COMMISSIONER OF INCOME TAX vs SHYAM BABU.

In this case a statement of case was called for by this Court under s. 256(2) of the IT Act, 1961 (in short the Act) on the following question of law :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the penalty amounting to Rs. 15,074 imposed under s. 271(1)(c) read with the Explanation ?

This reference pertains to the asst. yr. 1975-76. The assessee had returned its income of Rs. 37,775. Pursuant to assessment, addition of Rs. 37,701 was made to the returned income by the ITO. But ultimately going up to Tribunal the additions were sustained only to the extent of Rs. 15,074 only. The additions comprised under two heads, namely, Rs. 3,000 being unexplained cash credits and Rs. 12,074 as income from other sources. Keeping in view the additions, the IAC levied 100% penalty being Rs. 12,074 under s. 271(1)(c) of the Act. But the said order of penalty was cancelled by the Tribunal by holding that in view of the law laid down by the Supreme Court in the case of Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, since the Department had failed to prove that the assessee was guilty of concealment of any income, the same is not sustainable.

After hearing the learned counsel for the parties, we are clearly of the view that the Tribunal has gone wrong in placing reliance on the case of CIT vs. Anwar Ali (supra). It is so because, during the period under consideration that explanation to s. 271(1)(c) of the Act had come into operation and since in the present case the total income returned by the assessee was less than 80% of the total income as assessed, the onus was on the assessee to prove that the failure to file the correct income did not arise from any fraud or any gross or wilful neglect on his part.

In the case of Commissioner of Income Tax Vs. Mussadilal Ram Bharose, it has been held by the Supreme Court as follows :

"The position, therefore, in law is clear. If the returned income is less than 80% of the assessed income, the presumption is raised against the assessee that the assessee is guilty of fraud or gross or wilful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent. It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body, bearing the aforesaid principles in mind, comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact. No question of law arises."

In the case before us, from the order of the Tribunal it appears that the assessee had rendered some explanations with regard to both the items of additions. But the Tribunal without applying itself to the said explanations of the assessee had deleted the penalty on a presumption that the onus to prove concealment lay on the Department. The Tribunal should have considered the explanation of the assessee in the light of the law as in force at the material time and should have accordingly adjudged the validity of the order of penalty passed by the IAC.

In view of the aforesaid discussions, the question as referred is answered in negative. No order as to costs.