The assessee has the onus of proving that the failure to return the correct income was not due to fraud or gross or wilful neglect, where the total income returned is less than eighty percent of the total income assessed.

( 1 ) THE Income-tax Appellate Tribunal, Allahabad Bench, Allahabad (hereafter "the Tribunal"), has referred the following questions for the opinion of thiscourt under Section 256 (1) of the I. T. Act, 1961 (hereafter "the Act") :

"1. Whether, on the facts and in the circumstances of the case, the assessee had discharged the onus under the Explanation to section 271 (1) (c) of the I. T. Act, 1961 ?

( 2 )

Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in cancelling penalties of Rs. 26,000, Rs. 1,49,000 and Rs. 8,000 imposed by the Inspecting assistant Commissioner under section 271 (1) (c) of the I. T. Act, 1961, in the assessment years 1967-68, 1968-69 and 1969-70 ?"

2. The respondent-assessee, M. Habibullah, is an individual and a non-resident. He had not filed any return of income for the assessment years 1967-68 to 1969-70, On receipt of information that there were a large number of deposits in the bank accounts of the assessee, the ITO took action under Section 147 (a) of the Act for these three years. Notices were issued to the assessee and he filed returns showing his income at nil. During the course of assessment, the ITO found that in the previous year relevant to the assessment year 1967-68, there were two deposits of Rs. 11,000 and Rs. 15,000 in the account of the assessee with the Punjab National Bank, Varanasi. It was claimed by the assessee that those amounts had come to him from his son, Shaukat AH, who in turn ascribed the source to one Munshi Raghunath Prasad. This gentleman was an employee of the assessee himself. The ITO required the assessee to produce him but the assessee could not do so because he had died in 1970. The ITO hence treated these deposits as the assessees own income from an undisclosed source.

( 3 ) IN the previous year relevant to the assessment year 1968-69, three deposits aggregating to Rs. 1,49,000 were found in the assessees bank account. His explanation that he had received those amounts from one H. M. Patel was not accepted because Sri Patel could not be produced before the ITO and his whereabouts could not be ascertained. This total amount as well was treated as the assessees income from an undisclosed source. A similar deposit of Rs. 8,000 was found in the assessees bank account in the previous year relevant to the assessment year 1969-70. The assessee claimed that he had received this amount from a relation of his, Abdul Habibi. The ITO did not accept that explanation and treated that amount as the assessees own undisclosed income. These assessment orders were confirmed by the AAC as also by the Tribunal.

( 4 ) THE ITO initiated penalty proceedings as well for all these three years under Section 271 (1) (c)/274 (2) of the Act and referred the cases to the IAC. The IAC after hearing the assessee held that the assessee had concealed the particulars of his income to the extent of the aforesaid deposits appearing in his bank account in the year under consideration and imposed penalties in the sums of Rs. 26,000, Rs. 1,49,000 and Rs. 8,000 for these three years, respectively. Aggrieved, the assessee took up the matter in appeals before the Tribunal. The Tribunal has taken note of the fact that the findings given in assessment proceedings were relevant and have probative value and further that under the Explanation to Section 271 (1) (c) the onus was on the assessee to prove that the failure to return the correct income was not due to any fraud or gross or wilful neglect on his part. However, since penalty proceedings are quasi-criminal in nature, it has taken the view that "something more is required than mere findings at the assessment stage. It has to be ensured whether in the totality of circumstances and keeping in view the preponderance of probability that the charge of concealment and furnishing inaccurate particulars of income has been brought home to the assessee. "

( 5 )

After giving its anxious consideration, the Tribunal fe