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TMI Blog1981 (4) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... had not received any such prize and the amount alleged to have been received as prize was in truth his unaccounted income. The statement, made by the assessee in Part IV of his return was thus proved to be factually false. And yet, the Income-tax Appellate Tribunal (hereinafter referred to as " the Tribunal "), in the appeal preferred by the assessee against the levy of penalty under s. 271(1)(c) of the I.T. Act, 1961 (hereinafter referred to as " the Act ") by the IAC, held that no penalty was leviable because, (i) in view of the disclosure made by the assesse in Part IV of the return, the assessee could not be said to have concealed income or furnished inaccurate particulars thereof ; (ii) the Revenue had not proved that the money which the assessee was alleged to have received as prize in the crossword puzzle competition was income earned by the assessee in the aforesaid assessment year and that it was a case of mere falsity of explanation given by the assessee; and (iii) there being no gross or wilful neglect or fraud on the part of the see, no penalty was leviable on the basis of the Explanation to s. 27l(1)(c) of the Act, notwithstanding that the assessee's case was covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther disclosed that the assessee had paid Rs. 4,695, being 10 per cent. commission to the organisers of Harifai, for getting the prize declared. According to the Revenue, both these amounts represented the unaccounted money or income of the assessee. In his return of income for the year under reference, the assessee disclosed the prize money received by him from Harifai and agricultural income which were claimed to be not taxable in Part IV of his return. The particulars of his income declared in Part IV of the return are as follows : Particulars Amount Reasons why not taxable Lottery receipts Rs. 44,239 Casual income Agricultural income Rs. 3,434 --- The ITO by a letter called upon the assessee to produce evidence in support of the claim made in Part IV of the return. The assessee, however, did not avail of the opportunity, ignored the letter and in fact failed to give any reply to this letter. Thereafter, the ITO issued notices under ss. 142(2) and 143(2) of the Act, calling upon the assessee to appear before him. The assessee was also called upon to produce the organiser of Harifai with his books of account to establish his claim for exemption for the sum of Rs. 44,23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no penalty has been levied for other additions. It may also be mentioned that the addition of Rs. 3,251, which was made on account of unexplained investment in purchase of land, was deleted by the Tribunal in the appeal preferred by the assessee against the order of the AAC, confirming the assessment framed by the ITO. The IAC, to whom penalty proceedings were referred, as the concealed income exceeded Rs. 25,000, called upon the assessee to show cause why penalty should not be imposed for concealing income or furnishing inaccurate particulars thereof. In response to this notice, the defence of the assessee was that the crossword puzzle competition, in which, according to him, he had participated and won a prize, was a genuine competition. He contended that the prize which he had received by cheque was a genuine prize. According to the assessee, he had filled in entry forms and paid the prescribed fee to take part in the competition. He further contended that he was in no way concerned with the object with which the organisers of Harifai were conducting the crossword puzzle competition. So far as he was concerned, he was a genuine competitor and that a prize was genuinely won b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to have concealed the particulars of income or furnished inaccurate particulars thereof for the purpose of cl. (c) of s. 271(1). In the result, the IAC levied a penalty of Rs. 60,000 as against the maximum penalty of Rs. 1,09,810 leviable under the said provision. Being aggrieved by the penalty imposed by the IAC, the assessee carried the matter in appeal to the Tribunal. The Tribunal, following its decision in the case of Jogibhai Mangalbhai, Nani-Daman v. ITO, in appeal (I.T.A. No. 373/AHD/74-75 decided on 18th October, 1975) held that levy of penalty for concealment of income or furnishing inaccurate particulars thereof was not justified as the assessee had disclosed income in question in Part IV of his return of income. The Tribunal further held that all that the revenue authorities had been able to establish was that the explanation given by the assessee as regards the money as received by him by way of a prize from the crossword puzzle competition was false. However, mere falsity of the explanation was not enough to attract penalty under s. 271(1)(c). The Tribunal observed that the Revenue had failed to prove that the money which the assessee had shown as prize money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an income is not taxable. Non-inclusion in return may be justifiable if it involves interpretation of some provision or decision on a debatable point of law. It must, however, be admitted that it is income and its true nature, character and source must be stated. Of course, having made a true disclosure, he can say that according to his interpretation such income is not taxable because of his bona fide doubt about its includibility under law. The belief may or may not turn out to be right. The protection will be available. But when he states that it is prize won at, say, lottery, and that statement is false to his knowledge and found to be false as a matter of fact, he cannot earn immunity. That would be placing dishonesty and prevarication of tax dodgers at a premium. It could not have been (and we do not believe it ever was) the intention of the Legislature to protect perpetrators of frauds and falsehood. It is not an amulet for cheats. It is an armour for the honest taxpayer who need not anticipate an interpretation or view against himself and may bona fide interpret in his favour requiring the Revenue to prove that his interpretation is wishful