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TMI Blog2004 (12) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ied under section 271(1)(c) of the Income-tax Act, 1961? 4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the penalty of Rs. 37,000 was validly imposed under section 271(1)(c) of the Income-tax Act, 1961 on the assessee? 5. Whether the Income-tax Appellate Tribunal was justified and correct in law in not considering that there was a similar brought forward opening balance in 1975-76 as in 1976-77 and thereby ignoring the correct fact, which vitiated the order of the Income-tax Appellate Tribunal and rendered it illegal?" The reference relates to the assessment year 1975-76. Briefly stated, the facts giving rise to the present reference are as follows: The applicant is an individual. Up to the assessment year 1974-75, he did not draw the balance-sheet which was drawn for the first time for the assessment year 1976-77. While examining the account for the assessment year 1976-77, the Income-tax Officer found that there were certain credits in the balance-sheet of the applicant in the name of one M/s. Jai Gopal Uma Shanker of Ahmedabad. On cross-checking with the said party, the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so alleged by the assessee that notice under section 271(1)(c) had not been served on the assessee at any earlier point of time. 2. That no part of income has been concealed and that the difference, if any, in the accounts of M/s. Jai Gopal Uma Shanker, Ahmedabad, cannot be said to be confined in the year in question and the income has got to be established related to this year and any difference in stock-in-trade does not invite the levy of penalty. As such these proceedings are liable to be cancelled ..." The Income-tax Officer after considering the above reply imposed the penalty. Feeling aggrieved by the order of penalty, the applicant challenged the aforesaid order of the Income-tax Officer and urged before the Commissioner of Income-tax (Appeals), firstly, that the penalty in question had been imposed on it without affording proper opportunity of being heard and, secondly, that the Income-tax Officer had not discharged the onus, which lay on him of showing that the entire difference, namely, Rs. 36,956 arose in the accounting period corresponding to the assessment year 1975-76. The Commissioner of Income-tax (Appeals) has accepted both the contentions. He pointed out in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Explanation to section 271(1)(c) of the Act, as it was applicable during the assessment year in question, only raised a presumption which is rebuttable. The applicant has given a valid explanation and, therefore, it was upon the Department to prove that the applicant had wilfully concealed the particulars of its returned income. In support of his aforesaid submissions, he has relied upon the following decisions: (i) CIT v. Net Ram Ram Swamp [1973] 88 ITR 213 (All); (ii) Addl. CIT v. Kishan Singh Chand [1977] 106 ITR 534 (All); (iii) CIT v. K.L. Mangal Sain [1977] 107 ITR 598 (All); (iv) CIT v. B.S. Badve [1982] 138 ITR 682 (Bom); (v) Addl. CIT v. Jeewandas Gyanthand [1983] 144 ITR 881 (MP); (vi) CIT v. Punjab Tyres [1986] 162 ITR 517 (MP); and (vii) C.M. Shivamallappa v. CIT [1987] 163 ITR 725 (Karn). Learned standing counsel for the Revenue submitted that the applicant had been provided reasonable opportunity of hearing and in fact he had submitted his reply, which has been considered and after disbelieving the same, the penalty has been imposed. According to him, as the returned income was less than 80 per cent, of the assessed income, the Explanation was applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 271(1) of the Act has been omitted and the following Explanation was inserted at the end of sub-section (1): "Explanation.- Where the total income returned by any person is less than eighty per cent, of the total income as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section." Prior to the aforesaid amendment made by the Finance Act, 1964, the apex court in the cases of CIT v. Anwar Ali [1970] 76 ITR 696 and CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 has held that the burden is on the Department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such a case and penalty cannot be imposed. It may be mentioned here that the aforesaid case related to the imposition of penalty for concealment of income under the Indian Income-tax Act, 1922 in which the Explanation, as inserted in the year 1964, was not there. Thus, no benefit or advantage can be obtained from the aforesaid decision. In the case of B.S. Badve [1982] 138 ITR 682, the Bombay High Court has held that the returns which were filed by the assessee, were merely on the basis of estimates of income and what the Income-tax Officer did was to raise the estimates of income given by the assessee in respect of the income from the cinema business and from the running of the power looms. There was nothing in the order of the Income-tax Officer to show that he found the estimates given by the assessee to be fraudulent or that the Income-tax Officer came to the conclusion that the assessee had made any deliberate false estimate of his income. Moreover, even the additions made by the Income-tax Officer in the estimates of income made by the assessee are so modest, that merely from those additions it cannot be said that the assessee has made any deliberate underestimation of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me assessed minus the expenses incurred bona fide and disallowed by the Income-tax Officer as a deduction. In the aforesaid case, there was no finding that this requirement was satisfied. In fact, the Inspecting Assistant Commissioner of Income-tax did not rely upon the Explanation and, as such, he did not record a finding that the income returned was less than 80 per cent, of the assessed income, attracting the Explanation nor has the Tribunal done so and once the Explanation is out of the way, the case would be governed by the law laid down by the apex court in the case of Anwar Ali [1970] 76 ITR 696. The penalty proceedings under section 271(1)(c) of the Act, are penal in nature and the burden is on the Department to establish that the assessee has been guilty of concealment, etc. Such a finding has to be recorded on positive material and cannot be inferred from the fallacy of the assessee's explanation. The aforesaid decision is of no help to the applicant as in the present case we find that the Explanation is attracted and further in view of the decision of the apex court, in the case of K.P. Madhusudhanan [2001] 251 ITR 99, where the returned income is less than 80 per cent, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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