TMI Blog1987 (9) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... Inspecting Assistant Commissioner imposed a penalty in the sum of Rs. 26,500 which was sustained in appeal by the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal, Allahabad Bench, has referred the following two questions of law for the opinion of this court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the imposition of penalty on the basis ofthe finding arrived by it in the quantum appeal? 2. Whether there was any material before the Tribunal to hold that the assessee was guilty of concealment and of furnishing inaccurate particulars of its income ? " Before considering the rival contentions, we may set out in brief facts concerning the disallowance of the assessee's claim for bad debt.The assessee claimed that it had sold saris worth Rs. 35,861 during the previous year, relevant to the assessment year in question, to one Abdul Ghani, out of which cash sales were Rs. 9,422 and balance sales amounting to Rs. 26,439 were on credit. Abdul Ghani, in turn, sold those goods to two parties, against two post-dated cheques. These cheques were delivered to the assessee for collection which in due course were di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also filed during the course of penalty proceedings before the Inspecting Assistant Commissioner to the effect that the claim was genuine and there was no mala fides on the part of the assessee in claiming the amount of bad debt in its profit and loss account. The Inspecting Assistant Commissioner, however, did not accept the assessee's explanation. He essentially relied upon the findings recorded in the assessment proceedings and held that the assessee had concealed its income and had furnished inaccurate particulars thereof within the meaning of section 271(l)(c) of the Act. He imposed a penalty of Rs. 26,500 which was almost 100% of the amount in respect whereof in accurate particulars were said to have been furnished by the assessee.The assessee unsuccessfully appealed to the Income-tax Appellate Tribunal which confirmed the imposition of the penalty in the following terms : " I have decided the quantum appeal by my order of date and I have upheld the disallowance of the claim. I have agreed with the revenue authorities that the transactions which the assessee claimed to have entered into with Abdul Ghani were not genuine. That being the position, it will have to be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1961 (for short " the Act "), as it stood after its amendment by section 40 of the Finance Act, 1964 (Act No. 5 of 1964). Before adverting to those provisions, it may be useful to take notice of two well-known decisions of the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696 and in CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369. Both these decisions were rendered in construing section 28(l)(c) of the Indian Income-tax Act, 1922, the predecessor section, which was in pari materia with section 271(1)(c) of the Act, before its amendment in 1964. In Anwar Ali's case [1970] 76 ITR 696 (SC) at page 701 of the report, it was observed by the Supreme Court: "It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive." The same observations were repeated by the Supreme Court in CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC) which were to the following effect (p. 376) : " Apart from the falsity of the expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the assessed income and returned income. The dividing line is the objective test whether the returned income is less than 80% of the assessed income or not, reduced by the expenditure incurred bona fide for the purposes of making or earning any income included in the total income, but which had been disallowed as a deduction. Cases where the returned income is more than 80 per cent. of the assessed income have been left out of the purview of the Explanation and they continue to be governed by the law as it existed prior to amendment in 1964. However, cases where the returned income is less than 80 per cent. of the assessed income would fall in the second category and are caught within the mischief of the Explanation. The burden of proof, in such cases, under the amended law, is shifted from the Revenue to the taxpayer. In such cases, as a result of fiction, the assessee shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income within the meaning of section 271(1)(c) unless he proves that the failure to return the correct income was not on account of fraud or any gross or wilful neglect on his part. Once the Explanation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve concealed the particulars of his income or furnished inaccurate particulars, for the purpose of section 271(l). The position is that the moment the stipulated difference was there, the onus to prove that it was not the failure of the assessee or fraud of the assessee or neglect of the assessee that caused the difference shifted to the assessee but it has to be borne in mind that though the onus shifted, the on us that was shifted was rebuttable. If in an appropriate case, the Tribunal or the fact-finding body was satisfied by the evidence on the record and inference drawn from the record that the assessee was not guilty of fraud or any gross or wilful neglect and if the Revenue had not adduced any further evidence, then, in such a case, the assessee cannot come within the mischief of the section and suffer the imposition of penalty." From the above, it is clear that the intention of the Legislature in making the amendments to section 271(1)(c) and in inserting the Explanation thereto was to bring about a change in the existing law. Thus, the ratio of Anwar Ali's case [1970] 76 ITR 696 (SC) is no longer available in cases falling within the mischief of the Explanation. In the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing appropriate pleas simply on the ground that such a plea was not taken in regular assessment proceedings or the material brought on the record has already been disbelieved in the assessment proceedings. Even where he does not choose to adduce evidence or produce such material, he may still rely upon the existing material itself, to prove that on the existing material itself, the presumption raised by the Explanation would stand rebutted and he was not guilty of any concealment or furnishing of inaccurate particulars, or there was no fraud or any gross or wilful neglect on his part to return the correct income as envisaged under the Explanation. The fact that the evidence was not accepted on the quantum side would not constitute res judicata in the way ofthe assessee in requiring the tax authorities to examine the matter afresh for the purposes of penalty proceedings. Keeping the aforesaid principle in view, we now proceed to consider the questions referred to us. The assessee's principal grievance before us is that the Income-tax Appellate Tribunal failed to apply its independent mind while confirming the order of penalty. Its case is that the conditions which were necessary f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation which is part of section 271(l)(c) and, we may, for ourselves, take into consideration the provisions of the said Explanation in answering the question referred to us. Learned counsel for the assessee, on the other hand, objected to this course being adopted by us. He contended that in such circumstances, the case is bound to assume a different complexion. His contention is that such a question was never raised before the Appellate Tribunal and, therefore, we are precluded from taking notice of such a contention. So far as the first part of the submission made on behalf of the Revenue is concerned, we agree with it. The Explanation does not confer any discretion on the concerned authority to invoke it or not. It automatically applies to cases where the income is less than eighty percent. of the assessed income. The consequences follow as a matter of law. We are not impressed by the stand taken on behalf of the assessee that the Revenue is not entitled to fall back on the Explanation since this question was not canvassed before the Tribunal when it decided the penalty appeal. The question that came up for consideration before the Tribunal was in regard to the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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