1985 (3) TMI 57 - HC - Income Tax

Court shifts burden of proof to assessee in penalty cases post-amendment

The court held that the ratio of CIT v. Anwar Ali is no longer applicable to the amended s. 271(1)(c) of the I.T. Act, 1961, post-amendment. The burden of ... Burden Of Proof, Penalty Issues Involved:1. Whether the ratio of CIT v. Anwar Ali [1970] 76 ITR 696 (SC) still holds the field despite the deletion of the word 'deliberately' from s. 271(1)(c) of the I.T. Act, 1961, and the insertion of an exhaustive Explanation thereto by the Finance Act No. 5 of 1964.2. Correctness of the Tribunal's decision in deleting the penalty of Rs. 12,000 levied by the Inspecting Assistant Commissioner u/s 271(1)(c) read with the Explanation.Summary:Issue 1: Applicability of CIT v. Anwar Ali [1970] 76 ITR 696 (SC) Post-AmendmentThe focal question was whether the ratio of CIT v. Anwar Ali still applies after the deletion of the word 'deliberately' from s. 271(1)(c) of the I.T. Act, 1961, and the insertion of the Explanation by the Finance Act of 1964. The court held that the legislative intent in deleting the word 'deliberately' and adding the Explanation was to shift the burden of proof from the Department to the assessee in cases where the returned income is less than 80% of the assessed income. The Explanation raises three rebuttable presumptions against the assessee: (i) that the assessed income is the correct income,(ii) that the failure to return the correct income was due to concealment, and (iii) that the failure was due to furnishing inaccurate particulars. The court concluded that the ratio of Anwar Ali's case is no longer applicable to the amended s. 271(1)(c).Issue 2: Correctness of Tribunal's Decision on PenaltyThe Tribunal had deleted the penalty of Rs. 12,000 imposed by the IAC, despite the fact that the assessee's explanation for the discrepancy between the returned and assessed income was categorically rejected by the Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal itself. The court observed that once the Explanation to s. 271(1)(c) is attracted, the burden of proof shifts to the assessee to rebut the presumptions. The Tribunal's decision to delete the penalty was found to be unwarranted as the burden of proof remained undischarged by the assessee. The court answered the question of law in the negative, in favor of the Revenue and against the assessee.The judgment emphasized that penalty proceedings are civil in nature and distinct from criminal proceedings, and that the burden of proof on the assessee can be discharged by preponderance of evidence, not necessarily by leading fresh evidence but possibly by existing material on record. The court also highlighted the necessity for the authorities to record clear findings on whether the assessee has discharged the onus to rebut the presumption raised by the Explanation.