Commissioner of Income Tax vs Satya Narain

We have heard the learned Counsel for both sides.

During the relevant assessment year, i.e., before the assessment year 1977-78, there was an Explanation below Section 271(1) (c) which provided that where the declared income was less than 80 per cent. of the assessed income there was a presumption of concealment which could be rebutted by the assessee by showing absence of fraud or gross or wilful neglect in his part.

For the assessment years 1970-71 to 1975-76, the assessee''s declared income was less than the aforesaid limit of 80 per cent. of the assessed income. Accordingly, the presumption arose under the Explanation and it was required to be rebutted by the assessee.

The assessee furnished an explanation for rebutting the presumption. With regard to such explanation the Tribunal in paragraph 16 of its order date January 21, 1982, made the following observation:

The whole thing appears to be a got up story to cover up the claim of the assessee for extra investment in the business of pawning and money-lending.

Thus, the explanation of the petitioner was held to be concocted by the Tribunal. Despite this, in its judgment dated November 14, 1986, the Tribunal held as follows with regard to its abovequoted observation:

However, these observations only show disbelief and they do not show that the contentions raised by the assessee were false.

The above observation of the Tribunal are beyond our comprehension. Once it has been said that the assessee is putting up a got up or cooked up story, how could it be said by any rational person that the contention of the assessee had not been found false.

The burden under the former Explanation being on the assessee and not having been discharged by an acceptable explanation the presumption under that Explanation warranted the penalty proceedings.

Reliance placed by the learned Counsel for the assessee upon two decisions of this Court, namely, in Commissioner of Income Tax Vs. University Printers, and COMMISSIONER OF Income Tax Vs. DHARAM PAL SINGH., are misplaced because these decisions do not consider the impact of the Explanation to Section 271(1)(c), as it existed during the relevant period, the impact of the presumption under that Explanation, and the effect of non-rebuttal of that presumption.

In the circumstances referred above, our answers to the question is that, on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal was not justified in cancelling the penalties levied u/s 271(1) (c) of the Income Tax Act, 1961, for the assessment years 1970-71 to 1975-76.

The statement of the case does not indicate that the assessment year 1976-77 was involved.

So far as the assessment year 1977-78 is concerned, the Explanation as it originally stood has been deleted and replaced by a new Explanation . The new Explanation is different and does not raise the presumption as under the earlier Explanation . Therefore, the Tribunal''s order cancelling the penalty for the year 1977-78 was correct.

The reference stands thus answered.