Burden of proof in income-tax penalty shifts to the Department when returned income exceeds 80% of assessed income.

Where returned income exceeded 80% of assessed income, the Explanation to section 271(1)(c) did not apply and the burden remained on the Department to justify penalty. The Tribunal erred by placing the burden on the assessee and sustaining penalty merely because no satisfactory explanation was given. The penalty order was therefore not sustainable without a fresh appraisal of the record in accordance with law, and the matter was remitted for reconsideration.

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Issues: Whether the penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the returned income exceeded 80% of the assessed income and the burden of proof lay on the Department.

Analysis: The returned income being more than 80% of the assessed income rendered the Explanation to section 271(1)(c) inapplicable, with the result that the burden rested on the Department to establish that penalty was leviable. The Tribunal, however, proceeded on the erroneous premise that the burden was on the assessee and sustained the penalty on the footing that no satisfactory explanation had been furnished. As the matter had been decided on a wrong view of the burden of proof, the penalty order could not be sustained without a fresh appraisal in accordance with law.

Conclusion: The Tribunal was not right in sustaining the penalty by wrongly placing the burden of proof on the assessee. The reference was answered in favour of the assessee, and the matter was sent back to the Tribunal for fresh decision.

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