TMI Blog1979 (6) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 48,598. Penalty proceedings were initiated under s. 271(1)(c) of the Act. The minimum penalty imposable exceeded Rs. 1,000. Therefore, the ITO referred the matter to the IAC under s. 274(2) of the Act. The IAC gave a reasonable opportunity to the assessee of being heard and after considering the explanation offered by the assessee, a penalty of Rs. 6,750 was imposed by him. The order of the IAC has been annexed as annex. A to the statement of case. An appeal having been preferred to the Income-tax Appellate Tribunal by the assessee, the income of the assessee was finally reduced to Rs. 21,584. That was done by the Patna Bench of the Tribunal in I.T.A. 59 (Pat) of 1969-70. Some of the additions made by the ITO as the assessing authority were, however, sustained by the Tribunal in its appellate order of assessment. Some of the amounts admittedly explained by the assessee were accepted by the Tribunal and such amounts were deleted from the taxable income of the assessee. With regard to the levy of the penalty, the assessee contested the same before the Tribunal in appeal. It was submitted by the assessee before the Tribunal that the penalty imposed, merely because the explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swer, I may now set out certain relevant facts which appear from the statement of the case read with annex. A, the order of the IAC. In the name of the son of the karta of the HUF (the assessee), namely, Shri Lakshminarain Daga, there was a cash credit of Rs. 4,081 and in the name of the karta's brother, namely, Shri Ramjiwan Daga, there was another cash credit showing Rs. 10,500. There was a third item in the name of Kishanji Sewak, an employee of the assessee-HUF, and a sum of Rs. 900 was shown against him. These are the only 3 items with which we are concerned. In regard to all other items of cash credit, which had been explained by the assessee-HUF but not accepted by the revenue authorities,the Appellate Tribunal in appeal upheld the contention or the explanation offered by the assessee. It was only with regard to these 3 items as aforementioned in which the assessee's explanation was not accepted even by the Tribunal as was done by the revenue authorities below. With regard to these 3 items, it is worthwhile to take note of what the IAC has held. Apropos of the sum of Rs. 4,081, it has been merely held that there were contradictions in the assessee's explanation. With regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nraj Dipchand amounting to Rs. 5,800. Thus, the cash credits totalling Rs. 9,800 which had been added by the ITO were deleted from the category of the assessee's income by the AAC. The matter having gone further up in appeal to the Appellate Tribunal, the Tribunal accepted the assessee's case with regard to the cash credits in the name of Meghraj Daga amounting to Rs. 12,500 and in the name of Smt. Janki Devi Daga of a sum of Rs. 2,200. Furthermore, item No. 8 aforesaid regarding the inadequate drawing for household expenses amounting to Rs. 2,400 which was added by the ITO and affirmed by the AAC was also deleted by the Tribunal. It would thus be seen that out of the 7 items of cash credits and the 8th item with regard to inadequate drawing for household expenses which had been added to the income of the assessee by the ITO, 5 items totalling quite a substantial figure were deleted either at the first appellate stage or at the final stage by the AAC or the Appellate Tribunal leaving only 3 items of cash credits with which we are concerned. The grounds for non-acceptance of these amounts have already been quoted in extenso hereinbefore. The non-acceptance by the IAC was only on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsertion of the Explanation as soon as it is found that there was a difference of more than 20 per cent. between the income returned and the income assessed, cl. (c) of s. 271(1) of the Act comes into play. The rule of presumption embodied in the Explanation is always attracted and it is for the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. What will amount, however, to furnishing of inaccurate particulars with an element of fraud or gross or wilful neglect on the part of the assessee will depend upon the facts and circumstances of each case. The doctrine of onus in such cases cannot be put into a strait-jacket of any rigid formula. Mere negligence in furnishing the particulars which are found to be inaccurate is not enough. What the Explanation demands or requires of the assessee is the discharge of the onus of proof of a negative fact, namely, that there has been no active concealment or fraud or wilful neglect on the part of the assessee. Where the onus is on one to prove a negative fact, direct evidence, generally and ordinarily, may be hardly possible. It is, however, too well settled that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of the explanation. The case is that of CIT v. Patna Timber Works [1977] 106 ITR 452 (Pat). Untwalia C.J., in whose judgment I had fully concurred, speaking for the Bench, had said thus with regard to the Explanation in question : ".. ...... the standard of proof applicable to prove a positive fact and the one which is required to prove a negative fact cannot be the same. A high standard is always applied for the proof of a positive fact while the standard of preponderance of probability is sufficient to prove a negative fact. The assessee, within the meaning of the Explanation, is required to prove that the failure to return correct income did