9911796707
TMI Blog1992 (10) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... w and is not perverse and unreasonable ?" The relevant assessment year is 1970-71 in respect of the assessee which is a firm and which manufactures bricks. The assessee-firm had acquired a certain land which was used partly for agricultural purposes and partly for supplying earth for the business of the assessee. There was a water supply facility also for the agricultural purpose, some water was being utilised by the assessee for its own business of the manufacture of bricks while the surplus water was being supplied to needy farmers for which the assessee was obtaining grain, that is, consideration in kind. The assessee used to maintain a land purchase account and also an agricultural account in respect of supplies of earth. Credit was given to the land purchase account and debit to the bricks manufacture account, and similar adjustments were made in respect of the agricultural account in regard to the supply of water for the assessee's business. The Income-tax Officer had taken the view that the payment for earth as well as for water were payments to self and in any case they cannot be treated as receipts from agriculture. The Income-tax Officer, therefore, disallowed an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heti khata or the agricultural income account and the abovesaid amount of Rs. 6,097 would also be a payment made to self, and, therefore, the abovesaid amount was required to be disallowed. Taking up the third branch of the income, the Income-tax Officer had come to the conclusion that the assessee used to sell water to needy agriculturists and, during the relevant year, the water was sold to three agriculturists, and that the assessee had received payment in kind, that is, in foodgrains, the receipt of which would work out to Rs. 1,580. In the view of the Income-tax Officer, an amount of Rs. 7,000 was also liable to be assessed as income from undisclosed sources. Lastly, according to the Income-tax Officer, there was income from business in land transactions amounting to Rs. 688. Thus, in the view of the Income-tax Officer as expressed in the assessment orders at annexure "A", for the year 1970-71, dated March 30, 1973, the total taxable income was of Rs. 1,10,514. The Appellate Assistant Commissioner by his orders dated June 7, 1974, has taken a similar view in respect of two of the items. So far as the principal amounts of Rs. 18,291 and Rs. 6,097 are concerned, the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions of the assessee and the Revenue, the Tribunal had come to the conclusion that, though copies of the land purchase account and bricks manufacturing account have been given to the Income-tax Officer, looking to the provisions contained under section 271(1)(c) of the Act of 1961, the onus was on the assessee to discharge the burden and that the assessee was required to have been more careful. Taking the abovesaid view, the Tribunal, by its orders dated October 14, 1977, has dismissed the appeal filed by the assessee. It is in the background of the abovesaid facts that the questions referred to us require to be answered. The relevant assessment year being 1970-71, the Explanation to section 271(1)(c) would become applicable. The abovesaid Explanation was on the statute book from April 1, 1964, to April 1, 1976. The said Explanation runs thus : Explanation.-Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation appended to section 271(1)(c), which is the subject-matter of consideration before us has come on the statute book with effect from April 1, 1964, and had remained there up to April 1, 1976, as indicate by us earlier. Anyhow, some decisions on which learned counsel for the assessee and the Revenue have placed reliance, for the period during which the abovesaid Explanation was not on the statute book, also require consideration. Mr. Patel, learned counsel for the assessee, has drawn our attention to the Supreme Court decision in CIT v. Anwar Ali [1970] 76 ITR 696. This decision considered the relevant provisions of the Indian Income-tax Act, 1922, and especially section 28(1)(c) of the same. While examining the same question, the Supreme Court has summed up the situation by saying thus (headnote) : " The gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This decision also further says that this fiction can be displaced if the assessee proves that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. The principle laid down by the Bench decision in the aforesaid case can be deduced as under (headnote) : "The Explanation to that provision, which was introduced by the Finance Act, 1964, provides that where the total income returned is less than eighty per cent. of the total income assessed, the assessee 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 within the meaning of section 271(1)(c). The Explanation creates a legal fiction if the condition of its applicability is satisfied. The condition is an objective condition, namely, that the total income returned by the assessee should be less than eighty per cent. of the total income assessed and the assessee is straightway brought within the penal provision in section 271(1)(c). But this legal fiction can be displaced if the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharged by any fantastic explanation, but it must be an explanation acceptable to the fact-finding body. It is on the basis of the abovesaid decisions that learned counsel appearing on behalf of the assessee has urged that, though the Explanation comes into play and though the onus shifts on to the shoulders of the assessee due to legal fiction, the assessee in the instant case should succeed, if it is proved that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. After having satisfied us on the question of correct principles to be applied to the facts of the instant case, learned counsel, Mr. Patel, has taken us to the facts of the case. The return submitted by the assessee showed the accounts in respect of the land purchase account, the agricultural income account and the bricks manufacturing account. It, therefore, could not have been said that the true particulars or the accounts were not submitted by the assessee to the taxing authority. When the accounts submitted by the assessee which are available at annexure "G" are perused, it becomes clear that in the bricks purchase and sales accounts for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, looking to the facts and circumstances of the case and especially looking to the fact that all the relevant accounts were produced by the assessee before the Income-tax Officer and further looking to the fact that, since last several years the same practice was being followed by the assessee and was recognised by the Department, it cannot be said that the showing of incorrect particulars or the failure to return the correct income had arisen from any fraud or gross or wilful neglect on the part of the assessee. In view of this clear position, both legal and factual, it appears that the Tribunal and the authorities below were not justified in the orders of penalty. In view of this conclusion of ours, questions Nos. 1 and 2 shall have to be decided in the negative, in favour of the assessee and against the Revenue by saying that the Tribunal was not right in law in holding that the imposition of penalty of Rs. 25,968 was justified, and by further saying that the finding of the Tribunal that the imposition of penalty was justified as sustainable in law, is not correct. Question No. 3 shall have to be answered in the affirmative, but again in favour of the assessee and against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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