1. This is a reference under s. 256(1) of the I.T Act, 1961, made by the Income-tax Appellate Tribunal, Patna “A”, for the assessment year 1965-66. The Tribunal has referred the following two questions of law for opinion of this court:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that no penalty could be imposed in this case under s. 271(1)(c) of the Income-tax Act read with its Explanation?

(2) If the answer to the above question is in the negative, whether the Tribunal was correct in holding that the quantum of penalty in this case was to be governed by the provisions of the law which were in force before April 1, 1968?”

2. From the statement of case submitted, the relevant facts that appear are these. The assessee is a registered co-operative society manufacturing guns under licence from the Government. In the course of the assessment proceedings, the ITO found certain discrepancies between the balance in the Central Bank of India and the accounts of that bank in the books of the assessee. The balance as per books was Rs. 7,974 whereas the pass book showed a balance of Rs. 28,105. At the time of assessment, the assessee could not explain this difference. It was merely stated on its behalf that at the time of audit, the pass book had been misplaced by the ex-secretary of the society and so it was not placed before the auditor. In the absence of any satisfactory explanation, the ITO treated the difference of Rs. 20,031 as the assessee's undisclosed income. The ITO further initiated proceedings under s. 271(1)(c) for concealment. A copy of the assessment order passed by the ITO is annex. A forming part of the statement of case.

3. In the quantum appeal, the AAC found that the transactions with the bank were partly recorded in the books of account and partly they were not so recorded. There were certain transactions in the bank which were explained by the assessee as representing sales of guns on behalf of the members of the said society (the assessee). It was explained that at the time of sales of guns, the sale proceeds were deposited in the bank directly without going through the ledgers or cash book maintained by the assessee. The AAC found that the discrepancy had not been proved and he further found that the credit in the bank to the extent of Rs. 1,81,000 could very well represent the sales by the assessee. He, therefore, estimated that the profit on such sales could be almost the same amount as added by the ITO. In this view of the matter, the addition made by the ITO was confirmed by the AAC, a copy whereof has been annexed to the reference as annex. B.

4. In the penalty proceedings, the IAC found that there was no explanation for the difference between the bank account as per pass book of the assessee and as per books maintained by the assessee. The IAC also referred to the fact that whereas the assessee showed sales of Rs. 6,380, the credit in the bank was to the extent of Rs. 1,81,000 which could very well represent the sales which had not been shown by the assessee. He, therefore, held that the assessee had concealed its income, and as such penalty had to be levied under s. 271(1)(c).

5. In this case, the assessee has filed several returns and one of the revised returns was filed on July 12, 1969, and as this return had been filed after April 1, 1968, the IAC held that the minimum penalty imposable was equal to the amount of concealment and he, therefore, imposed a penalty of Rs. 20,000. A copy of the penalty order passed by the IAC is annex. C to this reference.

6. Before the Tribunal it was submitted by the assessee that the society was making sales of guns on behalf of its members and the society was merely getting commission on these sales. It was, therefore, argued that the penalty was not leviable. On behalf of the Revenue, it was argued before the Tribunal that the penalty was leviable, as the difference between the returned income and the assessed income was as a result of some gross negligence on the part of the assessee. It was also argued that the revised return having been filed after April 1, 1968, the quantum of penalty was to be governed under the provisions of law which came into force from April 1, 1968.

7. The Tribunal held that the explanation of the assessee that the credits in the bank represented the sales on behalf of the members had not been fully met by the Department and the discrepancies in the bank account could not conclusively prove that the discrepancy represented the income of the assessee as such. The Tribunal further held that the assessee by making a submission that the amounts credited in the bank account were sales on behalf of the shareholders and that the assessee used to earn only income on behalf of those shareholders must be taken to have discharged the onus which lay on him under the law. The Tribunal held that it could not be stated that the assessee's explanation had no basis at all, and, therefore, it further held that there was no fraud or gross or wilful neglect on the part of the assessee in this case. The Tribunal also held that there might have been certain defects in the maintenance of accounts and in making entries but there was nothing to show that there was any gross neglect in filing the return. The Tribunal, therefore, came to the conclusion that the penalty could not be imposed.

8. The Tribunal further observed that the amended provision of law which had come into force from April 1, 1968, could be applied for the assessment year 1968-69 onwards and could not be applied to an earlier year merely because a return of income or the revised return had been filed after that date. On this basis, it was pointed out by the Tribunal that, if any penalty was to be levied in the case, it could be calculated only on the basis of the law which was in force before April 1, 1968.

