TMI Blog1978 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, the Tribunal was lawfully correct in determining the penalty at 20% of the tax sought to be avoided ? " In the second case, i.e., Misc. Civil Case No. 115 of 1973, the Appellate Tribunal, at the instance of the Additional Commissioner of Income-tax, M. P., Bhopal, has similarly referred the following question, said to arise from its aforesaid order, to the court for its opinion, namely : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amended provision, prescribing the higher quantum of the minimum penalty under section 271(1)(c) equal to the amount of income concealed, which came into effect from April 1, 1968, will be operative retrospectively in respect of the assessment years 1966-67 and 1967-68, on the basis that the return of income of each of these two years had been filed after April 1, 1968 ? " The assessee is a Government contractor. The business of the assessee was supply of railway ballast and sale of coal ash. On April 9, 1968, he filed a return of his income for the assessment years 1966-67 and 1967-68. For the assessment year 1966-67, he showed his income at Rs. 1,914, inclusive of Rs. 250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther appeal, the Income-tax Appellate Tribunal, having regard to the fact that the cost of acquisition of the property had been 'duly accounted for in the books of account produced before it', held that it was not proper to estimate additional income for the assessment years 1966-67 and 1967-68. It accordingly directed the deletion of Rs. 5,000 and Rs. 6,000 for the two years in question. In the penalty proceedings, the IAC held that the case was covered by the Explanation to s. 271(1)(c) of the Act. Since the returned income happened to be less than 80% of the income as assessed, the assessee should be deemed to have concealed the particulars of income or furnished inaccurate particulars of such income for the purposes of cl. (c). He came to the conclusion that the assessee did not furnish accurate particulars of his income from business, nor the returns were accompanied by balance-sheet. Further, there was no denying the fact that properly closed and adjusted books of account were never maintained. Such particulars, as were furnished along with the returns could not, therefore, be called as accurate on any logical or rational principle. Inasmuch as the returns for both the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis, followed by an assessment by the Income-tax Officer to the best of his judgment under section 144, i,e., based upon an estimate, then there can be no penalty imposed under section 271(1)(c). (2) Even for the applicability of section 271(1)(c) and the Explanation thereto, the question of burden varies in different situations. Where the Tribunal in the quantum appeal does not indicate any fraud on the part of the assessee, the burden placed on him is very slight." We are afraid, there is some difficulty in accepting these contentions. To our mind, the first contention is too broadly stated. As to the second, the assessee placed no material to discharge the burden that lay on him. Failure to comply with a notice under s. 142(1) or s. 143(2) or a direction under s. 142(2A), which warrants a best judgment assessment under s. 144, also attracts a penalty under s. 271(1)(c). In CIT v. Kedar Nath Ram Nath [1977] 106 ITR 172 (All), it was observed : " In appeal, the Income-tax Appellate Tribunal appears to have taken the view that in cases where book results are held by the revenue authorities to be low and not amenable to verification and a best judgment assessment is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing that failure to return the aggregate income correctly did not arise from any fraud or gross or wilful neglect is upon the assessee. Accordingly,in a case where the income returned by the assessee was less than 80% of the income assessed as reduced in the manner specified in the Explanation to section 271(1)(c) of the Act, law would deem it that the assessee had concealed or furnished inaccurate particulars unless the assessee is able to bring something on record to show that failure on. its part to return the correct income was not on account of its fraud, etc. The type of material to be indicated by the assessee for discharging the burden placed upon him will depend upon the facts and circumstances of each case. " That, in our opinion, correctly states the law. It is, however, urged by Shri Chitale for the assessee, on the strength of their Lordships' decisions in CIT v. Anwar Ali [1970] 76 ITR 696 (SC) and CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 (SC), that the penalty proceedings under s. 271(1)(c) are of quasi-judicial nature and, therefore, the department must establish that the receipt of the amount in dispute constituted income of the assessee and if there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities that this burden is akin to that in a civil case, where the determination is made on preponderance of probabilities. It is laid down in these cases that it is not necessary that any positive material should be produced by the assessee in order to discharge the burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in penalty proceedings, irrespective of whether it is produced by him or by the revenue. We again do not find how these authorities can be of any avail to the assessee. In the present case, the assessee placed no material to show that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part ; nor is the burden discharged by the material on record. On the contrary, the material on record in the penalty proceedings can lead to no other inference than the one drawn by the Tribunal. On preponderance of probabilities, there can be no doubt that the assessee deliberately failed to return his correct income. The Tribunal observed that the business income disclosed by the assessee at Rs. 1,664 for the assessment year 1966-67 and at Rs. 3,580 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5%. Taking these facts into consideration, the Tribunal held that the assessee could not be held to be guilty of fraud or. gross or wilful neglect. In upholding the view of the Tribunal, the High Court observed : " It is true that the Explanation will cover even the cases of estimate or the best judgment assessment but nevertheless a finding has to be recorded that the difference in the income returned and the income assessed is due to the fraud or gross and wilful neglect on the part of the assessee, even though the onus lies upon the assessee. In the present case, the Tribunal has recorded a clear finding to that effect. So also, in CIT v. Baburam Ajit Prasad [1977] 106 ITR 818 (All), the ITO rejected the books of account and estimated the assessee's income by applying a flat rate. The Tribunal held that the disallowance of certain expenses was a matter of opinion and it could not, therefore, be said that there was any gross or wilful neglect or fraud on the part of the assessee. Similar are the decisions in CIT v. K. L. Mangal Sain [1977] 107 ITR 598 (Al), CIT v. Nawab and Brothers [1977] 107 ITR 681 (All) and CIT v. Patna Timber Works [1977] 106 ITR 452 (Pat). In all the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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