R.L Gupta, J.:— This application by the Additional Commissioner of Income-tax, Rajasthan, Jaipur, has been made under s. 256(2) of the I.T Act, 1961 (hereinafter referred to as “the Act”), praying that the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, may be directed to state the case and refer the following question to this court:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty under section 271(I)(c) of the Act is not leviable in this case?”

2. The relevant facts and circumstances in which the present application has been filed may be stated in brief as follows:

The assessee carries on the business of sale of curios and presentation articles of brass, ivory and sandalwood. The assessee declared the income of Rs. 38,370 for the assessment year 1967-68. The ITO, ‘A’ Ward, Jaipur, found that the books of account maintained by the assessee were unreliable inasmuch as the stock register was not maintained by the assessee and it was difficult to deduce the correct income from the books. He, therefore, applied s. 145 of the Act and by estimating a gross profit rate at 12.5% added Rs. 18,525 on this score. He also disallowed the expenditure of Rs. 10,199 under the head “Bank commission and interest”, which was claimed by the assessee, and this amount was also added. He thus assessed the assessee at Rs. 68,858. No appeal against the above assessment was filed by the assessee and as such the assessment order became final. As the declared income of Rs. 38,378 fell short of 80% of the assessed income at Rs. 68,858 penalty proceedings under s. 271(1)(c) read with s. 274(2) of the Act for concealment of the income were initiated. The IAC of Income-tax, Jaipur, imposed a penalty of Rs. 9,500 on the assessee by his order dated September 17, 1970. The assessee went in appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, and the Tribunal by its order dated April 21, 1972, allowed the appeal and held that the order relating to levy of penalty could not be sustained. Aggrieved by the aforesaid order of the Tribunal, the Additional CIT, Rajasthan, Jaipur, submitted an application before the Tribunal under s. 256(1) of the Act requesting to draw a statement of the case and refer the question, which has been referred to above, arising out of its order to this court. As the Tribunal rejected the reference application and refused to state the case and make the reference to this court, this application under s. 256(2) of the Act has been made.

3. Mr. S.K Mal Lodha, appearing for the revenue, submitted that the assessee failed to return the true income and as such there was concealment of income under s. 271(1)(c) of the Act. As the total income returned by the assessee was less than 80% of the total income assessed by the ITO, the onus was on 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. The assessee failed to satisfy the authorities concerned in this respect and, therefore, a statutory presumption was created in favour of the revenue that the assessee has concealed the income and it is for the assessee to rebut this statutory presumption by proving that his failure to return the correct income did not arise from any fraud, gross or wilful neglect on his part. According to Mr. Lodha, the Tribunal has observed in its order dated April 21, 1972, that the addition was entirely on estimate basis by applying enhanced gross profit rate but this approach is wholly wrong in law. Therefore, the order of the Tribunal holding that it was unable to sustain the penalty without recording a finding based on material in favour of the assessee as required by the Explanation to s. 271(1)(c) of the Act, is patently and mainfestly erroneous and in any case raises a question of law which the Tribunal ought to have referred to this court. In the circumstances of the present case the view taken by the Tribunal that possibility of error in good faith on the part of the assessee cannot be ruled out and no manipulation in the account books was brought out which could be a pointer to mala fide action on the part of the assessee, is erroneous in law as the asseesee did not return the correct income and there was fraud or gross or wilful neglect on his part and this raises a question of law which the Tribunal ought to have referred to this court. He placed reliance on CIT v. S.P Jain, [1973] 87 ITR 370 (SC), Parimisetti Seetharamamma v. CIT, [1965] 57 ITR 532 (SC), CIT v. K.C Behera, [1976] 103 ITR 479 (Orissa) and CIT v. K.C Behera, [1976] 105 ITR 193 (Orissa) in support of his contention. Mr. G.M Lodha, learned counsel appearing on behalf of the assessee, on the other hand, has contended that in view of the Explanation to s. 271(1)(c) of the Act no doubt a statutory presumption is raised in favour of the revenue but this presumption is a rebuttable one and has to be rebutted by the assessee. The assessee has kept regular books of account and vouchers, etc., except the stock register as has also been noted by the ITO and an amount of Rs. 18,525 was added on the basis of estimate of gross profit rate and that an amount of Rs. 10,199 was disallowed by the ITO under the head “Expenditure” and was thus added to the income. These circumstances, in the opinion of the learned counsel, do not in any way lead to an inference that there was any fraud or gross or wilful neglect on the part of the assessee, rather they themselves go to rebut the presumption. It depends upon the facts and circumstances of each case as to what amount of evidence, direct or circumstantial, can be sufficient to rebut this statutory presumption. This, according to Mr. Gumanmal Lodha, is purely a question of fact and looking to the facts and circumstances of the case the learned Appellate Tribunal rightly held that this presumption stands rebutted. While disposing of the matter the Tribunal was fully aware of the amended provisions of s. 271(1)(c) of the Act. In support of this argument reliance has been placed on Addl. CIT v. Gem Palace, [1975] 98 ITR 640 (Raj), Addl. CIT v. Noor Mohd, & Co., [1974] 97 ITR 705 (Raj) and Basant Lal Om Parkash v. CIT, [1972] 83 ITR 356 (P&H).