not arise from any fraud or gross or wilful neglect on his part, that means, there is absence of fraud or gross or wilful neglect. Ordinarily and generally, there cannot be any direct evidence to prove such a fact. The assessee merely has to place materials of the primary facts or the circumstances which in all reasonable probability would show that he was not guilty of any fraud or gross or wilful neglect. He may discharge this onus by placing the facts found in the assessment order to show that the facts found therein had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 271(1)is not only penal or quasi-criminal in nature but departs from the normal well-established rule which would throw the burden of proof on the revenue to establish that the assessee had consciously concealed the particulars of his income or deliberately furnished inaccurate particulars in respect thereof. The onus of proof has been placed by the Explanation to s. 271(1) on the assessee who is required to prove the negative, i.e., the absence of fraud or gross or wilful neglect on his part. In the absence of any proof to the contrary, if the assessee can raise probabilities in his favour or point out circumstances which can create doubts, the benefit of this has to be given to the assessee. Penalty proceedings being distinct from the assessment proceedings, even if the assessee has failed to give a satisfactory explanation in respect of the cash credit in the assessment proceeding, it would be open to him in the penalty proceeding to offer an explanation on the basis of fresh materials. Whether any fresh material is required to be furnished in any particular case or not and the nature of such evidence to be furnished will depend on the facts and circumstances of each case, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him, the assessee never challenged that finding before the Appellate Tribunal. Therefore, it cannot be presumed that the Tribunal in the instant case was oblivious of the Explanation inserted in 1964, or that it had acted as if the provisions of the Explanation did not apply to the present case at all. The Tribunal was alive to the legal position since it appears from annex. A to the statement of the case that such a point was specifically taken and the provisions of the Explanation were brought into play in the instant case. Mr. B. P. Rajgarhia, learned counsel for the revenue, contended that from para 4 of the appellate order of the Appellate Tribunal it would appear that the Tribunal has merely one upon the onus of proof as laid down in the case of Anwar Ali [1970] 76 ITR 696 (SC), placing such onus squarely on the department. That, it was submitted, would lead to an inference that the Tribunal had proceeded merely upon the academic question of onus not being alive to the provisions of the Explanation. I do not see any justification in such a submission for the reasons already stated above. As already held, the question as to whether the onus has been discharged by one party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jgarhia is a Bench decision of this court, the leading judgment of which has been delivered by my learned brother. In that case also, the Tribunal had not applied the provisions of the Explanation at all and the only question mooted was as to whether the Explanation ought to be held to apply to the facts of that case or not. It was held in Advani's case [1979] 119 ITR 464 (Pat) that the Tribunal had erred in deleting the penalty imposed by wrongly placing the burden of proof on the department and since the Tribunal had not acted in accordance with the provisions of the Explanation and had proceeded upon the footing as if the Explanation were not there on the statute book, the matter was sent back to the Tribunal to deal with the merits of the assessee's appeal. Thus, all the three cases relied upon by Mr. Rajgarhia, for the revenue, were cases in which the Tribunal was oblivious of, and not alive to, the provisions of the Explanation inserted in 1964. In the instant case that is not so. Once it is held that the Tribunal had in its mind the provisions of the Explanation inserted in 1964 and on the facts and in the circumstances it would be held that there was a preponderance of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat certain credits have been added to the assessee's income as concealed income, then, if in the proceedings for levying penalty for concealment of income, the assessee gives a plausible and cogent explanation as to the source of the cash credit, which explanation had been given even earlier at the time of the assessment but had not been accepted by the department, a question may arise as to whether the non-acceptance of the assessee's explanation in the course of the assessment proceedings will be sufficient to impose penalty, always taking that the Explanation applies. In terms of the Explanation, no doubt a presumption arises against the assessee that having regard to the difference between the income returned and the income assessed, there was a concealment of income. But even then, if a plausible and cogent explanation has been given by the assessee, what has the department to do ? Should it merely go by the reasons given in the assessment order ; should it merely reject the explanation as not acceptable, or should it do something more in order to establish that there was conscious effort on the part of the assessee to play a fraud upon the department ? It is here that one ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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