1. The common contention in all these departmental appeals is that the AAC had erred in canceling the various penalties imposed by the ITO under Section 271(1)(c) of the Income-tax Act, 1961 ('the Act') on the assessee.
2. Shri Madanlal, who is now represented by his wife Smt. Darshan Kaur in the present appellate proceedings, died on 16-4-1973. Within his lifetime, he was carrying on business in retail in purchase and sale of cloth. He was not assessed to tax. After his death, estate duty proceedings were initiated against his widow Smt. Darshan Kaur, the present assessee before us. The Assistant Controller of Estate Duty found that the deceased had fixed and other deposits to the extent of about Rs. 78,000. All these deposits were included in the estate of the deceased for the purpose of estate duty. The Assistant Controller also estimated the investment in this business at Rs. 40,000. It may be stated here that the deceased had not maintained any books of account for his cloth business. While making the assessment, the Assistant Controller also observed that the deceased must be having annual income of about Rs. 20,000. It was on this basis that he had estimated the investment in the business, at Rs. 40,000.
3. After the completion of the estate duty proceedings, Smt. Darshan Kaur, finding that the income of her husband during his lifetime was taxable, filed returns for all the above assessment years sometime in March 1976. To regularise these returns, proceedings under Section 147(a) of the Act were also initiated against her as the legal representative of Shri Madanlal. Returns were also filed in response to notices issued under Section 148 of the Act. Smt. Darshan Kaur declared incomes on estimate at Rs. 8,000 each in the returns for the assessment years 1967-68 to 1971-72 and Rs. 9,000 in the returns for the assessment years 1972-73 and 1973-74. The ITO made the assessments on these returns. Following the finding given by the Assistant Controller in the estate duty assessment, he estimated the income of each year at Rs. 20,000 as having arisen to the deceased Madanlal from cloth business. These estimates were upheld by the AAC. However, the Tribunal reduced the income for the first five years to Rs. 14,000 each and for the last two years to Rs. 14,500 each.
4. The ITO also initiated penalty proceedings under Section 271(1)(c).
It was submitted by Smt. Darshan Kaur, in reply to the show cause notices issued by the ITO, that she was ignorant about the income earned by her husband during his lifetime as he had not maintained any books of account for his cloth business. It was further stated by her that the assessments had been made on an income of Rs. 20,000 in each of the years under consideration only on an estimate which did not suggest any concealment. The ITO, rejecting these contentions, levied penalties under the Explanation to Section 271(1)(c) at Rs. 15,000 each for the assessment years 1967-68 to 1971-72 and Rs. 14,000 each for the assessment years 1972-73 and 1973-74. In particular, he referred to the deposits found and taxed in the estate duty assessment, He also observed that late Madanlal was having income only from cloth business and unless he earned good income, it was not possible for him to make the above deposits.
5. The assessee appealed to the AAC. The AAC was of the view that proper enquiries had not been made in the case and that the assessments had been made on insufficient material purely on estimate. He finally cancelled all the penalties with the following observations : 10. I shall now proceed to examine as to whether the penalty is impos-able on facts in the light of the provisions contained in Section 271(1)(c) and Explanation thereto. A careful consideration of the facts/ material on record would lead to unmistakeable conclusion that there is no positive or independent evidence on record on the basis of which it could be established that the appellant had incurred the penalty either under the main section or under the Explanation. There is nothing on record to show that the difference between the assessed and returned income was due to any fraud or wilful or gross negligence on the part of the appellant.
Neither in the assessment orders, nor in the penalty orders, there is any conclusive finding based on any cogent or positive material that the appellant had consciously and deliberately concealed the particulars of his income or furnished inaccurate particulars thereof. There can be genuine difference of opinion between different authorities and as such the charge of concealment cannot be proved on the basis of the higher income than disclosed in the return being confirmed at the different appellant levels.
