Satish Chandra, C.J:— The question for our consideration is whether the Tribunal was right in holding that the penalty under s. 271(1)(c) of the I.T Act, 1961, was not exigible.
2. For the assessment year 1964–65, the assessee filed a return on 3rd January, 1969, declaring a total income of Rs. 3,700. During the course of assessment proceedings the ITO found that deposits totalling Rs. 9,400 existed in the assessee's account books. These were in the accounts of Gyan Prakash, Sushil Kumar and Ahmad Khan. The officer required the assessee to prove the genuineness of these deposits and also to furnish the addresses of these persons. The assessee did not respond.
3. He did not produce any evidence or furnish the required addresses. The ITO concluded that these deposits were not genuine and he added them as income from undisclosed sources. The assessment was passed on a total income of Rs. 15,000 under s. 144 of the I.T Act, 1961.
4. The assessee filed appeals, but failed before the AAC as well as the Tribunal. The additions were sustained.
5. In due course penalty proceedings were initiated. The assessee failed to respond or reply to the notice issued by the I AC. He imposed a penalty of Rs. 12,000.
6. The assessee went up in appeal. The Tribunal quashed the penalty order. The Tribunal observed:
“After perusing the order of the IAC, as also the assessment order and taking into consideration the arguments of both the sides, I am of the view that it is a case of no explanation in respect of the cash credits. When the assessee does not explain its cash credits, the assessment may be justified but the penalty is not on the basis of no explanation by the assessee in respect of cash credits. The revenue has to prove the charge of concealment or even of furnishing of inaccurate particulars. If it cannot prove the charge, the penalty does not become exigible. Only because the assessee did not furnish any explanaton in respect of the cash credits that does not by itself establish the charge of concealment in view of the case of Anwar Ali, [1970] 76 ITR 696 (SC). I, therefore, hold that the penalty is not exigible which is deleted.”
7. The Tribunal was of the view that the charge of concealment has to be proved by the revenue. In support, reliance was placed upon the Supreme Court decision in Anwar Ali's case, [1970] 76 ITR 696.
8. This court has in Smt. Rukmani Bahu v. Addl. CIT (Income-tax Reference No. 1226 of 1976—Decided on 26th May, 1976) (since reported in [1979] 116 ITR 468 (All)) dealt with this problem. It was observed that Anwar Ali's case, [1970] 76 ITR 696 (SC) dealt with the penalty proceedings for the year 1947–48 under s. 28(1)(c) of the Act of 1922, which was in pari materia with s. 271(1)(c) of the Act of 1961 as it stood prior to its amendment in 1964, with effect from 1st April, 1964. These provisions provided for levy of penalty in cases where the assessee has concealed particulars of his income or deliberately furnished inaccurate particulars of such income. Construing them the Supreme Court held that the penalty proceedings being penal in character the burden was on the department to establish that the disputed amount was income of the assessee. It was also ruled that the finding on the quantum side that the explanation was false, though relevant, was not conclusive in penalty proceedings. By the amendment of 1964, the word “deliberately” was omitted from the phrase has concealed the particulars of income or deliberately furnished inaccurate particulars of such income occurring in cl. (c). Further, an Explanation was added. For the assessment year 1964–65 onwards the Explanation applied to the proceedings. In cases covered by the Explanation, namely, where the returned income is less than 80 per cent, of the assessed income, the concealment on the part of the assessee is presumed. The presumption is rebuttable by the assessee proving that the failure to return the correct income was not due to fraud or gross or wilful negligence on his part.
9. In that case this court emphasised that the Explanation raises a threefold presumption—one, of concealment, the other, of inaccurate particulars and the third, that the amount so concealed or in respect of which inaccurate particulars have been furnished is “income” of the assessee. After the enactment of the Explanation, the burden of proof that the concealed items constituted assessable income of the assessee is no longer on the department. This is presumed to be so where the returned income is less than 80 per cent, of the assessed income. On the other hand, the burden is on the assessee to prove that the failure to return correct income was not due to fraud or gross dr wilful neglect on his part. We are in entire agreement with these observations.
10. In the present case, the Tribunal placed the burden of proof on the revenue. It held that the revenue has to prove the charge of concealment or of furnishing inaccurate particulars. This was incorrect. Further, Anwar All's case, [1970] 76 ITR 696 (SC) is inapplicable, because when that case was decided there was no Explanation in the statute. The Tribunal ought to have applied its mind to the materials on the record and should have recorded a finding whether the assessee had been able to establish that the failure to return the correct income was not due to fraud or gross or wilful neglect on his part.
11. We, therefore, answer the question referred to us in the negative, in favour of the department and against the assessee. As no one has appeared on behalf of the assessee, there will be no order as to costs.