9. In order to appreciate the stand taken by the assessee and the chain of reasonings adopted by the Tribunal in the penalty appeal, it is worthwhile to quote the most relevant portion from the Tribunal's appellate order which is paragraph six thereof and which lays down in these terms:

“We have considered the facts of the case and we are of the view that in this case no penalty should have been levied. No doubt an addition of Rs. 20,000 has been made by the Income-tax Officer due to certain discrepancy in the bank account and this was taken as business income by the Appellate Assistant Commissioner. However, the explanation of the assessee that the credit in the bank represented the sales on behalf of the members has not been fully met by the Department. Even if the discrepancy is accepted, there is nothing to hold that the discrepancy represented the income of the assessee as such. The assessee must be taken to have discharged his onus by making a submission that the sales credited in the bank account were sales on behalf of the shareholders and the assessee used to receive only commission on behalf of those shareholders. Though the explanation might have been rejected, but it could not be held that the explanation of the assessee had no basis at all. In these circumstances, it could not be held that there was any fraud or gross or wilful neglect on the part of the assessee….”

10. It will thus be seen that in so far as the addition of Rs. 20,000 is concerned, it is beyond any controversy. The only explanation that was submitted by the assessee, both at the stage of the AAC in the quantum appeal and before the Tribunal was that the said amount did not arise out of the sales made on behalf of the shareholders of the assessee, but it merely represented the commission which had been obtained by the assessee. We fail to see, how the commission earned by the assessee can be said not to be the income in the hands of the assessee. As a matter of fact, learned counsel appearing on behalf of the assessee fairly accepted the legal position that the commission earned by the assessee was his income from business or otherwise. The very purpose of the Tribunal's reasoning, therefore, seems to us to be inconsistent with the law. The moment there is difference of 80 per cent, between the income returned and the income assessed, the Explanation to s. 271(1)(c) is immediately attracted. It is true that although the penal proceedings are in the nature of quasi-criminal proceedings, the standard of proof is that of preponderance of probabilities and cannot be so strictly construed as to put the same amount of burden on a person to prove the negative fact as to prove the positive fact. All the same in this case there is absolutely no explanation of non-inclusion of this amount earned by way of commission in the revised return filed by the assessee or at any previous stage. It thus cannot be said that the presumption arising out of the Explanation to s. 271(1)(c) had been rebutted in any manner by the assessee.

11. We thus see no justification in holding that the assessee had discharged the onus put upon it by the Explanation because at the cost of repetition we may state that the only explanation of the assessee was that the income represented only the amount of commission. Whether the income as represented was the amount of commission or otherwise makes no difference in law since it remains an income of the assessee. That being the position we answer the first question referred to us by the Tribunal in the negative and against the assessee, and hold that, on the facts and in the circumstances of the case, the Tribunal was not correct in holding that no penalty could be imposed in this case under s. 271(1)(c) read with its Explanation. We deliberately refrain from referring to certain decisions cited at the Bar with regard to the first question, namely, the case of Commissioner Of Income-Tax v. M. Habibullah., [1982] 136 ITR 716 (All) relied upon by the senior standing counsel on behalf of the Revenue and also cases of Commr. Of Income Tax, Kerala v. H.A Mohamed Haneef, [1972] 83 ITR 215 (SC), CIT v. Patna Timber Works, [1977] 106 ITR 452 (Pat) and Commissioner Of Income-Tax, Bihar v. Gopal Vastralaya., [1980] 122 ITR 527 (Pat), because on the facts and in the circumstances as discussed above, none of these decisions are relevant to us at hand.

12. Thus, this brings us to the second question referred to us. The point is clearly covered by a number of decisions, but without multiplying them we may refer to a decision of the Supreme Court in the case of Brij Mohan v. CIT, [1979] 120 ITR 1, and a Bench decision of this Court in the case of Commissioner Of Income-Tax, Bihar v. Lalji Ram Bhagat., [1984] 147 ITR 645 (Pat). It is well established by now that the provisions of law applicable to the penal proceedings would be those governing on the date on which the return is filed. In other words, the relevant date for the purpose of determining the quantum of penalty would be the date on which the delinquency was committed, namely, when the revised return was filed. As already stated above, it was filed on July 12, 1969. Therefore, the provision of law effective from April 1, 1968, shall govern the case of quantum of penalty. Thus the second question is also answered against the assessee and in favour of the Revenue, and we hold that the Tribunal was not correct in holding that the quantum of penalty was to be governed by the provisions of law which were in force before April 1, 1968. On the facts and in the circumstances of the case, there shall be no order as to costs.