TMI Blog1984 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... involved is 1964-65. During the course of the assessment proceeding, the Income-tax Officer found that a sum of Rs. 40,000 in the form of three cash credits represented the assessee's income from undisclosed sources. The assessment was completed on a total income of Rs. 91,647 whereas the income returned was Rs. 18,881. The Income-tax Officer was, therefore, satisfied that the penalty provisions were attracted both under the provisions of section 271 (1)(c) and the explanation to that section. He, therefore, initiated penalty proceedings against the assessee and as the minimum penalty imposable under the Act would exceed Rs. 1,000, he referred the matter to the Inspecting Assistant Commissioner, who, after taking into consideration the explanation of the assessee held that the latter was guilty of concealment. Having reached this conclusion, a penalty of Rs. 39,293 was imposed. Being aggrieved, the assessee preferred an appeal to the Appellate Tribunal against the imposition of penalty. After hearing both sides, the Tribunal came to the conclusion, on the authority of the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696, that the penalty provisions were not attracted in this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The Allahabad High Court held that the Tribunal had not recorded appropriate or adequate findings. Hence, it was not possible to answer the question whether there was any material to warrant the conclusion that the assessee had established that he was not guilty of fraud or wilful or gross negligence in furnishing the particulars of his income within the meaning of the Explanation to section 271(1)(c). There, the Chief justice, speaking for the court, observed thus (p. 562) : " Taking up the last feature first, the position is that clause (c) to section 271 (1) used the word "deliberate' in connection with the phrase `furnish inaccurate particulars of such income'. The word 'deliberate' was omitted by the Finance Act of 1964 which came into force on April 1, 1964. Clause (c) as it stood after the amendment provided that the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. It is no longer necessary to establish that those actions were deliberate on the part of the assessee. The view that it is necessary to establish that the assessee deliberately acted in defiance of law, etc., is not tenable after April 1, 1964. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality and it is, therefore, inapt to use the terminology of criminal law, like an offence, crime, or charge, etc., which should be scrupulously avoided. In cases of concealment of income and tax evasion, the modus of concealment is obviously within the special knowledge of the assessee. Consequently, in cases of blatant evasion, the Legislature was compelled to take off the impossible burden of establishing facts which are obviously in the special knowledge of the assessee alone. The onus was, therefore, rightly placed on the shoulders of the assessee, who alone could reasonably discharge the same. The insertion of the Explanation and the omission of the word " deliberately " from clause (c) of section 271 (1) was not merely declaratory of the existing law, but designed to effect change in law. The changes were obviously brought in to remedy a particular mischief. To say that, despite the amendment, no change was brought about in the law would be rendering the whole of the provisions nugatory and would be violating the settled canon of construction that meaning must be given to every word in a statute. The intention of the Legislature in making the amendments to section 271(1)(c) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove a positive fact. In these matters it is, in our opinion, appropriate to decide each question on the facts and circumstances of the case bearing in mind the basic principles and these are that the evidence in the assessment proceedings are not by themselves conclusive, the circumstances under which the fact that certain sums added as the income of the assessee in the assessment proceeding do not ipso facto make the same the income of the assessee in the penalty proceedings but the circumstances under which such assessment has come to be made and the nature of the evidence produced in the assessment proceedings, are material and may provide some good evidence for coming to certain conclusions. The fact that there has been rejection of the explanation given by the assessee about the source is also not conclusive of the fact either of concealment of income which is a positive act or negative or furnishing inaccurate particulars, which is presumed by the operation of the Explanation to the section which was implied before the introduction of the Explanation and had to be proved before the introduction of the Explanation. It is not conclusive nor ipso facto proof and, hence, the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this sub-section'. Now, the law introduced a certain state of affairs, even though that state of affairs was not the reality. The requirement of section 271(1)(c) is that the assessee must be guilty of concealment of the particulars of his income or furnishing inaccurate particulars. Previous requirement was that the furnishing of inaccurate particulars should have been deliberate. The expression 'concealment' has to be understood in contradistinction to the expression 'failure '. Concealment requires a positive act. So, before the amendment in 1964, s. 271(1)(c) required that there should have been a positive or active act on the part of the assessee to conceal particulars of his income or to deliberately furnish inaccurate particulars. But, by virtue of the addition of the Explanation, if the difference between the assessed income and the returned income was of certain magnitude, then unless the assessee proved that such difference was not caused by reason of failure to return the correct income from any fraud or any gross or wilful neglect, he should be deemed to have committed a positive act of concealment or of deliberately furnishing inaccurate particulars. The particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1964, requires a mental volition or mental attitude of guilt or of mind not to comply with the requirements of law. If that is the position, then the question arises whether mens rea is an integral part of s. 271(1)(c) read with the Explanation. Now, it was contended on behalf of the Revenue that means rea in the cases covered by the Explanation was not the requirement. That is not the position here, for, in the instant provision, no absolute liability has been provided and the conduct contemplated has not been made an offence irrespective of the mental element-what has been provided for is a particular mode of proving or disproving the mental element. The mental element has not been dispensed with. " It appears to us that the requirements or ingredients of section 271(1)(c) have not been materially affected by the introduction of the Explanation. Before a penalty can be imposed, the authorities have to bring on record cogent material or circumstances leading to a reasonable conclusion that the amount added in the assessment represents the assessee's income. Merely because a particular amount has been assessed as income is not enough for the purpose of levying penalty. Even wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The circumstances must show that there was animus. The onus of proof has been shifted in certain contingencies to the assessee by reason of rebuttable presumption introduced by the Explanation. The presence or absence of mental element has to be proved. The shifting of onus under certain circumstances has not materially affected the law even after the introduction of the Explanation. The statutory difference between the returned income and the assessed income may be due to various factors but once there is a difference, the onus lies on the assessee to show that the difference was not attributable to him either on account of any fraud or gross or wilful neglect. The authority cannot proceed solely on the rejection of explanation as regards the difference in the assessed income and the returned income. There must be circumstances leading to the only reasonable and positive inference that the assessee's explanation is false and, in that event, the assessee must be held to have failed to prove that there was no fraud or gross or wilful neglect on his part. The nature and quality of the evidence will vary from case to case. Absence of evidence acceptable to the Revenue cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause the version of the assessee is rejected, it does not automatically bring the assessee within the mischief of section 271 (1)(c) of the Income-tax Act, as has been held by the latest decision of the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696, that in the absence of cogent and convincing evidence to prove that the assessee is guilty of concealment or of furnishing inaccurate particulars of its income, the penalty provisions are not attracted. It will be seen that the assessee has produced its accounts and claimed deduction by way of expenditure. The same has been disbelieved by the authorities below. That circumstance itself will not go to show that the assessee is guilty either of wilful neglect or fraud. We are, therefore, satisfied on the evidence on record before us that no penalty provisions are attracted. We, therefore, vacate the order of penalty and allow the appeal. " Having regard to the facts and circumstances of this case, it cannot be said that the Tribunal wrongly placed the onus on the Department. The Tribunal took into consideration that certain deduction was claimed by the assessee by way of expenditure which was disallowed. This itself will not go t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
