Harbans Singh, C.J:— This is a petition under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act), asking for a direction to be issued to the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal) to refer the following question of law to the High Court for its opinion:
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in deleting the penalty levied under section 273(a) of the Act?”
2. Bipan Lal Kuthiala as karta of the Hindu undivided family has his income from his property, dividends, etc., as well as from his personal timber business. In addition he has shares in four different firms, including a cinema. It is unnecessary to give the details thereof. Bipan Lal Kuthiala (hereinafter referred to as “the assessee”) is a regular assessee and on the basis of the assessment made during the previous year, a notice was issued to him under section 18A(1) of the Indian Income-tax Act, 1922, on 15th May, 1958, directing him to pay a sum of Rs. 65,067 in four equal instalments during the financial year 1958-59 as advance tax. The assessee filed an estimate on 16th September, 1958, indicating that his estimated income was only Rs. 47,369 on which a sum of Rs. 15,206 became payable as tax in accordance with the provisions of the Act. No revised estimate was filed by him during the financial year. The amount of tax estimated by the assessee was duly deposited. For the accounting year 1958-59, i.e, for the assessment year 1959-60, he filed a return in which he indicated that he had suffered a loss of Rs. 21,852 in addition to what he may get as his share of the profits from the firms of which he was a partner. The Income-tax Officer assessed him to tax at Rs. 1,77,648, which amount, in appeal, etc., was reduced to Rs. 1,71,943. In view of the wide gap between the estimated income given by the assessee at Rs. 47,369 and the actual income at which he was assessed, the Income-tax Officer formed the opinion that the assessee had given an estimate which was false and inaccurate to his knowledge or he had reason to believe the same to be incorrect. Consequently, the Income-tax Officer issued a notice under section 273(a) of the Act and, after hearing the assessee, imposed a penalty of Rs. 25,000, which was approximately 33 per cent, of the maximum penalty imposable. Ultimately, in appeal before the Appellate Assistant Commissioner, relief was granted to the assessee by reducing the penalty to Rs. 15,000. The plea taken up by the assessee, that section 273(a) of the Act did not apply, because the assessment related to the year 1959-60, i.e, prior to the enforcement of the Act of 1961, was rejected by the Appellate Assistant Commissioner but was allowed by the Tribunal. However, on a reference to this court it was held that section 273(a) of the Act did apply.
3. When the matter went back, the Tribunal went into the other contentions of the assessee, namely, whether the burden of proving, that the estimate given by the assessee was false to his knowledge, was on the department and, secondly, whether the department had been able to discharge the burden. Both these points were found in favour of the assessee. The application given to the Tribunal for referring the question of law mentioned above for decision by the High Court having been declined, the present petition has been filed by the department.
4. The simple question for determination is whether under section 273 of the Act, burden lies on the department to show that the estimate furnished by the assessee under section 18A(1) of the old Act, corresponding section of which is 212 in the new Act, was untrue to his knowledge or he had reason to believe the same to be untrue. Relevant part of section 273 of the Act runs as under:
“If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment, is satisfied that any assessee—
(a) has furnished under section 212 an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue……………
he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty………”
5. Section 271 of the Act is a similar section authorising the imposition of penalty for filing a return in which particulars furnished of his income by the assessee are inaccurate or such particulars are concealed. Relevant part of this section is as follows:
“(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person—…………
(c) has concealed the particulars of his income or deliberately (this word has been omitted by Finance Act, 1964) furnished inaccurate particulars of such income,
he may direct that such person shall pay by way of penalty,—…………”
6. Prior to the decision of the Supreme Court in Commissioner of Income-tax v. Anwar Ali [1970] 76 ITR 696, 699 SC., different views were taken as to on whom lies the burden of proving that the income has been concealed or that incorrect particulars have been given. In Anwar All's case, while making assessment for the year 1947-48, the Income-tax Officer found certain cash deposits aggregating to Rs. 87,000 as having been made by the assessee in the bank during the accounting year on 21st November, 1946. The explanation of the assessee that he had received certain amounts from his relations and he had deposited them in the joint names of himself and his minor sons was not accepted and the taxing authority came to the conclusion that this amount of Rs. 87,000 represented the income from undisclosed sources. The amount was, consequently, added to the income of the assessee and he was taxed accordingly. The assessee was unsuccessful up to the Tribunal. Penalty proceedings were started and penalty of Rs. 66,000 was imposed. The department did not lead any further evidence to show that the return was false, except that a sum of Rs. 87,000 had been added to the income which was not disclosed. The Tribunal took the view that penalty proceedings were of a criminal nature and that the onus lay on the department to show by adequate evidence that the amount of the cash stated to have been concealed by the assessee was of a revenue nature and was assessable as income and that the assessee had concealed it or deliberately furnished false particulars in regard thereto. Then it was observed as follows:
“This onus, in the opinion of the Tribunal, was not discharged by the income-tax authorities by showing merely that the explanation given by the assessee in the assessment proceedings was found to be unacceptable. The Income-tax Officer, according to the Tribunal, must find some material apart from the falsity of the assessee's explanation to support his finding that the receipt from undisclosed sources was income.”
