1. The Income-tax Appellate Tribunal, Delhi Bench 'B', New Delhi, hereafter 'the Tribunal', has referred the following two questions for the opinion of this court :
'1. Whether, on the facts and circumstances of the case, the assessee could be said to have discharged its onus under the Explanation to. Section 271(1)(c) of the Income-tax Act, 1961 ?
2. Whether the Tribunal was justified and had material in deleting the penalty levied by the Inspecting Assistant Commissioner of Income-tax under Section 271(1)(c) read with the Explanation thereto ?'
2. The reference relates to the assessment year 1966-67. The assessee ran a cold storage and ice factory at Moradabad. For the assessment year 1966-67 it filed its return on December 26, 1970, declaring a loss of Rs. 51,942. It was mentioned in the return that it was a duplicate return. According to the ITO there was no such previous return on record and it was only after the service of a notice under Section 142 on September 1, 1970, when the assessee was called upon to produce its account books on September 15, 1970, that the appellant filed the return on December 26, 1970. Even after the filing of the return several notices were issued to the assessee but it did not appear before the ITO. Consequently, the ITO made an ex parte assessment on a totalincome of Rs. 85,000. Ultimately, that income was reduced by the Tribunal to Rs. 6,700, Since the income returned fell short of eighty per cent. of the income assessed, the ITO initiated penalty proceedings under Section 271(1)(c) read with the Explanation thereto of the Act. As the minimum penalty imposable exceeded Rs. 1,000, the case was referred to the IAC. The assessee was served with a showr cause notice. In reply thereto it submitted that it was not guilty of any fraud, gross or wilful neglect and had filed its return on the basis of the regular books of account maintained by it and, secondly, that the difference between the income returned and the income assessed was as a result of an estimate of the income and no penalty could be levied in respect of such estimated income.
3. The IAC did not accept these contentions and held that the assessee had failed to discharge the onus which lay upon it under the Explanation to Section 271(1)(c) and, hence, it was guilty of concealing its income or furnishing inaccurate income in respect thereof. The IAC hence levied a penalty in the sum of Rs. 60,000 which was almost equal to the minimum penalty leviable.
4. Aggrieved, the assessee took up the matter in appeal before the Appellate Tribunal. The Tribunal agreed that the conduct of the assessee hadnot been above board, in withholding the account books from scrutiny by the I.T. authorities. However, for that default, action could be taken under Section 271(1)(b) of the Act. As for action under Section 271(1)(c) no specific finding had been given of concealment nor any adverse comment had been made by the I.T. authorities at the assessment stage and taking into consideration the fact that the additions had been made in the trading account merely on the basis of an estimate and there was scope for error in good faith, penalty could not be levied. The Tribunal took note of the decisions of this court in Addl. CIT v. Swatantra Confectionery Works : 104ITR291(All) and CIT v. Kedar Nath Ram Nath : 106ITR172(All) , but taking into account the totality of the circumstances of the case, it felt inclined to delete the penalty. The Tribunal also noted that under the Explanation to Section 271(1)(c) the onus is on the assessee but the quantum of proof to discharge the onus is as in a civil case and it is to be decided by the rule of preponderance of probability. Taking the facts and circumstances of the case cumulatively, the Tribunal felt itself unable to affirm the penalty. In the result the penalty was deleted. Now, at the instance of the revenue, the questions mentioned above have been referred to this court.
5. Before referring to the submissions made before us we may read therelevant provision. It is now settled after the decision of this court inCIT v. Data Ram Satpal : 99ITR507(All) , that the law as in force onthe date of default would be applicable to penalty proceedings. Since thisis a case of concealment and of furnishing inaccurate particulars, the defaultoccurred when the return was filed on December 26, 1970. At that time Section 271(1)(c), in so far as it is relevant for the'present purpose, read asunder :
'271. (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 furnished inaccurate particulars of such income,
he may direct that such person shall pay by way of penalty,--...
(iii) in the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished.
Explanation.--Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under Section 143 or Section 144 or Section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall,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, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of Clause (c) of this sub-section.'
6. This Explanation was inserted by the Finance Act, 1964, with effect from 1st April, 1964. It enacted that where the total income returned was less than eighty per cent. of the total income assessed (reduced by the revenue or capital expenditure incurred bona fide but disallowed as deduction) the assessee will, unless he proved that the failure to return the correct income did not arise from any fraud, or any gross or wilful neglect on his part, be deemed to have been guilty of concealment or of furnishing inaccurate returns. The nature of proof is certainly as in a civil suit and for the degree of proof necessary to dislodge this presumption, preponderance of probabilities of a case ought to be examined. Even if the difference between the income returned and that assessed has been due to an estimate, the applicability of the Explanation will not be affected (see the decision in Swatantra Confectionery Works : 104ITR291(All) and Kedar Nath Ram Nath : 106ITR172(All) ). The Appellate Tribunal did note these decisions but tried to get over them by taking into consideration the fact that no specific instance of concealment had been detected during the assessment proceedings nor had any adverse comments been made against the assessee and further that the estimate of income at Rs. 85,000 made by the ITO was reduced to Rs. 6,700 by the Appellate Tribunal, there was thus a scope open for error in good faith and it is difficult to categorically hold that there was a conscious concealment of income. We do not agree with the reasoning given by the Tribunal. The assessee had given a written explanation before the IAC. That explanation was that the return had been filed on the basis of the account books maintained by it and that the ITO had not pointed out any concealment and had determined the income on the basis of an estimate only and no penalty could be levied in respect of such an estimate. The assessee did not produce the account books during the, assessment proceedings and thus could not justify its assertion that the return of income was on the basis of the regular accounts. The Tribunal did not refer to this aspect of the case at all and merely for the reason that no specific concealment had been pointed out and that a bona fide mistake is possible in the estimate of income, held that there was no conscious concealment of income. The import of 'consciousness' was absolutely beside the point. The provision does not require that there should be a conscious concealment of income. The word 'deliberately' in Clause (c) of Sub-section (1) was deleted by the Finance Act, 1964. The effect of that amendment is that even if the furnishing of inaccurate particulars is not deliberate but is the result of gross orwilful neglect, a penalty may still be attracted. There is no onus on the department to show that there was gross or wilful neglect on the part of the assessee in the furnishing of inaccurate particulars. The onus is on the assessee to prove that the omission to return the correct income was not due to any fraud, gross or wilful neglect on his pArticle. It will be seen, therefore, that the assessee failed to discharge the onus placed under the Explanation to Section 271(lXc) of the Act and there was no material before the Tribunal which could justify the deletion of the penalty.
7. It was, however, contended before us by Sri B. C. Dey, learned counsel for the assessee, that though the assessee was in default, penalty could not be imposed on him because under Clause (in), which has been reproduced above, the amount of penalty which can be levied shall be 'in addition to any tax payable by him'. In the present case the income as finally determined after the Tribunal's order was below the minimum taxable limit. In other words, there was no tax payable by the assessee and, therefore, no penalty could be levied on the assessee. We are afraid we cannot go into this question because it is beyond the scope of the two questions referred to this court. However, it shall be open to the assessee to urge this question before the Appellate Tribunal when the case goes back to it for passing an order in conformity with our answers to the questions referred to this court.
8. In the result we answer both the questions in the negative, in favour of the department and against the assessee. However, in the circumstances, we direct the parties to bear their own costs.