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TMI Blog1991 (5) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... tment in a case covered by the Explanation to section 271(1)(c) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the penalty of Rs. 19,000 imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Income-tax Act, 1961 ? " The relevant assessment year under our consideration is 1967-68. The Income-tax Officer by his judgment dated January 2, 1970, did not believe the stand of the assessee that he had spent the money out of his past savings and running income towards the expenses in connection with bus No. UPD 7036 and bus No. UPD 9039 in the relevant year. The Income-tax Officer, against the returned income of Rs. 10,225, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed the return on the basis of his books of account. The Revenue has mainly relied on the assessment order where the addition had been made for unexplained investment. But the. Revenue has not proved by cogent material that the assessee either earned a higher profit and he did not disclose the income in his return. In the absence of material to prove the concealment of income, we cannot sustain the penalty and hence the penalty order passed by the Inspecting Assistant Commissioner is set aside. The Income-tax Officer is directed to refund the penalty if already collected. " It appears that the Additional Commissioner of Income-tax, Lucknow, applied for a reference under section 256(1) and, thereafter, this court directed the Tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 271(1) of Income-tax Act, 1961, and adding an Explanation thereto by the Finance Act, 1964, was to bring about a change in the existing law regarding the levy of penalty so as to shift the burden of proof from the Department on to the assessee in the class of cases where the returned income of the assessee was less than 80 per cent. of the assessed income. The learned Chief justice noted that the significant thing about the change made in clause (c) of section 271(1) was the designed omission of the word 'deliberately' therefrom, whereby the requirement of a designed furnishing of inaccurate particulars of income was obliterated. According to the learned Chief justice, the language of the Explanation indicated that for the purposes of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct view when it states that it only makes a presumption but the presumption is a rebuttable one and if the fact-finding body on relevant and cogent materials comes to the conclusion that in spite of the presumption the assessee was not guilty, such conclusion does not raise any question of law. Our attention was drawn to the decision of the Division Bench of the Allahabad High Court in Addl. CIT v. Lakshmi Industries and Cold Storage Co. Ltd. [1984] 146 ITR 492. There, the High Court found that the assessee had not given any explanation. So, on the facts found, the inference of the Tribunal that the amounts had been added and the evidence had been found unsatisfactory was not correct. Penalty was exigible in that case and the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, we have quoted paragraph 2 of the judgment of the Tribunal dated September 19, 1973, wherein the Tribunal has set aside the order imposing penalty on the ground that a negative burden on the assessee, in view of the Explanation to section 271(i)(c), was discharged when the assessee filed the return on the basis of his books of account. According to the Tribunal, the Revenue had mainly relied on the assessment order where the addition had been made for unexplained investment. The Revenue had not proved by cogent material that the assessee had either earned a higher profit or that he had not disclosed the income in his return. In the absence of material to prove the concealment of income, the Tribunal did not sustain the penalty. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case mentioned above, it is evident that every explanation by the assessee cannot be accepted. In the facts and circumstances of the case, a perusal of the order of the Appellate Tribunal does not indicate as to what cogent explanation was in the books of account which necessitated the Tribunal to place the burden upon the Department to prove that the assessee had earned a higher amount. Relying upon the decision of the Supreme Court mentioned above, their Lordships of the Supreme Court in CIT v. K. R. Sadayappan [1990] 185 ITR 49, have indicated that when the presumption arising out of Explanation to section 271(1)(c) is attracted, the assessee would be guilty of fraud or wilful neglect as a result of which the assessee had conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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