or over-optimistic but untenabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prize which he was alleged to have won at such crossword puzzle competition was not a genuine prize. In view of the fact that the assessee had shown the prize money in Part IV of his return, there was a clear admission on his part that he had earned the income shown therein in the year under consideration. He showed the prize money as a casual income earned in the year in question. However, the Revenue was able to positively establish by evidence that the income which the assessee had disclosed in Part IV of his return as casual income was not really casual income. That it was income, earned in the year in question, was not disputed by the assessee. Since he failed to prove that it was income which was exempt, or which did not fall within the definition of " income " as defined in s. 2(24) as it then stood, this income became taxable. Since it was established that the assessee had not genuinely won any prize at any genuine crossword puzzle competition, but the whole, thing was a hoax, the only inference that can be legitimately drawn is that he had sought to introduce his unaccounted income earned during the year under reference under the guise of prize money which he disclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esumption, no doubt rebuttable, arose that the assessee had concealed the particulars of his income or furnished inaccurate particulars thereof. Presumption could be dislodged, if the assessee proved that failure to return the correct income did not arise from any fraud or gross or wilful neglect. In the instant case, as pointed out above, the income which the assessee had returned in his return of income was Rs. 1,892, while the income as assessed after giving effect to the order of the Tribunal was Rs. 69,009. There was thus clearly a difference of more than 20 per cent. between the income returned and the income assessed. The Explanation to s. 271(1)(c) would, therefore, be attracted. It was not disputed before the Tribunal that the Expln. to s. 271(1)(c) was applicable to the facts of the case. The Tribunal, however, declined to levy penalty even with the aid of the Explanation on two grounds, namely, (i) it was a case of mere falsity of explanation and as the Revenue had failed to prove that the prize money shown by the assessee in Part IV of his return was income earned by the assessee in the year in question; and (ii) in any case, since the assessee had disclosed the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal. If the view taken by the Tribunal is correct, in no case could the Revenue succeed. Even with the aid of the Explanation to s. 271(1)(c), ultimately what would be proved would be that the explanation given by the assessee was false. In the instant case, the assessee himself had shown the prize money as his casual income earned in the year under reference. If the income which the assessee described as the casual income was not the income earned by the assessee in the year under reference, there was no reason to show that income in the return of his income for the said year. It was because the assessee had earned that income in the year under reference that he disclosed it in Part IV of his return. Therefore, on the assessee's own admission, it was income earned in the year under reference. The assessee's assertion that the above income was casual income was proved to be false. It was the assessee who was claiming exemption from payment of tax in respect of his income on the ground that it was casual income. He, however, did not choose to lead any evidence to establish his claim. On the other hand, the evidence led on behalf of the Revenue not only proved that the claim made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ositive material should be produced by the assessee in order to discharge this burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings, irrespective of whether it is produced by him or by the Revenue. The only question to which the income-tax authority has to address itself is, whether, on the material on record in the penalty proceedings, can it be said, on a preponderance of probabilities, that the failure to return the total assessed income had not arisen on account of any fraud or any gross or wilful neglect on the part of the assessee. If the answer to the question is in the affirmative, the legal fiction enacted in the Explanation cannot arise and the Revenue must fail in its attempt to impose penalty on the assessee." In CIT v. Drapco Electric Corporation [1980] 122 ITR 341, this court had an occasion to consider the true content and effect of this Explanation; it was observed (p. 354): " The Explanation consists of two parts. The first part sets out the facts which, if proved, give rise to a rebuttable presumption. It provides, in order to raise the presumption, that the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and to conceal the real source of the unaccounted income to the extent of Rs. 46,959. There was no crossword puzzle competition and there was no prize won at such competition. In the face of these glaring facts established by the evidence on record, we are unable to understand how one can reasonably come to the conclusion that failure to return the correct income did not arise on account of fraud or any gross or wilful neglect on the part of the assessee. It was a clear case of fraud. It is true that this is not a case of gross or wilful neglect on the part of the assessee, since the assessee, with the intention to practice deceit, had instead of showing the above income as taxable income, showed it as casual income which was not taxable. In our opinion, therefore, the view taken by the Tribunal is unreasonable and unsustainable. The assessee has failed to discharge the burden which lay on him to prove that failure to return the correct income did not arise on account of any fraud or any gross or wilful neglect on his part. Besides making a statement in Part IV of his return which was proved to be false, the assessee has not led any evidence nor is there any material on record t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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