COMMISSIONER OF INCOME TAX vs VASUDEO AGRAWALLA.

By the Court - This is a reference under s. 256(2) of the IT Act. In this reference, we are concerned with the asst. yr. 1964-65. In the relevant year the assessee was assed in the status of an individual. He filed his return showing income of Rs. 1,09,775.96 which was ultimately assessed at Rs. 2,04,265. The difference between the assessed sum and the returned sum being more than 20%, a penalty proceeding was initiated in terms of s. 271(1)(c) of the Act. No explanation was given by the assessee before the IAC. The IAC, therefore, imposed a penalty of Rs. 94,560. The assessee being aggrieved by the order of the IAC filed an appeal before the Tribunal. The Tribunal deleted the penalty holding that the department had not proved that the difference was such which could by itself lead to an inference that the assessee had committed any fraud or gross or wilful neglect in not returning the correct income.

Being aggrieved by the order of the Tribunal the revenue moved the Tribunal for referring the case to this Court for opinion. The application did not find favour with the Tribunal. It was, therefore, rejected. The revenue than moved this Court for a reference. This Court being satisfied that a question of law was involved in the case called for a reference. In obedience thereto the Tribunal has referred to this Court the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the ITAT was correct in law in deleting the penalty of Rs. 94,560 imposed under s. 271(1)(c) of the IT Act 1961, for the asst. yr. 1964-65 ?"

Learned counsel for the revenue has submitted that the Tribunal has erred in law in deleting the penalty by throwing the onus upon the department. He has drawn our attention to the Explanation to s. 271(1)(c) which was inserted by the Finance Act, 1964 effective from 1-4-1964. This Explanation lays down that where the total income returned by any persons is less than 80% of the total income as assessed income such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars for such income for the purpose of cl. (c) to this sub-section. The ambit and scope of the Explanation fell for consideration before a Full Bench of this Court. The question referred to us will be fully answered by the opinion of the Full Bench. The law has now been finally settled so far as this Court is concerned.

The Full Bench laid down that once a difference of more then 20% between the assessed income and the returned income occurred, it would be presumed that the assessee had concealed his correct income. It also laid down that, in the situation covered by the Explanation, the onus would be upon the assessee to show that there was no fraud or any gross or wilful neglect on his part. It must follow that the Revenue had no more to establish that there was any deliberate endeavour by the assessee to conceal the correct income.

The above being the law, the Tribunal clearly erred in placing the onus upon the department to establish that the difference between the sums returned and the sums assessed was not such which could by itself lead to an inference that the assessee had committed any fraud or gross or wilful neglect in returning the correct income. The Tribunal, therefore, deleted the penalty on a wrong view of the law.

After we were satisfied that the Tribunal has gone wrong on the question of law, we applied ourselves to the question whether we should direct the Tribunal to reconsider the matter and find out the facts but we find that no circumstance was brought on the record either in the penalty proceeding or at any stage which could point out in the direction that the assessee had not acted fraudulently or was not guilty of gross or wilful neglect. The assessee having failed to bring any material at any stage which could show that he had extended reasonable explanation, we are left with no option but to hold that the Tribunal has erred in cancelling the penalty.

For the reasons stated above, we are definitely of the view that the Tribunal has clearly erred in law in deleting the penalty imposed upon the assessee under s. 271(1)(c) for the asst. yr. 1964-65.

Before, we close, there seems to be some clerical mistake in the figure regarding imposition of penalty. The penalty imposed was Rs. 94,560. That was the figure mentioned in the application filed by the revenue in this Court in their application under s. 256(2) of the IT Act. It appears that, in the order of this Court dt. 16-2-1981, by some slip, the sum of Rs. 13,000 has been mentioned. This seems to be a clerical mistake which was clarified by the Tribunal in the statement of facts. Thus, the penalty imposed was Rs. 94,560 and not Rs. 13,000. The sum mentioned in the order of this Court dt. 16-2-1981 must be read accordingly.

For the reasons stated above, the reference is answered in favour of the revenue and against the assessee. As the assessee has not appeared, there shall be no order as to costs. Let a copy of this order be transmitted to the Appellate Tribunal, Patna Bench, Patna, in terms of s. 260 of the IT Act as soon as possible.