Ashwini Kumar Sinha, J.:— The Income-tax Appellate Tribunal, Patna Bench, has stated a case and referred to this court under s. 256(1) of the I.T Act, 1961 (hereinafter referred to as “the Act”), the following question of law:
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty imposed u/s. 271(1)(c) read with the Explanation to the section?”
2. I may take the necessary facts from the statement of the case. In respect of the assessment year 1965-66, the ITO noted certain cash credits and the assessee was called upon to explain the genuineness of these credits. The assessee gave an explanation in respect of some of these credits and they were accepted. But in respect of three credits in the names of Shri Surendranath Deogharia, Bujjan Kumar Ktetan and Ramjatanjee Chaturvedi, the assessee submitted that though they were genuine loans, the parties were not in a position to come forward and depose before the ITO regarding those credits; it was further stated by the assessee that he was not in a position to give further evidence in support of the genuineness of these credits and he was agreeable to be assessed in respect of the three credits of those amounts. The ITO added Rs. 43,000 as the assessee's income from undisclosed sources, as that was the peak credit of those three accounts. There was no appeal against this addition of Rs. 43,000.
3. The IAC imposed the penalty under s. 271(1)(c) with reference to the credits appearing in the three accounts in the names of the aforesaid three persons. The IAC pointed out that those three accounts had been surrendered by the assessee and that surrender had been made after several months of inquiries by the ITO regarding the genuineness of the credits. He was also of the view that the so-called loans were not genuine and represented the secreted income of the assessee. According to the IAC, the surrender of these sums in the course of assessment proceedings could not have the effect of absolving the assessee completely from the original guilt of having admitted the concealment of the particulars of its income. As the tax sought to be avoided was Rs. 6,745, the IAC imposed a penalty of the same amount. The order of the IAC is annex. A, which has formed part of the statement of the case.
4. The matter was taken up in appeal before the Tribunal. The Tribunal considered the matter along with two other matters of the same assessee and three appeals were disposed of by a consolidated order dated June 21, 1973. The Tribunal was of the view that, though in the year in question the initial onus upon the assessee was to show that the addition was not due to any fraud or gross or wilful neglect on his part, the assessee had given certain explanations before the ITO and at the same time had submitted that it was not possible for him to substantiate any further the genuineness of those credits. The Tribunal considered that, when the explanations were given by the assessee, it was for the Department to bring some cogent material on record to show that the amount in question constituted the concealed income of the assessee.
5. The Tribunal further held that the assessee might surrender a particular amount for various reasons but mere surrender was not enough to justify the imposition of penalty. The Tribunal also referred to the letter which the assessee had written to the ITO and found that there was no admission that the amount in question was the assessee's income as such. The Tribunal further found that the assessee had merely offered to be taxed on that amount, as he found himself unable to substantiate his case regarding the genuineness of the credits. The Tribunal on these facts held that the charge of concealment had not been established and the penalty could not be sustained. The order of the Tribunal is marked as annex. B to the statement of the case.
