TMI Blog1986 (11) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... see had disclosed purchases of sugar one day before the closing of the accounting period and also that the assessee had not shown any closing stock at the end of the accounting year. It was also found that up to a certain point in the accounting year, the assessee had sold certain quantity of sugar in respect of which no purchases were disclosed nor was any opening stock shown. The Income-tax Officer came to the conclusion that the goods purchased had been suppressed and that the sources for the purchases had not been disclosed. He came to the conclusion that the assessee had suppressed profits in its accounts which he estimated to be Rs. 9,200. The Income-tax Officer also estimated profits in respect of other transactions of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal against the order of penalty before the Appellate Tribunal. It was contended on behalf of the assessee before the Tribunal that the finding of the Income-tax Officer that as no stocks had been disclosed by the assessee, the assessee had not only concealed the purchases but also the sales, was erroneous. The transactions, it was admitted, were not fully entered in the accounts. It was contended that when the goods were purchased by the assessee, the bills were not received. But purchases were recorded in the books when the bills were received. Goods had been received in the meantime under challans. It was conceded on behalf of the assessee that the challans showing the receipts of the goods by the assessee had not been produced eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly upheld the order of penalty passed by the Inspecting Assistant Commissioner except that it reduced the quantum of penalty from Rs. 18,400 to Rs. 12,500. On an application of the assessee under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question as a question of law arising out of its order for the opinion of this court: " Whether, on the facts and in the circumstances of the case, the Tribunal was correct in sustaining to the extent of Rs. 12,500, the penalty levied by the Inspecting Assistant Commissioner, holding that the Explanation to section 271(1)(c) was attracted ? " At the hearing before us, the learned advocate for the assessee submitted that the Tribunal in partly affirming the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where an assessee had failed to disclose an item in his return on the ground that he bona fide believed that the said item was not required to be shown in the return as his own income and where it was found that it was a matter of controversy whether such item was required to be included in his return or not, it could not be held that the assessee was guilty of gross or wilful negligence or that he had deliberately concealed the income or furnished inaccurate particulars thereof fraudulently or under gross or wilful negligence. (c) M. Radha Krishniah v. CIT [1984] 147 ITR 133 (Mad). In this case, additions had been made on estimate to the income of the assessee on the ground that there was discrepancy in stock. A penalty was levied in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is only required to explain the gap between the income returned and the income assessed. The explanation may be accepted or rejected by the Department. But mere rejection of the explanation even in respect of the gap or difference cannot ipso facto prove that there has been concealment. The circumstances must lead to the only reasonable and positive inference that the explanation of the assessee is false. As a matter of fact, the Explanation to section 271(1)(c) has material bearing on the question of mental element or mens rea. The mental element or mens rea is an integral part of section 27 I (1)(c) read with the Explanation. The circumstances must show that there was animus. The onus of proof has been shifted in certain contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage before the Inspecting Assistant Commissioner. In the absence of any explanation of the assessee, the Inspecting Assistant Commissioner, in our view, was justified in drawing the presumption against the assessee under the Explanation to section 271(1)(c) of the Income-tax Act, 1961. Before the Tribunal, no doubt, the assessee came with a case that the purchases were not duly recorded in the books of account as the bills had arrived later. But this was a mere submission on behalf of the assessee. No evidence was produced or sought to be tendered before the Tribunal. Such evidence, if it was in the possession of the assessee, ought to have been produced but was not produced at any stage. There was no explanation why such evidence was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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