6. The department is now in appeal before us. The learned departmental representative submitted before us that the fact that the deceased Madanlal was found having deposits in banks and other institutions amounting to about Rs. 78,000 clearly went to show that he was having a good income from the cloth business. He further contended that since the declared incomes were of Rs. 8,000 and Rs. 9,000 only in different years, it had to be accepted that they were not the correct incomes. He further submitted that the Tribunal had estimated the above incomes at Rs. 14,000 in the assessment years 1967-68 to 1971-72 each and at Rs. 14,500 in the assessment years 1972-73 and 1973-74 each. According to him, since the declared income was less than 80 per cent of the assessed income of each year, the Explanation to Section 271(1)(c) was attracted. He argued that the AAC had wrongly placed the burden of proving that the returned income did not suffer from any fraud or gross or wilful neglect on the ITO which, according to him, was on the assessee in terms of the above Explanation. For the arguments he made before us, he relied on the following authorities of Allahabad High Court : Addl. CIT v. Swatantra Confectionery Works  104 ITR 291, CIT v. Gyan Prakash  116 ITR 513 and CIT v.'Swamp Cold Storage & General Mills  136 ITR 435.
The learned departmental representative also referred to another decision of Allahabad High Court in CIT v. Mohinder Singh  139 ITR 160. He distinguished the case of Supreme Court in Anantharam Veerasingaiah & Co. v. CIT  3 Taxman 56 by submitting that it related to Section 271(1)(c) and not its Explanation.
7. We have carefully considered the submissions placed by the learned departmental representative. There is no dispute that the onus is on the assessee to prove that the omission to return the correct income was not due to any fraud or gross or wilful neglect on his part. That is the principle laid down by the Allahabad High Court in the cases of Swatantra Confectionery Works (supra), Gyan Prakash (supra) and Swamp Cold Storage & General Mills (supra). Similarly, the case of the Supreme Court in Anantharam Veerasingaiah & Co.'s case (supra), is also distinguishable as it does not deal with the Explanation to Section 271(1)(c) as rightly pointed out by the learned departmental representative. In the case of Mohinder Singh (supra), the Court held that the function of a fiction, created by the Explanation, is to convert a case where the assessed income is more than 80 per cent of the returned income into a case which is covered by Section 271(1)(c) (sic) unless the assessee proves that he was not guilty of any fraud or gross or wilful neglect in filing the return of income. However, the Explanation exhausts itself once this purpose is achieved and does not create any further fiction to the effect that the assessed income has to be taken as the correct income for the purpose of imposition of penalty under Section 271(1)(c)(iii). For purposes of fixing the quantum of penalty, the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has to be found by the authority concerned. In doing so, it may or may not accept the amount assessed as the concealed income of the assessee in the quantum matter. The Court also held that any other interpretation would make the proceedings for levy of penalty completely subservient to the assessment proceedings which does not appear to be the scheme of the Act. This principle, in our opinion, squarely applies to the present case. Although the Explanation to Section 271(1)(c) is attracted to the case, yet we have to find out what is the quantum of concealment. Frankly, we are unable to find any.
In this respect, we will like to refer to the decision of the Allahabad High Court itself in the case of Addl. CIT v. Chatur Singh Taragi  111 ITR 849. In this case, the Tribunal had found that the additions made by the ITO to the assessable income were all by estimate based upon the fact that the assessee's account books were not properly maintained and were not open to verification. There was no particular item of income which the assessee could be said to have omitted to include in its return. The Tribunal found that in view of some shortcomings in the account, some additions were called for. The Tribunal held that the charge of concealment could not be said to have been established. The Tribunal further found that having regard to the facts and circumstances of the case, the difference between the assessed and the returned income was not due to gross or wilful neglect on the part of the assessee. The High Court held that there was ample material for the finding of the Tribunal that the assessee was not guilty of gross or wilful oversight. This case squarely covers the case in appeal before us also. In the case before us also, incomes had been estimated from cloth business without pointing out any omission on the part of the assessee or her late husband Madanlal. We, therefore, hold that they cannot be held guilty of any fraud or gross or wilful neglect in not returning the income correctly. We may observe that the above case of Chatur Singh Taragi (supra) was again approved by the Allahabad High Court in the case of Addl. CIT v. Lakshmi Industries & Cold Storage Co. (P.) Ltd.  14 Taxman 144. The order of the AAC cancelling the penalty in all the years, is, therefore, correct though it may not have been worded in the manner the department would have liked it.