Satish Chandra, C.J.
1. For the assessment year 1967-68, the assessee returned an income of Rs. 14,394. He was ultimately assessed on an incomeof Rs. 67,687. The additions included unexplained cash credits in the names of three parties, totalling Rs. 10,500. The difference between the returned and the assessed income being more than 20%, the assessing authority initiated penalty proceedings. The Tribunal held that the Explanation to Section 271(1)(c) of the Act was applicable, but it took the view that the explanation offered by the assessee was no doubt not accepted on the quantum side but that was not the end of the matter. It observed that so long as the explanation is not proved to be false, the onus is on the department for the purpose of penalty to establish by independent evidence that the credits were the income of the assessee. The department has not discharged that onus.
2. In Rukmani Bahu v. Addl. CIT : 116ITR468(All) and Addl. CIT v. Ram Prakash : 128ITR559(All) , this court has emphasised that the explanation given by the assessee for showing that the disputed amount was or was not his income is not relevant. When the Explanation to Section 271(1)(c) is applicable, there is a presumption that the disputed amount was the income of the assessee. The assessee is required to prove that he was not guilty of fraud or gross or wilful neglect in submitting the original return. The onus is squarely on the assessee and not on the department to establish the lack of fraud or gross or wilful neglect. It is not for the department to prove the negative. The Tribunal was in error in placing this burden of proof on the department. The question whether the explanation is reasonable or is false in showing that the disputed amount was or was not the income of the assessee is entirely beside the point. In penalty proceedings, the fact which has to be established is entirely different. The assessee has to establish that he was not guilty of fraud or gross or wilful neglect in submitting the return.
3. The questions of law which have been referred to us are as follows :
'1. Whether the construction placed by the Tribunal on the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, was in law justified ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the penalty ?'
4. In the view that this court has taken, both the questions are answered 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.