G. P. Singh, J. - This is a reference made by the Income-tax Appellate Tribunal, Jabalpur Bench, Jabalpur, referring for our answer the following questions of law :
'(i) Whether on the facts and in the circumstances of the case, the Tribunal, after assuming that the provisions of the Explanation to s. 271(1)(c) applied to the facts of the assessees case, was right in law in holding that the onus was on the Department to prove with positive evidence that the assessee had concealed particulars of its income or furnished inaccurate particulars thereof ?
'(ii) Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the penalties levied under s. 271(1)(c) for the assessment years 1966-67 and 1967-68 on the basis of such view ?'
2. The assessee is private limited Company. The relevant assessment years are 1966-67 and 1967-68. For the assessment year 1966-67 the assessee had returned a loss of Rs. 14,506/- and for the assessment year 1967-68 a profit of Rs. 770/-. Ultimately, the Appellate Assistant Commissioner assessed the total income at Rs. 70.365/- for the year 1967-68. The Income-tax Officer initiated penalty proceedings and referred the same to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner, after hearing the assessee, imposed Rs. 10,000/- as penalty for the year 1966-67 and Rs. 5,000/-for the year 1967-68. In appeal, the Tribunal set aside the order of the Inspecting Assistant Commissioner. On an application made by the Department, the case was stated referring the questions which we have already set out.
3. The learned counsel for the Department has argued that the Tribunal did not properly appreciate the scope of the Explanation to s. 271(1)(c) which was then in force and that the Tribunal failed to raise the necessary presumption under that provision. The Accountant Member of the Tribunal in paragraph 5 of the order held the Explanation to be inoperative. That view was not shared by the Judicial Member. That view was plainly wrong. It is not necessary to say anything further on that point. The Accountant Member in paragraph 6 of the order proceeded to discuss the facts and circumstances of the case on the basis that the Explanation had an operative effect. It was pointed out that the assessment made was on the basis of estimate and no specific suppression or omission was pointed out in the books of account produced by the assessee. It was also pointed out that there was no cogent evidence of fraud or wilful or gross neglect. The Tribunal further said that the assessment was made on the basis of estimate; the case for levying penalty was not made out.
4. It is obvious that the orer of the Tribunal is not happily worded. But we have to examine the substance of the order. It is true that in a case governed by the explanation, the burden is 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. This burden, however, can be discharged by showing the circumstances and there need not be any positive evidence proving the negative that the assessee was not guilty of any fraud or gross or wilful neglect. The assessee placed the circumstances of the case in the penalty proceedings. The circumstances were that no particular item of income or expenditure was found to be false. There was also no positive evidence that any particular item of income was not entered in the books of account of the assessee. The assessee had disclosed in part II of the return that there was overloading of its buses, but income of overloading was not received by the assessee. There was no positive evidence that the income of overloading was really received by the assessee. One of the circumstances that was there was a raid of the business premises of the assessee and note-books containing certain accounts of the earlier years were recovered which showed that the books of account of the earlier years were not correct. This was not positive evidence to show that the books of account of the years, with which we are concerned, were also false. In these circumstances, it was open to the Tribunal to come to the conclusion that the assessee had been successful in proving that there was no fraud or gross or wilful neglect on his part. As earlier pointed out by us. although the order of the Tribunal is not properly worded, yet this is in substance what the Tribunal meant to say. Similar was the position in the case before the Gujarat High Court in Commissioner of Income-tax, Gujarat v. S. P. Bhatt.
5. Our answers to the questions referred to us are as follows :
Question No. (i) : On a correct reading of the Tribunals order, it cannot be said that the onus of proof was placed on the Department to lead positive evidence that the assessee had concealed particular of his income or furnished inaccurate particulars thereof.
Question No. (ii) : The Tribunal was justified deleting the penalties.
There shall be no order as to costs.