The burden of proof in penalty proceedings lies with the assessee to establish absence of fraud or gross neglect, and the penalty should be imposed based on the law prevailing at the time of original return filing.

VS.K. Singhal, J.-In pursuance of the order given by this Court under Section 256(2) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following questions of law arising out of the order of the Tribunal dated April 14, 1976, for the assessment year 1966-67:

1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal misdirected itself in computing the amount of concealed income at Rs. 5,000 as against Rs. 25,071 computed by the Inspecting Assistant Commissioner and thus in reducing the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961, to a sum of Rs. 7,500?

2. Whether the learned Income-tax Appellate Tribunal was correct in law in holding that the penalty should be imposed on the assessee by computing on the basis of the law as obtained on the date of the assessment order and not on the basis of the law as obtained on the date of furnishing of return, i.e.,, May 21, 1966 ?“

2. The brief facts of the case are that the assessee is a medical practitioner in the Government service. The return of income was filed on May 21, 1966, showing a total income as Rs. 21,736 which included Rs. 18,000 as income from private practice. The assessment was completed on June 17, 1968, and the income from private practice was increased from Rs. 18,000 to Rs. 25,000 on the ground that the assessee has not maintained any account with regard to his private practice. Subsequently, information came to the knowledge of the

Income-tax Officer that the assessee has not disclosed his true income in respect of consultation fees received from the Central Government employees and accordingly proceedings under Section 147 were initiated. It was found that a sum of Rs. 60,571 has been received by the assessee as consultation and injection charges from the employees of the Posts and Telegraphs Department but the same had not been disclosed in the return submitted. The assessee admitted that he must not have received more than Rs. 40,000 from the employees of the Posts and Telegraphs Department and Rs. 2,000 to Rs. 3,000 from other Central Government employees. The Income-tax Officer estimated the income at a figure of Rs. 65,571 as receipts from the employees of the Posts and Telegraphs Department and other Central Government employees. A sum of Rs. 6,000 was allowed in respect of expenses.

3. Against the above order, the matter was challenged before the Appellate Assistant Commissioner who has

confirmed so far as gross receipts were concerned but allowed the deduction of Rs. 12,000 instead of Rs. 6,000

in respect of expenses. This order of assessment was confirmed by the Income-tax Appellate Tribunal.

4. Penalty proceedings were initiated by the Inspecting Assistant Commissioner when the assessee was

confronted with the two returns filed on May 21, 1966, and July 22, 1970, where the income of Rs. 18,000 and

Rs. 25,000 have been shown as his correct income. The statements were recorded on July 27, 1970, wherein it

was stated that the major part of the income has been received from the employees of the Posts and

Telegraphs and Accountant-General’s Office, Food Corporation, Income-tax, All-India Radio and Salt

Commissioner’s office and that he has kept a register which has since been lost. A letter was written by the

Post-Master General, Jaipur, to the Superintendent of Police (S. P. E.) as under:-

“Sub : Ways to prevent abuse of medical reimbursement facilities granted to Government employees.

The authorised medical attendants who have received consultation and injection fees of the total income

above Rs. 1,000 from the Posts and Telegraphs employees from 1965-66 are detailed in annexure-’A’

Annexure-’A’

1. Dr. A.K. SharmaRs. 60,561.”

A true copy of the aforementioned letter was received by the Income-tax Department.

5. When the matter with regard to quantum appeal was considered by the Tribunal, it was observed as under:

“From his statement dated July 27, 19