6. It is well settled that, under the provisions of s. 271(1)(c) of the I.T Act, 1961, read with the Explanation thereto, as soon as it is found that there was a difference of more than 20% between the income returned and the income assessed, cl. (c) comes into operation by the rule of presumption engrafted in the Explanation and it is for the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. If he succeeds in discharging that onus, no penalty can be imposed under s. 271(1)(c) of the Act. When a case is covered by the Explanation, then, on the failure of the assessee to discharge the onus of proving absence of certain ingredients the rule of presumption not only covers the matter of conscious concealment or furnishing of incorrect particulars on the part of the assessee, but on a plain and grammatical meaning of the provision it also ropes in the presumption of the assessed income being that of the assessee, it is difficult to bifurcate the rule of presumption into two and to say that it only affects the first part and not the second. If the assessee while supplying the particulars of his income gives inaccurate particulars as a result of his fraud or gross or wilful neglect then and then only he can be subjected to the imposition of penalty under the second part of cl. (c). Unless such ingredients are found on the finding of a mere difference in the particulars of income and the figure of income assessed, it cannot be said that the assessee furnished inaccurate particulars of such income. When it will amount to furnishing of inaccurate particulars with an element of fraud or gross or wilful neglect on the part of the assessee will depend on the facts and circumstances of each case. Mere negligence in furnishing the particulars which are found to be inaccurate is not enough. The neglect must be either wilful or at least gross. The expression “wilful neglect” again imports neglect of a kind where the neglect is mixed with a conscious, wilful or deliberate act of the assessee. The standard of proof applicable to prove a positive fact, and the one which is required to prove a negative fact cannot be the same. A high standard is always applied for the proof of a positive fact while the standard of preponderant probabilities is sufficient to prove a negative fact. The assessee, within the meaning of the Explanation, is required to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. If the assessee succeed in discharging the initial onus on him, then the onus shifts back to the Department to prove the positive fact that the failure to return the correct income on the part of the assessee was as a result of his fraud or gross or wilful neglect.
7. The aforesaid view in law has been taken in many cases. Reference may be made to a few only, as for example, the cases of CIT v. Patna Timber Works, [1977] 106 ITR 452 (Pat) and the case of Commissioner Of Income-Tax, Bombay City I v. Tata Services Ltd., [1980] 122 ITR 594 (Bom).
8. Keeping the well established law as laid down in the aforesaid cases in the instant case, in my opinion, the assessee has been able to discharge his onus to the extent that the addition was not due to any fraud or gross or wilful neglect on his part. The assessee has given a plausible explanation before the ITO. Once the assessee has given an explanation which, in my opinion, is plausible, the onus on the assessee is discharged and in the instant case it was for the Department to bring some more cogent material on the record to show that the amount in question constituted the concealed income of the assessee. In my opinion, the onus having shifted back to the Department, the Department has not been able to discharge its onus. For the reasons stated above, I would answer the question under reference in the affirmative, in favour of the assessee and against the Revenue, and hold that, on the facts and in the circumstances of this case, the Tribunal was correct in setting aside the penalty imposed under s. 271(1)(c) of the Act read with the Explanation thereto. But, in the circumstances, there will be no order as to costs.
S.K Jha, J.:— I agree with all that has been said by my learned brother. But in deference to the vehemence with which learned standing counsel for the Revenue has argued the case, I want to make a few observations of my own.
9. The only grievance raised by the learned standing counsel was that the Tribunal had applied the principle laid down by the Supreme Court in the case of Commissioner Of Income Tax, West Bengal v. Anwar Ali , [1970] 76 ITR 696. He contended that after the insertion of the Explanation to s. 271(1)(c) of the Act, Anwar Ali's case no longer holds good. This approach, in my view, is erroneous and not tenable in law. As has already been pointed out by my learned brother, if the initial onus put upon the assessee by the Explanation is discharged by him by giving a plausible explanation which demolishes the conduct of the assessee, conscious, deliberate or wilful, then the onus shifts back to the Department and the principle as laid down in Anwar Ali's case shall still hold the field. On the insertion of the Explanation all that was done was to modify the effect of the Supreme Court judgment in Anwar All's case only to this extent that by legal fiction the presumption against the assessee arises by virtue of the provision of the Explanation in certain contingencies. The instant case is not one of those cases in which the Tribunal was oblivious of the Explanation. As a matter of fact, it was very much alive to the legal position and the effect of the Explanation appended to s. 271(1)(c) of the Act. In para. 8 of its judgment it has clearly noticed the change in the law and has observed that the initial onus lay on the assessee by virtue of the Explanation. It is only thereafter that the Tribunal has proceeded to go into the facts and materials on the records to find out that the assessee has been able to discharge the initial onus. Having held that such initial onus had already been discharged by the assessee, the principle in Anwar All's case, [1970] 76 ITR 696 (SC), came into full play. There is, thus, no force in the submission of the learned standing counsel for the Revenue.