4. It is true, as laid down in CIT v. S.P Jain, [1973] 87 ITR 370 (SC), that the High Court and the Supreme Court have always the jurisdiction to interfere with the findings of the Appellate Tribunal if it appears that either the Tribunal has misunderstood the statutory language because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory to it, or it has acted on material partly relevant and partly irrelevant or where the Tribunal draws upon its own imagination and imports facts and circumstances not apparent from the record or bases its conclusions on mere conjectures or surmises or where no person judicially acting and properly instructed as to the relevant law could have come to the determination reached. These are no doubt the guidelines in considering such matters. It may, however, be said that in the light of these guidelines each case has to be judged on it own merits.

5. There can also be no dispute that the Explanation to s. 271(1)(c) of the Act, as added from April 1, 1964, now places on the assessee the burden of proving that the failure to return the correct income did not arise from any fraud or wilful neglect of the assessee, where the total income returned is less than 80% of the total income assessed.

6. It has been held in CIT v. K.C Behera, [1976] 103 ITR 479 (Orissa) that the Tribunal should have determined the validity of the penalty with reference to law as it was subsequent to the amendment. The case of Parimisetti Seetharamamma, [1965] 57 ITR 532 (SC) relates to gifts which are not taxable as income. Findings were arrived at by the Tribunal by placing the burden wrongly on the assessee. It was held that the conclusion recorded by the Tribunal cannot be regarded as binding upon the High Court. This authority is distinguishable and does not, however, help the petitioner in any way. The question which emerges in the present case for our consideration is whether the present case raises a question of law? In order to comprehend the viewpoint of the Tribunal it would be proper to reproduce the operative portion of the Tribunal's finding which runs as under:

“We have given our due consideration to all the circumstances. As far as the disallowance of Rs. 10,199 is concerned, the facts relating to the same were disclosed by the assessee in the account books and in the return. The assessee's contention is that it, in good faith, believed that these expenses were allowable. The Income-tax Officer, however, found that they did not relate to the present year, and therefore, disallowed them. There was no finding that any mala fide was involved in the assessee's conduct or that the mistaken belief of the assessee could not at all be attributed to difference of opinion. This amount, therefore, could not justify the levy of penalty. Adverting next to the other addition of Rs. 18,525 in the trading result, we find that the addition has not been of that magnitude vis-a-vis the declared income which should show that the assessee consciously understated its income. The addition was entirely on estimate basis by applying enhanced gross profit rate. The possibility of error in good faith on the part of the assessee cannot be ruled out. No manipulation in the account was either brought out which could be a pointer to mala fides on its part.”

7. The order of the Tribunal is of April 21, 1972. The disparity between the income returned and the income assessed was less than 80% (sic) and it related to the assessment year which was governed by the Explanation. We have no doubt in our mind that when the Tribunal set aside the imposition of penalty, it was aware of the existence of the Explanation. No doubt the Explanation now places on the assessee the burden of proving that the failure to return the correct income did not arise from any fraud or wilful neglect on the part of the assessee, when the total income returned is less than 80% of the total income assessed. This presumption in favour of the revenue is a rebuttable presumption and the burden to rebut no doubt lies on the assessee but it depends on the facts and circumstances of each case whether that burden has been discharged or not. From the perusal of the impugned order of the Tribunal, it is clear that it did not place the burden on the revenue to prove that there was fraud or wilful neglect on the part of the assessee but it came to the conclusion, after giving its due consideration to the facts and circumstances of the case, that the burden placed on the assessee stands discharged or rebutted by the material that has come on the record. What quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigid rule. The facts and circumstances of the present case are on all fours identical with the facts and circumstances of the case of Addl. CIT v. Gem Palace, [1975] 98 ITR 640 (Raj). In that case, the assessee filed a return showing its income as Rs. 32,940 for the assessment year 1967-68. The ITO, “A” Ward, Jaipur, assessed the total income of the assessee for the year in question at Rs. 74,613 by including an estimated amount by way of gross profit and by disallowance of some of the expenses claimed by the assessee. A penalty was imposed by the IAC, Jaipur Range I, to the tune of Rs. 13,000. This penalty was, however, cancelled by the Appellate Tribunal. An application under s. 256(2) of the Apt was made before this court and it was held by this court that it was purely a finding of fact and no question of law did arise and the court declined to direct the Tribunal to refer the aforesaid question.

8. In the present case also, the Tribunal considered the facts and circumstances of the case in the light of the presumption and in the ultimate analysis it appeared to the Tribunal that the facts and circumstances appearing on the record of the case were adequate to rebut the presumption of fraud, wilful or gross neglect. The Tribunal, however, felt satisfied that the presumption raised by the Explanation stood rebutted because the addition of Rs. 18,525 made to the income returned was merely estimated and has not been of that magnitude Vis-a-vis the declared income which should show that the assessee consciously understated its income. It did not find that there was any manipulation in the accounts which could be a pointer to mala fides on the part of the assessee. As far as the disallowance of Rs. 10,199 is concerned the Tribunal said that the facts relating to the same were disclosed by the assessee in the return. The assessee believed in good faith that these expenses were allowable. The ITO, however, found that they did not relate to the present year and, therefore, he disallowed them. The Tribunal, therefore, was not prepared to infer fraud, wilful or gross neglect on the part of the assessee. The evidence which satisfied the Tribunal was the facts and circumstances of the case. As pointed out above what quantum of evidence would rebut a legal presumption in a given set of facts does not admit of any rigid rule. The evidence may be direct or circumstantial or both and a mere statement of the assessee may be enough in some cases. It does not raise a question of law.

9. In our considered opinion no question of law arises in the present case because whether the presumption raised by the Explanation to s. 271(1)(c) has been rebutted or not is essentially a question of fact and, therefore, we decline to direct the Tribunal to refer any question to us. The application is rejected. Parties are left to bear their own costs.