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TMI Blog1991 (4) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent-assessee is a firm carrying on hotel business in Hyderabad city. For the year 1970-71, the assessment was made on a total income of Rs. 25,000 as against the income of Rs. 5,871 returned by the respondent. The respondent did not produce any account books stating that they were lost in the separate. Telangana agitation. Hence, the Income-tax Officer estimated the net income from boarding and lodging at a sum of Rs. 25,000 to which the assessee agreed. On November 19, 1971, the Department conducted a search of the business premises. The scrutiny of books and vouchers seized during the search revealed suppression of sales, short-totalling of the figures in the ledger, short-postings from the collection register and short-posting of bills-in all to the tune of Rs. 56,784. Certain unaccounted payments made to various parties were also noticed. Proceedings were, therefore, initiated to reopen the assessment. In response to the reassessment notice, the assessee filed a return declaring an income of Rs. 25,000. The Income-tax Officer, having found that there was no basis for the returned income of Rs. 25,000 and that the books of account maintained by the assessee did not reveal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, the Tribunal dismissed the assessee's appeal and partly allowed the Department's appeal. The Tribunal determined the taxable income at Rs. 90,000. Thereupon, the Inspecting Assistant Commissioner initiated penalty proceedings under section 271 (1) (c) and levied a penalty of Rs. 62,941. On appeal to the Tribunal, this order was set aside and the penalty cancelled. The Tribunal passed a common order for the years 1970-71 and 1971-72 cancelling the penalty. The reference under section 256(2) is a sequel to that order. It may be noticed that the Inspecting Assistant Commissioner not only applied clause (c) of section 271(1), but also the Explanation thereto for the purpose of imposing the penalty. The Income-tax Appellate Tribunal referred to the decided cases dealing with the scope and ambit of section 271(1)(c) and held that this being a case of "pure estimate of income" which had varied from stage to stage, the Department cannot be said to have discharged the burden of proving conscious concealment of the particulars of income. The Tribunal, also referred to the explanation of the assessee that the employees of the firm were to be blamed for irregular maintenance of accounts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties have no objection : " Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that there was no concealment of the particulars of income by the assessee in spite of discovery of suppression of sales from the seized material ?" It is true that, in order to amount to concealment of particulars of income within the meaning of clause of section 271(1), the nondisclosure of the particulars of income should be the result of a conscious or deliberate act on the part of the assessee. It is also true that the burden of proving that the assessee had consciously suppressed the particulars of his income is on the Department and the falsity of the explanation of the assessee by itself is not sufficient to infer an act of concealment of the particulars of income. But, from these well-settled propositions, it does not follow that a case of estimate of income can never give rise to penal action under section 271(1)(c). It depends upon the facts and circumstances of given case. However, it is not necessary for us to delve deep into this aspect and express our final opinion with regard to the applicability of the main clause (c) of section 271(1) to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharges the initial burden, the presumptions stand rebutted and the burden shifts to the Revenue to establish that the assessee has concealed, income. The assessee can be said to have discharged the initial burden by a preponderance of probabilities and evidence. Such burden can be discharged by the material already existing on the record or by the assessee choosing to adduce fresh evidence during the course of the penalty proceedings. If the assessee does not choose to adduce fresh evidence or produce fresh materials, it is still open to him to show and prove that on the existing material itself, the presumptions raised by the Explanation would stand rebutted. Broadly, these are the basic principles governing the applicability of the Explanation to section 271(1)(c) of the Act." In that case, the Full Bench found fault with the penalty proceedings on the ground that the Inspecting Assistant Commissioner did not himself apply his mind to the evidence on record but merely recorded his satisfaction regarding the applicability of the Explanation based upon the findings reached in the assessment proceedings. As penalty proceedings are distinct from assessment proceedings and the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid explanation in support of the plea that the assessee was not actuated by any fraudulent motive or that he was not guilty of gross or wilful neglect. If the matter had rested there, we would have answered the reference in favour of the Revenue, but we feel that there is something more which needs to be probed into by the Tribunal before coming to a firm conclusion in regard to the applicability of the Explanation to section 271(1) (c). It is apparent from the Tribunal's. order in the tax appeals (ITA Nos. 1678 to 1680/HYD. 1976-77) that the respondent contended that the suppression of sales was more than offset by omission of purchases and the additional demand raised against the assessee towards electricity charges. This explanation given by the assessee cannot be said to be irrelevant or extraneous to the subject-matter of enquiry, viz., the conduct of the assessee and the possible justification for the understatement of income. Whether the explanation is factually correct or whether it deserves acceptance is, of course, a matter for the Tribunal to go into. Apart from referring to the untenable plea of the assessee throwing the blame on the employees, the Tribunal had not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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