Commissioner of Income Tax vs Simco Auto India

S.S. Sodhi, J.—The matter here concerns the burden of proof u/s 271(1)(c) of the Income Tax Act, 1961, in the context of the amendment made therein by the Finance Act, 1964.

The assessee, Simco Auto India, declared an income of Rs. 6,197. After the examination of the accounts of the assessee, the Income Tax Officer added a further sum of Rs. 14,600 thereto and penalty proceedings were thereafter initiated against the assessee. A sum of Rs. 14,600 was then imposed as penalty. This penalty was, however, deleted on appeal by the Tribunal. This is what led to the following question of law being referred for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty ignoring the amendment made by the Finance Act. 1964, to Section 271(1)(c) of the Income Tax Act, 1961, with effect from April 1, 1964 ?"

It will be seen that the returned income was less than 80 per cent, of the assessed income. It now stands settled by the judgment of our Pull Bench in Vishwakarma Industries Vs. Commissioner of Income Tax, , that in such a situation, the provisions of the Explanation u/s 271(1)(c) of the Act become applicable and when this is so, three legal presumptions arise, namely :

(i) that the amount of the assessed income is the correct income and it is in fact the income of the assessee himself,

(ii) that the failure of the assessee to return the correct assessed income was due to fraud, or

(iii) that the failure of the assessee to return the correct assessed income was due to gross or wilful neglect on his part.

The judgment in Vishwakarma Industries Vs. Commissioner of Income Tax, , was later approved by the Supreme Court in Chuharmal Vs. Commissioner of Income Tax, M.P., .

Such thus being the settled position in law, the reference has clearly to be answered in the negative, in favour of the Revenue and against the assessee with a direction to the Tribunal to redecide the appeal in the light of the two judgments noticed herein. There will, however, be no order as to costs.