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TMI Blog1995 (9) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... dded represented concealed income of the assessee of the previous year relevant to the assessment year in question ? (4) Whether the effect of the provisions of sections 68, 69 and 69A is only fictional and not real, inasmuch as, even though the additions could be made to the income of the assessee such added amount cannot be considered as income or concealed income of the assessee in the relevant previous year ? " We have heard learned counsel for the parties. The facts of the case are that the assessee is engaged in the manufacture and sale of tin containers, drums, buckets and other tin articles. In the previous year relevant to the assessment year 1971-72, the assessee furnished the return under section 139 of the Act declaring an income of Rs. 43,297. The return was supported by the trading account, copy of the profit and loss account and copy of the balance-sheet. The Income-tax Officer during the course of assessment proceedings noticed certain cash credits in the names of several parties. He required the assessee to produce copies of accounts of such creditors to prove the genuineness of the documents. The assessee was able to produce before the Income-tax Officer some co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty proceedings that the appellant had either concealed its income or furnished inaccurate particulars of his income, which the Income-tax Officer has failed to do. The Appellate Assistant Commissioner was further of the opinion that the facts of the present case on all fours are similar with the facts of the case decided by this court in the case of CIT v. Vinaychand Harilal [1979] 120 ITR 752. Following the said decision the appeal of the assessee was allowed. On further appeal before the Tribunal, the Tribunal recorded its finding as under : " From the evidence on record it is clear that the assessee maintains books in the ordinary course of business. The deposits in question were recorded in the different accounts. At the time of filing of the return, the assessee filed the copies of accounts of such creditors. Even copies of the trading account, profit and loss account and the balance-sheet were furnished. Some of the confirmatory letters from the depositors were filed. In cases where such confirmatory letters were not available request was made to the learned Income-tax Officer to summon the creditors and accordingly they were summoned. Unfortunately, the said creditors wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee of that previous year. Relying on this provision, learned counsel contends that as under the statute the unexplained credits are deemed to be the income for the previous year. The ratio in Anwar Ali's case [1970] 76 ITR 696 (SC) is not applicable to the case arising after the Explanation was inserted in section 271(1)(c) that is to say after April 1, 1964, and once the same is treated to be an income within the meaning of section 68 to be charged to tax, in the penalty proceedings, the Revenue is not further under any obligation to prove the same as income of the previous year for the purpose of levying penalty. Learned counsel further sought to distinguish the decision of this court in Vinaychand Harilal's case [1979] 120 ITR 752 on the ground that the same pertains to the provisions, vis-a-vis the additions made with the aid of section 69A of the Income-tax Act which related to the cases where the assessee is found to be the owner of any asset enumerated under section 69A in respect of which the assessee has not been able to offer satisfactory explanation and the case of unexplained cash credit cannot be equated with the case of Vinaychand Harilal's case [1979] 120 ITR 75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the assessee shall, unless he proves that the failure to return the correct income did not arise from any fraud or any wilful or gross neglect on his part he is deemed to be guilty of concealment or furnishing inaccurate particulars. A rebuttable presumption was allowed to be raised about concealment of income in case of substantial understatement of income, vis-a-vis, assessed income. However, no presumption of any particular part of assessed income being concealed income of that year was raised. Obviously, it could not be raised merely on the basis of difference of returned and assessed income. It could not be said that where returned income is less than 80 per cent. of the assessed income, no concealment has taken place, though no presumption under the Explanation could be, raised, nor could it be said, in the absence of any statutory provision, that every part of the difference between the assessed and returned income is concealed income. Moreover, on establishing the absence of fraud or wilful or gross neglect on the part of the assessee, no presumption under the Explanation could survive to treat the assessee as guilty of concealment of income. The amount of proof needed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction that where presumption of concealment of particulars of income is raised under the Explanation to section 271(1)(c) on account of additions having been made or deductions being disallowed in the returned income, the burden of the assessee is to prove that the failure to return the correct (assessed) income did not arise from any fraud or any gross or wilful neglect on his part. Establishing such absence of fraud or gross or wilful neglect on the part of the assessee results in discharge of the burden placed on the assessee under the Explanation and once that burden is discharged the position reverts to as it was before the insertion of the Explanation. That is to say that on a finding that return of income which is less than 80 per cent. of the assessed income is not the result of fraud or gross or wilful neglect, the penalty cannot be sustained by raising a presumption of concealment of income under, the Explanation. In this connection, we may refer to the decision of the Rajasthan High Court in the case of Addl. CIT v. Noor Mohd. and Co. [1974] 97 ITR 705. The court said (page 714) : " In sub-section (1)(c) the word ' deliberately ' was omitted and the Explanation was add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. " The same principle applies when it comes to whether a presumption of fact stands rebutted or not. Applying the aforesaid principle, we find in the present case the Tribunal has considered the entire evidence and material on record and has come to a positive finding that it is proved that there were preponderance of probabilities which go to show that there was no fraud or gross or wilful neglect on the part of the assessee in not returning assessed income. This is the finding of fact and does not give rise to any question of law unless it is specifically challenged on the grounds on which the finding of fact can be challenged. We may reiterate at this stage at the cost of repetition that the Supreme Court has said in unequivocal terms that if in an appropriate case the Tribunal or fact-finding authority is satisfied that there is no fraud or gross or wilful neglect on the part of assessee in submitting his return, then in such a case the assessee cannot be found within the mischief of the Explanation. At best additions made on account of the provisions of sections 68, 69, 69A, 69B and 69C become relevant at the time of raising the presumption under the Explanation to sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed." The above Explanation was substituted for the Explanation which was in existence at the relevant time when the returns in the present case were filed, and was the governing provision, Obviously, the Explanation which was inserted in section 271(1)(c) with effect from April 1, 1976, cannot be held to be retrospective in operation to govern the cases coming earlier. This fact goes to show that prior to the insertion of this Explanation it was not open to the Assessing Officer to raise any presumption about specific sums added or deductions disallowed, to consider it as income in respect of which particulars of income have been concealed merely on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless and until we come to the stage of it being established, that the receipt of Rs. 60,000 constituted income of the assessee and that too without resort to the deeming provisions of section 69A, it cannot be said that there was any scope for invoking the penalty provision of section 271(1)(c). In any event, the burden of proof would be clearly discharged the moment it was pointed out on behalf of the assessee in the penalty proceedings that it was by virtue of the deeming provisions after the assessee's version was rejected that the amount was brought to tax under section 69A of the Income-tax Act." Thus, the decision of this court in Vinaychand Harilal's case [1979] 120 ITR 752 clearly covers the present case. In our opinion, no distinction can also be found about the deeming provisions for treating unexplained cash credit investment or expenditure, etc., as income chargeable to tax by treating the same as income of the assessee of the previous year in their application to penalty proceedings, as sought to be drawn by learned counsel for the Revenue to distinguish the aforesaid decision of this court, on the ground that the principle was laid down with reference to section 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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