TaxTMI 
TaxTMI 
2004 (12) TMI 69
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....n groundnut account Rs. 10,000 ----------- Rs. 39,568 ----------- Feeling aggrieved by the said order, the applicant preferred an appeal before the Commissioner of Income-tax (Appeals) who deleted the penalty relying mainly on his own order in the quantum appeal where he had granted relief of Rs. 25,70....
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....g and as the applicant has placed no further material on record in the penalty proceedings before any of the authorities below, the onus which lay on him by virtue of the Explanation to section 271(1)(c) of the Act has not been discharged and the presumption raised against the applicant by the said Explanation would remain, namely, that the difference between the assessed income and the returned income had arisen on account of fraud or gross or wilful neglect of the applicant. This presumption could have been rebutted by the applicant but inasmuch as no evidence has been led by the applicant in this regard, the said presumption remained unrebutted and in that circumstance, the penalty has to be sustained in reference to the items in reference to which addition has been made by the Income-tax Officer and ultimately sustained by the Tribunal. We have heard Sri Vikram Gulati, learned counsel for the applicant, and Sri A.N. Mahajan, learned standing counsel appearing for the Revenue. Learned counsel for the applicant submitted that no discrepancy whatsoever was found and the sales were duly verified and further 6R vouchers were produced before the sales tax authorities which had ....
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.... was attracted. The applicant had not produced any material to discharge the onus which lay upon him in order to prove that the failure to return the correct income did not arise from any fraud, or gross or wilful neglect on his part. It may be mentioned here that by section 40 of the Finance Act, 1964 the word "deliberately" occurring in clause (c) of section 271(1) of the Act has been omitted and the following Explanation was inserted at the end of sub-section (1): "Explanation.- Where the total income returned by any person is less than eighty per cent, of the total 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 any income included in the total income but which has been disallowed as a deduction), such person 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 for the purposes of clause (c) of this sub-section." Prior to the aforesaid amendment made by the Finance ....
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....the mere failure of an assessee to prove the nature and source of an income would not lead to an inference that he is deliberately concealing the income or has furnished inaccurate particulars thereof. The Income-tax Department's burden to establish that the assessee's case falls under section 28(1)(c) of the Indian Income-tax Act, 1922, would not be discharged in such a case and penalty cannot be imposed. It may be mentioned here that the aforesaid case related to the imposition of penalty for concealment of income under the Indian Income-tax Act, 1922 in which the Explanation, as inserted in the year 1964, was not there. Thus, no benefit or advantage can be obtained from the aforesaid decision. In the case of B.S. Badve [1982] 138 ITR 682, the Bombay High Court has held that the returns which were filed by the assessee, were merely on the basis of estimates of income and what the Income-tax Officer did was to raise the estimates of income given by the assessee in respect of the income from the cinema business and from the running of the power-looms. There was nothing in the order of the Income-tax Officer to show that he found the estimates given by the assessee to be fraudule....
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....sh High Court and the Karnataka High Court have not considered the effect of the Explanation added by the Finance Act of 1964. In the case of Kishan Singh Chand [1977] 106 ITR 534, this court has held that the Explanation to section 271(1)(c) of the Act does not apply to all the cases of suspected concealment but applies only where the income returned is less than 80 per cent. of the income assessed minus the expenses incurred bona fide and disallowed by the Income-tax Officer as a deduction. In the aforesaid case, there was no finding that this requirement was satisfied. In fact, the Inspecting Assistant Commissioner of Income-tax did not rely upon the Explanation and, as such, he did not record a finding that the income returned was less than 80 per cent. of the assessed income, attracting the Explanation nor has the Tribunal done so and once the Explanation is out of the way, the case would be governed by the law laid down by the apex court in the case of Anwar Ali [1970] 76 ITR 606. The penalty proceedings under section 271(1)(c) of the Act, are penal in nature and the burden is on the Department to establish that the assessee has been guilty of concealment, etc. Such a find....