TMI Blog1981 (4) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by the said Explanation. In our opinion, for the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing 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. 44,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----- Proceedings for the levy of penalty under s. 271(1)(c) of the Act for the concealment of income or furnishing inaccurate particulars thereof were initiated against the assessee. It appears that the proceedings were initiated for additions made on account of unexplained cash credits, bogus prize alleged to have been received at the crossword puzzle competition, commission payment and amount paid for purchase of land which was not accounted for in the books. So far as the present reference is concerned, the only addition which is relevant is the addition made on account of bogus prize alleged to have been received by the assessee at the crossword puzzle competition, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome assessed was Rs. 69,009 (after giving effect to the Tribunal's order). The IAC observed that the Explanation to s. 271(1)(c) prescribes a rule of evidence and raises a presumption of concealment of income and filing of inaccurate particulars of the income when the difference between the returned income of the assessee and the assessed income is more than 20 per cent. The presumption was no doubt rebuttable, if the assessee could prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In the opinion of the IAC, however, the assessee had failed to dislodge the presumption and, consequently, he was to be 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 decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wilful neglect on the part of the assessee, nor was it case of fraud, and, therefore, levy of penalty on the basis of the Explanation to section 271(1)(c) of the Act on the facts of the case was not justified ? " It passes our comprehension as to how the assessee can escape payment of penalty for concealing income or furnishing inaccurate particulars thereof, in view of the admitted facts, merely because of the statement incorporated in Part IV of his return, which statement is proved to be false one. The inclusion in Part IV throws a protective armour when with candour, frankness and truthfulness income is indicated by giving true facts in view of a bona fide belief that such 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. However, prior to this amendment, winnings from crossword puzzle competitions were considered to be income of casual and non-recurring nature, which were not includible in the taxable income and did not fall within the definition of " income " as defined in s. 2(24). It was in view of this legal position that the assessee claimed in his return of income for the assessment year 1969-70 that the prize money received by him from the crossword puzzle was casual income which was not taxable. The claim made by the assessee that it was prize money and casual income was proved to be false. It was proved that he had not participated in any genuine crossword puzzle competition and the 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew taken by the Tribunal, which, in our opinion, is patently an impossible view. Under the Explanation to s. 271(1)(c) (as it stood at the relevant time), where the total income returned by any person was less than eighty per cent. of the total income as assessed, such person was deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of cl. (c), unless he proved that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. Therefore, once it was proved that the difference between the returned income and the assessed income was more than 20 per cent., the presumption, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings by the ITO, the AAC and the Tribunal. In other words, the IAC, on considering the evidence on record afresh, held that the crossword puzzle competition, in which the assessee was alleged to have participated and won the prize, was not a genuine competition and the prize won by the assessee was not a genuine prize. It was proved beyond any shadow of doubt that the assessee had, in conspiracy with the organisers of Harifai, made arrangement to give colour to his unaccounted income or money or prize money won at the competition. In the face of this overwhelming evidence, we are unable to see how this is a case of mere falsity of explanation as held by the Tribunal. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed is sufficient to bring the assessee within the penal provision enacted in section 271(1)(c). That is achieved by the legal fiction enacted in the Explanation ......... If the assessee wants to repel the legal fiction and throw the burden of bringing the case within section 271(1)(c) again on the Revenue, as it would be in the absence of the Explanation, the assessee has to show and this burden is upon him that his failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part ......... It is a burden akin to that in a civil case where the determination is made on a preponderance of probabilities. It is also not necessary that any positive 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 failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In the instant case, the view taken by the Tribunal is that the assessee has rebutted the presumption. The finding which the Tribunal has recorded is again founded on the disclosure made by the assessee in Part IV of his return. The Tribunal, it appears, was so much obsessed by the disclosure made by the assessee in Part IV of his return that it shut its eyes to the evidence on record and the glaring facts established by such evidence. The disclosure in Part IV of the return was not an honest and bona fide disclosure. It was made to throw dust in the eyes of the taxing authorities 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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