TMI Blog1978 (10) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 10,000 ? " The facts leading to this reference are as follows : We are concerned in this case with the assessment year 1967-68. During the previous year relevant to this assessment year, the respondent was a partner of Messrs. Keshavlal Co., running an oil mill at Mahuva, in Bhavnagar District. The assessee originally filed his return for the assessment year under consideration on August 14, 1967, declaring an income of Rs. 20,024. Later on, in March, 1968, the assessee filed a revised return declaring an additional income of Rs. 600 from " fatak dalali ". The ITO, while processing the assessment, found that the assessee had encashed demand drafts totalling Rs. 88,455. These demand drafts were obtained by the assessee in his own name and they had been obtained from the branches of Dena Bank at Bombay. Later on, these demand drafts were encashed by the assessee at Mahuva with the Dena Bank. For the purpose of encashment of the demand drafts, the assessee was identified by a partner of the firm of Messrs. Keshavlal Co. The assessee contended before the ITO that the amount of the demand drafts represented gross receipts of dalali business in which he had earned nominal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from dalali business. The IAC rejected the contentions of the assessee and imposed a penalty of Rs. 10,000 and the IAC proceeded on the footing that in the assessment proceedings before the AAC, the assessee had agreed to the addition of the peak amount of Rs. 60,000. Against the imposition of penalty of Rs. 10,000, the assessee took the matter in appeal before the Tribunal. On behalf of the assessee, it was submitted that the value of unexplained investment was assessable as deemed income of such financial year and, on deemed income, penalty as such was not exigible. It was further argued that the burden was shifted to the assessee to prove his innocence, though, in penalty matters, it was for the revenue to prove concealment. The assessee relied upon the Supreme Court decisions in CIT v. Anwar Ali [1970] 76 ITR 696 and in CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369. Before the Tribunal, the revenue relied on the Explanation to s. 271(1)(c) and contended that it was for the assessee to explain the source of the money in his hands. Otherwise the case would fall under s. 271(1)(c) read with the Explanation. The Tribunal followed the decision of the Punjab High Court in Gum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by resorting to the provisions of s. 69A that the ITO and the AAC assessed the amounts of the demand drafts as income of the assessee of the particular previous year relevant to the assessment year under consideration. Under s. 69A : " Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. " On behalf of the assessee, an admission was made before the AAC that the amounts invested in the purchase of the demand drafts belonged to the assessee and may be assessed in his hands. Now, it is obvious that there was no concession on behalf of the assessee, nor was there any admission on his p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utted by the assessee. In order to rebut the presumption raised by the Explanation to s. 271(1)(c), it is open to the assessee to point to the record of the case and point to materials on the record which would enable him to show that he had not concealed the particulars of his income or furnished inaccurate particulars of his income. In the instant case, because of the admission made on behalf of the assessee before the AAC at the time of the assessment proceedings, the revenue could proceed upon the footing that the amount of Rs. 60,000 represented money belonging to the assessee. Thereafter, by virtue of the provisions of s. 69A, it was open to the ITO to deem that amount to be income of the assessee for the financial year in question because no satisfactory explanation was forthcoming from the assessee regarding the source of this amount of Rs. 60,000 which belonged to the assessee. It was, therefore, by the deeming provision under s. 69A that the ITO and, thereafter, in appeal, the AAC could assess the amount of Rs. 60,000 as the income of the assessee for the financial year in question. But that does not discharge the onus on the revenue in proving in the penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year in question. As pointed out by Desai J. speaking for the Division Bench of the Bombay High Court at page 1056 : " ...whether a revised return is filed or an admission is made before the Income-tax Officer in the course Of Original assessment proceedings would seem to make little difference. The basis in both the cases is the same, viz., that the assessee agreed to accept the amounts as his income from business for the year in question. Once this true position is established, it would appear that it would be sufficient for the department to seek to discharge the onus in the penalty proceedings by relying upon this admission, and at that stage the onus would seem to shift to the assessee to show in the penalty proceedings that the admission made by him was incorrect as a matter of fact or it was wrongly or illegally made or that it was made for a reason which would suggest that it was not really the concealed income of the assessee. " The mere fact that there was some wealth in the hands of the assessee would not mean that there was accretion to the wealth of the assessee. Unless and until the department is able to bring home the fact that there was accretion to the weal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of this case is concerned and, hence, in our opinion, the decision in CIT v. P. R. Seetharama Rao [1976] 105 ITR 151 (Mad) cannot help the revenue. In may be pointed out that a Division Bench of this High Court in CIT v. S. P. Bhatt [1974] 97 ITR 440 had explained the scope of the Explanation to s. 271(1)(c). The entire history of the Explanation has been set out in the course of that judgment and it has been pointed out (p. 444) : " It is an Explanation enacted in the context of a highly penal provision and there can, therefore, be no doubt that it must be construed fairly and reasonably. This, of course, does not mean that if a case falls fairly and squarely within the language of the Explanation, we should refuse to give effect to the mandate of the legislature as disclosed in the Explanation. But what is necessary to be borne in mind is that when we are construing the true meaning and effect of the Explanation, we must not forget that it is the Explanation which adds to the rigour of a highly penal provision and we must not, therefore, be over anxious to enlarge the scope and ambit of the Explanation by making an effort to bring every possible case within it, but we shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the prosecution in a criminal case where the prosecution has to establish the guilt of the accused beyond reasonable doubt nor is it of the same nature as the burden which lies upon the revenue in establishing that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. It is a burden akin to that in a civil case where the determination is made on 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 o 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 has not arisen on account of any fraud or any gross or wilful neglect on the part of the assessee. " Ultimately, the question whether, in a particular case, the burden cast on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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