Back
1984 Supreme(P&H) 21
PUNJAB & HARYANA HIGH COURT
M.M.Punchhi and R.N.Mittal JJ.
Commissioner Of Income-tax
Versus
Metal Products Of India
Income tax Reference No. 43 of 1977,
Civil Miscellaneous No. 2049 of 1983,
Decided On : JANUARY 6, 1984
The assessee has the burden to prove that the difference between the assessed and the returned income was not due to any fraud or any gross or wilful neglect. This burden can be discharged by producing evidence that is sufficient to show that the assessee acted in good faith and that there was a reasonable explanation for the difference in income.
Headnote:
INCOME TAX - Penalty - Levy of penalty - Assessee's burden to prove that the difference between the assessed and the returned income was not due to any fraud or any gross or wilful neglect - Evidence before the Tribunal - Explanation to Section 271(1)(c) of the Income-tax Act, 1961.
Fact of the Case:
The assessee filed an income tax return declaring a total income of Rs. 52,416. The ITO rejected the books of account and added Rs. 1,49,624. On appeal, the AAC reduced the addition to Rs. 80,000, which was confirmed by the Tribunal. The IAC imposed a penalty of Rs. 12,000 for concealment of income. On appeal, the Tribunal cancelled the penalty. The Revenue sought a mandamus from the High Court, which directed the Tribunal to state a case and refer the question of whether there was any evidence before the Tribunal from which it could be said that the assessee had discharged the burden that lay on him under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961.
Finding of the Court:
The High Court held that there was evidence before the Tribunal from which it could be said that the assessee had discharged the burden that lay on him under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961. The Court considered the following factors: * The assessee had produced regular books of account, which displaced the presumption that the failure to return the correct income was due to fraud or gross or wilful neglect. * The discrepancy in the value of stock shown to the bank and the value of stock as per books of account was explained by the assessee. * The assessee could hold a bona fide belief that the shares stood in the names of the partners and, therefore, the dividend income belonged to the partners.
Issues: Whether there was any evidence before the Tribunal from which it could be said that the assessee had discharged the burden that lay on him under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961.
Ratio Decidendi: The Court held that the word "evidence" in the question under reference has to be understood in the generic sense, and not in the arrested sense so as to be either oral or documentary evidence, or both. The Court further held that the assessee had discharged the burden of proof by producing regular books of account, explaining the discrepancy in the value of stock, and by showing that he could hold a bona fide belief that the shares stood in the names of the partners.
Final Decision: The question framed is answered in the affirmative, in favour of the assessee and against the Revenue.
M.M.Punchhi, J.
1. This income-tax matter came in reference to us in the following circumstances:
For the accounting year ending March 31, 1965, the assessee submitted a return declaring a total income of Rs. 52,416 on the basis of the books of account maintained by it. Those were rejected by the ITO and he made an addition of Rs. 1,49,624. On appeal to the AAC, the addition was reduced to Rs. 80,000. On further appeal to the Income-tax Appellate Tribunal, the same was confirmed. Then came the turn, for levying penalty. The IAC undertook the. exercise and requisite notice for the purpose was served on the assessee for January 31, 1972. The assessee did not put in appearance but sent an application requesting for an adjournment. The prayer was rejected and the decision communicated. The assessee kept mum thereafter. The IAC thus proceeded in the absence of the petitioner and came to hold that the assessee had not been able to show that the difference between the assessed and the returned income was not due to any fraud or any gross or wilful neglect, and thus he should be deemed to have concealed the particulars of its income or furnished inaccurate particulars of such income. On this view, he imposed a penalty of Rs. 12,000. On appeal to the Appellate Tribunal, the penalty levied was cancelled. For coming to such view, the Tribunal had taken into account three particulars which are as under : (1) The addition of Rs. 80,000 had been made merely on the basis of an estimate and even though it had itself confirmed the estimate, the assessee by producing regular books of account had in its opinion displaced the presumption that failure to return the correct income had arisen from any fraud or gross or wilful neglect. (Proviso to Section 145(1) had been applied).
(2) Even though there was a discrepancy in the value of stock as per books of account, yet no specific addition had been made in the assessment on this account. In this situation, on a mere discrepancy in the stock statement, no penalty could be imposed,
(3) The assessees claim that 10,000 shares of Messrs Panipat Woollen and General Mills Limited belonged to the partners and not to it, and thus the dividend income of Rs. 4,000 derived therefrom was not that of the assessee, though not believed in the quantum case, could still have the assessee entertain the belief for penalty purposes that the dividend income belonged to the partners, and thus there was no positive evidence to draw an inference that the assessee was guilty of any concealment regarding the income from dividends."
2. The Revenue sought a mandamus from this court, vide decision in Income-tax Case No. 40 of 1973 decided on October 18, 1976. This court allowed the prayer by observing as follows :
"On appeal, the Tribunal set aside the levy of penalty on the ground that no penalty could be imposed for a mere discrepancy in the stock statement as declared to the bank and as shown by the assessee in his books. On these facts, we think that the following question arises for our consideration and we direct the Tribunal to state a case and refer the question for our decision : Whether, on the facts and in the circumstances of the case, it could be said that the Tribunal had any evidence before it from which it could be said that the assessee had discharged the burden that lay on him under the Explanation to Section 271(1)(c) of the Income-tax Act ?"
3. In obedience to the abovesaid order, the Tribunal has prepared the statement of the case and referred the aforesaid question of law to us for our opinion.
4. Indisputably, the extent of the additions in the instant case put the burden on the assessee to prove his case as envisaged in the Explanation to Section 271(1)(c) of the I.T. Act, 1961. The point to be seen is whether, on the facts and in the circumstances of the case, there was any evidence before the Tribunal for the purpose from which it could be said that the assessee had discharged that burden. As is