7. The question of law referred to the Calcutta High Court (Commissioner of Income-tax v. Anwar Ali [1967] 65 ITR 95 Cal.) was as under:
“Whether, on the facts and in the circumstances of the case, the income-tax authorities were justified in imposing a penalty on the assessee under section 28(1)(c) of the Income-tax Act?”
8. Their Lordships of the Supreme Court observed that the majority of the High Courts had expressed the view that proceedings under section 28(1)(c) were of a penal nature. The Allahabad High Court had taken the view that penalty was merely an additional income-tax and, therefore, the proceedings were not of a penal nature. At page 700 of the report, the question posed before their Lordships was given as follows:
“The first point which falls for determination is whether the imposition of penalty is in the nature of a penal provision.”
9. After referring to the decision of the Allahabad High Court in Lal Chand Gopal Dass v. Commissioner of Income-tax and an earlier decision of the Supreme Court in C.A Abraham v. Income-tax Officer, it was observed as under:
“It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings (Hindustan Steel Ltd. v. State Of Orissa†. [1972] 83 ITR 26 SC.). In England also it has never been doubted that such proceedings are penal in character (Fattorini (Thomas) (Lancashire) Ltd. v. Inland Revenue Commissioners [1942] AC 643).”
10. Then their Lordships went on to examine the next question that when proceedings under section 28 are penal in character what would be the nature of the burden upon the department for establishing that the assessee is liable to payment of penalty and observed as under:
“………the gist of the offence under section 28(1)(c) (now section 271) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and, therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income.”
11. With regard to the point, whether a finding given in the assessment proceedings that a particular receipt is income after rejecting the explanation given by the assessee as false would, prima facie, be sufficient for establishing, in proceedings under section 28, that the disputed amount was the assessee's income, it was observed as follows5:
“It must be remembered that the proceedings under section 28 are of a penal nature…… It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.”
12. The learned counsel for the revenue, however, contended that though, as held in Anwar Ali's case, the burden of establishing that income has been concealed or that the particulars of the income given in the return were inaccurate to the knowledge of the assessee, is certainly on the department, but that is not so under section 273 of the Act and that there is no decision under that section as to on whom the burden lies. As we have already stated, the provisions of sections 271 and 273 are in pari materia and the ratio of the decision of the Supreme Court for coming to the conclusion that the burden to prove is on the department, is that the imposition of penalty is in the nature of a penal provision. If imposition of penalty under section 271 is of a penal nature, so is the penalty which is imposed under section 273 of the Act. The ratio of the decision of the Supreme Court in Anwar All's case fully applies to the imposition of penalty under section 273.
13. The question sought to be referred, if spilt up, falls into two questions. The first is whether the Tribunal is right in holding that the burden is on the department to show that the estimate was false to the knowledge of the assessee or was believed to be inaccurate by the assessee. The answer to this question would obviously be in the affirmative in view of the decision of the Supreme Court in Anwar Ali's case.
14. The second question is, whether in the present case that burden has been discharged. That is hardly a question of law, particularly in view of the clear statement of the Tribunal on this point. In paragraph 17 of the judgment of the Tribunal, this is what is observed:
“While on the subject, we would like to discuss the facts and to see whether the Income-tax Officer has discharged the burden which lay upon him. In our opinion, it is doubtful whether the Income-tax Officer was even aware that there was any burden upon him. The two paragraphs quoted above would show that he thought his only burden was to put or to draft his order in terms of the words used in the section…………discharging of the burden requires:
(a) collection of materials,
(b) giving the assessee an opportunity of controverting or refuting them, and
(c) placing them on record.
And this has not been done in the present case.”
15. Then in paragraph 18 the Tribunal stated as under:
“Is there any material on the record to show that the Income-tax Officer was aware of what was required of him? He sent a notice to the assessee which was a stereotyped notice……Here……it is a printed notice and the notice does not even show the specific charges which the assessee is supposed to meet. The Income-tax Officer, for instance, did not ask the assessee the basis on which the estimate of Rs. 47,000 was arrived at. If he had asked the assessee at any stage and the assessee had given a reply, then, perhaps, the case would have been different. But the Income-tax Officer did not ask the assessee how the estimate was filed……”
16. We agree with the Tribunal that the second question is hardly a question of law, particularly in view of the findings of fact arrived at by the Tribunal, and, so far as the first point of law is concerned, that is covered by the decision of the Supreme Court. We, therefore, see no force in this petition and dismiss the same with no order as to costs.
17. Petition dismissed.