TMI Blog1982 (8) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... lace in the books of account. On enquiry the assessee explained that it had consumed firewood in its boiler in the manufacture of kattha and part of the same was sold in the market for Rs. 28,624. Quantitative details of the firewood extracted and consumed in the manufacture of kattha were not available and hence the ITO estimated the assessee's consumption of firewood at Rs. 22,000 and estimated the excess firewood available for sale but not accounted for at 37,500 quintals. Taking the price of the firewood at Rs. 4 per quintal, the ITO made an addition of Rs. 1,50,000. On appeal, that addition was reduced to Rs. 1,06,000. From the order of the AAC appeals were filed, both by the Revenue and the assessee. The Tribunal required the assessee to furnish a comparative statement of firewood consumed by it in the manufacture of kattha in some of the previous years. The assessee could not do so and also conceded that the quantity of firewood purchased was not mentioned in the books. The same was the position regarding the recovery of firewood from the jungle. The Tribunal found that the assessee had taken firewood trees from the Government. It had extracted firewood. Its claim that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the names of Banshidhar Shyam Lal and Hasnanand Jiwandass, the Tribunal has held that the assessee had discharged the onus and these deposits were genuine. In the result, the addition of Rs. 41,500 on account of unexplained deposits was confirmed. Since the income returned was less than eighty per cent. of the total income assessed, the ITO took action under s. 271(1)(c) read with the Explanation thereto of the I.T. Act, 1961, hereafter " the Act ", and referred the case to the IAC. The IAC issued a show-cause notice to the assessee in reply to which it furnished an explanation. After considering that explanation the IAC held that the assessee was guilty of concealment of its income and imposed a penalty in the sum of Rs. 1,60,000 which was almost one and one-half times of the difference between the income returned and the income assessed. It was submitted before the Tribunal on behalf of the assessee that so far as the unexplained credits were concerned, it could not be held that merely because the assessee did not disclose this amount in its return, it was guilty of fraud or gross or wilful neglect. As for the addition of Rs. 50,000 it was urged that the addition was at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or furnished inaccurate particulars of the same. Of course, the assessee could have rebutted this presumption by proving that the failure to return the correct income was not due to any fraud or gross or wilful neglect on its part. The Tribunal did not apply these provisions to the facts of this case in coming to the above conclusions. It was also urged that even if the difference in the income returned and the income assessed has been due to estimate of income, the provisions of s. 271(1)(c) read with the Explanation thereto shall be attracted and the view to the contrary taken by the Tribunal was not legally correct. On behalf of the assessee, on the other hand, its learned counsel, Sri S. P. Gupta, urged before us that in the first instance the question referred to this court does not include any of the following three aspects : Firstly, that the Tribunal wrongly placed the onus on the Department, that the Explanation to s. 271(1)(c) is attracted to this case and the Tribunal did not apply its mind to it and, lastly, it was not a case of no evidence and, therefore, the burden on the assessee stood discharged. According to the learned counsel the question referred embrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of making or earning any income included in the total income but 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." These amendments came into effect from April 1, 1964. It would be seen that in so far as the assessment year under consideration is concerned, two important amendments had been made in the relevant provisions, one, the deletion of the word " deliberately " in cl. (c) aforesaid and the other, the insertion of an Explanation to sub-s. (1). The principles which emerge from the cases decided under the law prior to the enactment of the Explanation are that the findings given in assessment proceedings would be relevant and admissible materials in penalty proceedings, but those findings cannot operate as res judicata because the considerations that arise in penalty proceedings are different from those in assessment proceedings. The fact that the assessee's exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed (See Rukmani Bahu v. Addl. CIT [1979] 116 ITR 468 (All)). We may also refer to another recent decision of our court to which both of us were parties, rendered in Addl. CIT v. Mangalsen Mohanlal [1982] 136 ITR 905 (All). Following the decision in Rukmani Bahu's case in that case, we had occasion to observe that the onus placed on an assessee under the Explanation is of a negative nature. Its extent is that required in civil case and not as in a criminal case where the prosecution is required to establish the guilt of the accused beyond all reasonable and probable doubt. The assessee can discharge this onus by relying on direct or circumstantial evidence. He can rely on evidence given in assessment proceedings and give further evidence in penalty proceedings. He can rely on circumstantial evidence also. Ultimately, the matter has to be decided on the preponderance of probabilities after considering the materials placed on the record. We do not think that after the insertion of this Explanation there arises any question of giving any benefit of doubt to an assessee. The penalty can be knocked off only in case the Tribunal holds that the assessee has established that the failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Durga Dutta Chunni Lal v. CIT [1979] 120 ITR 319 (All). We agree with Sri S. P. Gupta, learned counsel for the assessee, that in reference proceedings under s. 256(2) of the Act before this court, adjudicatory process starts from the point of findings given by the Appellate Tribunal and not from the evidence. The facts found by the Tribunal are to be accepted by this court and it is on those facts that it is to be seen as to what legal conclusions can be drawn. We do not agree with the learned counsel in regard to his submission that the question referred to us does not embrace the aspect of the onus of proof in terms of the Explanation to s. 271(1)(c) of the Act or the application of the mind to it by the Tribunal or that it was not a case of " no evidence ". The question referred is a wide question and we have to see as to whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the penalty. In other words, on the facts and in the circumstances found by the Tribunal, what is required to be seen is as to whether the penalty was exigible. It cannot be disputed that the Explanation to s. 271(1)(c) was attracted and it was consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i's case [1970] 76 ITR 696 (SC), has really not been affected by the Explanation added to s. 271 on April 1, 1964 ". We have shown that in the case of Rukmani Bahu [1979] 116 ITR 468 (All) and Gyan Prakash [1979] 116 ITR 513 (All), a different view has been taken on this point and that view has been followed in other cases also subsequently. The facts of the present case being very clear, we do not find it necessary to refer this particular aspect for decision to a larger Bench. Apart from this, in Jiwan Lal Shah's case [1977] 109 ITR 474 (All), levy of penalty merely for the reason that the explanation given by the assessee was not acceptable, was not held as justified. In other words, the decision turned on the facts of the case. In CIT v. Nadir Ali and Co. [1977] 106 ITR 151 (All), on the facts, it was found that the assessee had sufficiently discharged the burden which lay on him. The turnover of the sales disclosed was accepted by the Department and merely because a higher rate of profit was applied by the I.T. authorities in the past, it was held, that it could not be said that the higher income assessed by the Department was due to any gross neglect on the part of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not reasonable. The IAC while imposing penalty relied only on the material collected during the assessment proceedings and the findings arrived at therein. On appeal, the Tribunal cancelled the proceedings and, on a reference, this court agreed with that view. It would be seen that that was a case where the only material available was the assessee's explanation, which, of course, had not been accepted. That also proceeded on its own facts. We were next referred to a decision of the Andhra Pradesh High Court in Addl. CIT v. China Krishna Murthy [1980] 121 ITR 326. In that case, the view taken is that even after the omission of the word " deliberately " by the Finance Act of 1964, the legal position that is applicable to penalty proceedings as enunciated by the Supreme Court in the cases of Anwar Ali [1970] 76 ITR 696 and Khoday Eswarsa and Sons [1972] 83 ITR 369, does not materially alter. The import of the Explanation was considered and it was observed that the fiction created by the Explanation can be displaced by the assessee by proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. As regards the nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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