counsel for the applicant, argued that it is open to the assessee during the course of penalty proceedings to show that the income was rightly returned and that there had been no fraudulent or wilful concealment of income. Learned counsel submitted that before the Income-tax Officer during the course of penalty proceedings, the assessee had offered a reasonable and plausible explanation regarding non-inclusion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which has been disallowed as a deduction), such person 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 his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." This Explanation to section 271(1)(c) is attracted in cases where the income is assessed under section 143 or section 144 or section 147. If the finding is that the income returned by the assessee falls short of eighty per cent. of the income so assessed, he will be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o indicate that the disputed amount represents the assessee's income that was concealed by the assessee. This was the view taken by the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696. Interpreting section 28(1)(c) of the Indian Income-tax Act, 1922, it was observed in that case that the nature of the proceedings was penal and the gist of the offence is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the Department to establish that the receipt of the amount in dispute constitutes the income of the assessee. The Supreme Court further laid down that it will be legitimate to say that the mere fact that the explanation of the assessee is fals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to section 271(1)(c), the burden was on the assessee to show that the failure to return the income correctly did not arise out of fraud or gross or wilful neglect. The Tribunal has not accepted the explanation offered by the assessee. Once this explanation is excluded from consideration as untenable, there is no escape from the finding that the assessee is guilty of wilfully not returning his correct income, for such is the presumption that has to be drawn in view of the Explanation to section 271(1)(c). In the present case, the Tribunal has in its order dated December 31, 1977, found as a fact that the assessee has not discharged the burden which lay on him in view of that Explanation and that this finding by it is based upon apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the non-inclusion of the income in his return. Whether or not, added learned counsel, the explanation offered is reasonable, is not a question of fact but is one of law. In the instant case, submitted learned counsel, the explanation offered was reasonable and the non inclusion of the income cannot be said to be either wilful or negligent or fraudulent. Learned counsel relied upon the decision of the Punjab and Haryana High Court in Karnail Singh V. Kaleran's case [1974] 94 ITR 505 (P H). In that case, the finding of the Tribunal was that there was no proof that the cash belonged to the assessee and, therefore, it was held that the amount did not represent the income of the assessee. The assessee was consequently held not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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