Satish Chandra, C.J.
1. For the assessment year 1967-68, the Tribunal has referred for our opinion the following question of law :
'Whether, on the facts and in the circumstances of the case, there was any material to warrant the conclusion that the assessee had established that he was not guilty of fraud or wilful or gross negligence in furnishing the particulars of his income within the meaning of the Explanation to Section 271(1)(c) of the Income-tax Act, 1961 ?'
2. The assessee owns a truck which is run in partnership with some other persons. He had 50 per cent, shares in two partnership firms. He filed a return on 29th July, 1968, disclosing an income of Rs. 4,000. The ITO, having come to know that the assessee had made investments to the tune of Rs. 1-5,000 in purchasing a truck, called upon the assessee to explain its source. The explanation offered by the assessee was not found believable and a sum of Rs. 13,000 was added as income from undisclosed sources.
3. The ITO initiated penalty proceedings. The IAC found that the assessee did not maintain accounts of his income and outgoings. He did not produce any documentary evidence to sustain his explanation that he had taken Rs. 2,000 as loan from his father-in-law or that he had available with him savings to the extent of Rs. 13,000 from past income. He also relied on the circumstance that even in the preceding year 1966-67, a sum of Rs. 10,792 was treated as the assessee's income from undisclosed sources to cover the investments that the assessee had made in that year. He ultimately concluded that the assessee was guilty of fraud, gross or wilful negligence within the meaning of the Explanation to Section 271(1)(c) of the Act. He found that the assessee was guilty of concealing the particulars of his income and was liable to penalty. He imposed a sum of Rs. 14,000 as penalty.
4. The assessee appealed to the Tribunal. The Tribunal, while allowing the appeal, held:
'The explanation offered by the assessee cannot be said to be entirely untenable, nor can it be said to be so unreasonable as to warrant a conclusion that the assessee was guilty of fraud, gross or wilful neglect.....whenthe explanation offered by the assessee was found unacceptable it does not conclusively establish that the assessee had committed a fraud in filing thereturn of income or was negligent wilfully or grossly. The evidence on record falls short for warranting such a conclusion.'
5. A little further the Tribunal observed :
'Before a penalty can be imposed, it is necessary to establish that the assessee deliberately acted in definance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of his obligation. The facts on record do not point to this direction.'
6. The Tribunal further held that the amendment brought about to sub- Clause (iii) of Clause (c) of Sub-section (1) of Section 271 was effective from 1st April, 1968, and was not retrospective. The IAC had no jurisdiction to impose penalty under the amended Section. This has reference to the quantum of imposable penalty.
7. The question of law referred to us, however, does not take in the quantum of penalty imposed on the assessee.
8. The IAC had recorded several concrete findings. We do not find any discussion of those findings in the judgment of the Tribunal. The Tribunal has made general remarks that the explanation was not so unreasonable as to warrant a conclusion that the assessee was guilty of fraud or gross or wilful neglect. This conclusion has not been reached after a discussion of the explanation on its merits or of the individual findings of the AAC. In fact, none of his findings has been upset as such. In the next place it is noticeable that the Tribunal was influenced to believe that it is necessary that the assessee should 'deliberately' act in defiance of law before he can be penalised.
9. Taking up the last feature first, the position is that Clause (c) to Section 271(1) used the word 'deliberate' in connection with the phrase 'furnish inaccurate particulars of such income'. The word 'deliberate' was omitted by the Finance Act of 1964 which came into force on 1st April, 1964. Clause (c) as it stood after the amendment provided that the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. It is no longer necessary to establish that those actions were deliberate on the part of the assessee. The view that it is necessary to establish that the assessee deliberately acted in defiance of law, etc., is not,tenable after 1st April, 1964.
10. The Explanation which was added with effect from 1st April, 1964, completely reversed the burden of proof in cases where the returned income was less than 80 per cent. of the assessed income. In this class of cases the Explanation provided that the assessee shall be deemed to have concealed the particulars of income or furnished inaccurate particulars of such income for the purpose of Clause (c) unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In other words, the presumption is that theassessee has concealed or furnished inaccurate particulars. This presumption is rebuttable only if the assessee proves affirmatively that the failure to return the correct income was not due to fraud or any gross or wilful neglect on his part. Thus, the burden is squarely on the assessee, not in relation to concealment either of income or of particulars thereof, but in a very distinct matter. The burden of proof on the assessee is that the failure to return the correct income was not due to either of the three things, fraud, or gross or wilful neglect. On this aspect the burden cannot be shifted on to the department by merely saying that the explanation offered by the assessee that the amount in question was not his income though not believable or acceptable, yet the mere disbelief will not lead to the conclusion that he was guilty of fraud or gross or wilful neglect. By saying so, in substance, the burden is shifted without any material.
11. The correctness or falsity of the explanation may throw some light on the conduct of the assessee, namely, whether he committed fraud or was guilty of gross or wilful neglect but the fact that the explanation was not believable or acceptable cannot possibly shift the burden. Still the assessee had to lead some evidence or to place some material on record from which the inference may be drawn that the conduct of the assessee in not returning the correct income was not due to fraud or gross or wilful neglect on his part.
12. In the present case the Tribunal did not examine the explanation or even the findings recorded by the IAC. It did not discuss the merits of the matter. Under these circumstances a bald conclusion that the explanation cannot be said to be so unreasonable as to warrant a conclusion that the assessee was guilty due to fraud or gross or wilful neglect is itself untenable.
13. In the end, the Tribunal relied upon the Supreme Court decision in Anwar Ali's case : 76ITR696(SC) . That case was rendered under the Indian I.T. Act, 1922. It had some value prior to the enactment of the Explanation to Clause (c) of Section 271(1). After this, it is hardly of any assistance in either construing the Explanation or in applying it.
14. In view of the position that the Tribunal has not recorded appropriate or adequate findings, it is not possible for us to answer the question referred to us. In CIT v. George Henderson and Co. : 66ITR622(SC) and also in CIT v. Greaves Cotton and Co. Ltd. : 68ITR200(SC) , the Supreme Court instead of calling for a supplementary statement of the case directed the Tribunal to rehear the appeal in similar circumstances. This decision was followed by the Madras High Court in B. Muniappa Gounder v. CIT : 102ITR787(Mad) . We feel that in the interest of justice it will be reasonable to adopt that course in the present case.
15. We, therefore, return the question unanswered with a direction that the Tribunal will rehear the appeal and decide it in accordance with lawkeeping in view of the observations made by us above. As no one has appeared on behalf of the assessee, there will be no order as to costs.