D.V. Sehgal, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter called 'the Act'), the Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for the opinion of this court:
'Whether, on the facts of the case, the Tribunal has been right in law in holding that since the Income-tax Officer did not invoke the Explanation to Section 271(1)(c) for levying the penalty of Rs. 10,000 and since the Appellate Assistant Commissioner also did not refer to the Explanation, when he deleted the penalty, the Revenue for the first time before the Tribunal, could not take support from the Explanation to seek reversal of the Appellate Assistant Commissioner's order deleting the penalty ?'
2. Shri Rajeshwar Singh (hereinafter referred to as 'the assessee'), an individual, was dealing in iron goods. While examining his books of account for the accounting period relevant to the assessment year 1970-71, the Income-tax Officer noticed a cash credit of Rs. 10,000 in the name of one Gurdial Singh on March 23, 1970. The assessee explained that the loan was taken by him for purchasing a shop worth Rs. 15,000 and that actually the purchase was effected on May 23, 1970. The creditor was produced and was subjected to examination by the Income-tax Officer and he admitted having advanced a friendly loan of Rs. 10,000. A statement of Kirpal Singh, father of the creditor, Gurdial Singh alias Hardial Singh, was recorded in his village by an Inspector of Income-tax at the back of the assessee, Kirpal Singh stated that he had no knowledge of his son having given a sum of Rs. 10,000 to the assessee. Though the assessee made a specific written request dated March 3, 1975, he was not given the necessary opportunity of cross-examining the said Kirpal Singh. During the assessment proceedings, in addition to the above-noted credit of Rs. 10,000, the Income-tax Officer noticed three other items of cash credits totalling Rs. 10,300 and treated all the credits totalling Rs. 20,300 as 'unexplained'. The Appellate Assistant Commissioner, however, deleted the cash credit additions totalling Rs. 10,300, but upheld the addition of Rs. 10,000 referred to above. The matter came up in appeal before the Income-tax Appellate Tribunal in respect of the cash credit of Rs. 10,000. The Tribunal also held that the assessee failed to satisfactorily explain the said credit and dismissed the appeal.
3. The Income-tax Officer while framing the assessment had recorded his satisfaction that the assessee had committed an offence in respect of Section 271(1)(c) of the Act. After the Tribunal confirmed the cash credit addition of Rs. 10,000 as not satisfactorily explained, the Income-tax Officer imposed a penalty of 10,000 by specifically holding that it represented the concealed income of the assessee. The assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax who cancelled the penalty on the ground that from the statement of Kirpal Singh who was not allowed to be cross-examined by the assessee, it could not be inferred that the concealment charge was proved. The matter was taken up in appeal by the Revenue before the Tribunal and a grievance was made that the Appellate Assistant Commissioner was in error in ignoring the Explanation to Section 271(1)(c) of the Act while deleting the penalty. It was also argued that once the Tribunal upheld the addition of Rs. 10,000, the penalty was a natural corollary and was rightly levied by the Income-tax Officer. It was contended that the Tribunal's finding that the credit was not satisfactorily proved was tantamount to the assessee being found guilty of concealment. It was further contended that the Explanation to Section 271(1)(c) of the Act was attracted as the assessed income exceeded 20% of the returned income and the assessee had led no evidence that such assessment did not result from any fraud or gross or wilful neglect on his part. The Tribunal after perusing the assessee's letter dated March 3, 1975, besides a copy of the creditor's account which showed payments back to him on March 31, 1970, and May 22, 1970, and after reproducing the statement of Kirpal Singh, as recorded by the Inspector, came to the conclusion that if the statement of Kirpal Singh helped any one, it helped the assessee and not the Revenue. Though in the statement of the case submitted by the Tribunal, the statement of Kirpal Singh recorded by the Inspector has been reproduced in extenso, it is not necessary to set out the same here.
4. The Tribunal dealt with the contention of the Revenue to the effect that the Explanation to Section 271(1)(c) of the Act was attracted as the assessed income exceeded 20% of the returned income and the assessee had led no evidence that such assessment did not result from any fraud, or gross or wilful neglect on his part and by observing that since the Income-tax Officer did not take any support from the Explanation to the said section for levying the penalty and the Explanation was not pressed into' service before the Appellate Assistant Commissioner, it held that no contention on the basis of the said provision could be entertained before the Tribunal. We think it proper to reproduce a part of the order of the Tribunal which deals with this contention :
'The penalty under Section 271(1)(c) necessarily has to flow from the satisfaction of the Income-tax Officer and, therefore, the type of satisfaction he records becomes the fountain head and the basis for passing an order under Section 271(1)(c). Now, in this case, such satisfaction was that the assessee concealed particulars of his income and it was on the recording of such satisfaction that the penalty was levied. Even before the Appellate Assistant Commissioner, the Income-tax Officer did not raise the question of the applicability of the Explanation which clearly means that he was wanting to process the penalty proceedings initiated by him under the substantive provisions of Section 271(1)(c). Under the Explanation to Section 271(1)(c), a fiction has been created that where there is a difference of over 20% between the returned and the assessed incomes, the assessee shall be deemed to have concealed income or furnished inaccurate particulars of such income. As it is, the section does not further say as to what percentage of penalty shall be leviable where the Explanation is applicable. We also find no prohibition in Section 271(1)(c) that where the Explanation is applicable, the Revenue authorities are precluded from pressing the charge of concealment or furnishing of inaccurate particulars of income. One thing, however, is clear to us that where the Revenue attempts to prove the charge under the main provision, the Explanation cannot be made to play any role unless the charge under the substantive provision is withdrawn or dropped. Otherwise, the discretion of the authorities to levy penalty between 100% to 200% would come in direct conflict with the limitation of fictional concealment in which case such discretion simply must be non-existent. Section 271(1)(c) has two limbs and there is an Explanation attached to it. Under one limb, the assessee can be proceeded against for actual concealment; under the other, on the charge of filing of inaccurate particulars of income; and for invoking either of these limbs, the application of which is alternative as the conjunction used is 'or', satisfaction must get recorded in the course of the assessment. But, if the assessee is to be proceeded against under the Explanation, it has to be made clear so as to enable him to address his argument or put any case he likes. The Explanation, in addition to changing the rule of evidence, also createsa fiction and under such fiction there can be no place for the authorities empowered to levy penalty under Section 271(1)(c) to use any discretion and go beyond the minimum penalty prescribed. Discretion of levying penalty between 100% and 200% would necessarily involve consideration of the assessee's pattern of behaviour and when the authorities levying penalty exceed the minimum on the ground that the circumstances of the case do not justify the minimum imposable one, it means that the elements of discretion are exercised and once that happens, it must be assumed that the Revenue took it upon itself to prove the concealment. Here, we may further observe that where the Revenue frames a charge of actual concealment against a taxpayer, then, ' in addition to penalty, the taxpayer may be prosecuted under Section 276 which course may not be open if the assessee is penalised under the fiction of the Explanation to Section 271(1)(c).'
5. The Tribunal accordingly held that, on the facts, there was no case made out against the assessee under the main provision of Section 271(1)(c) of the Act and that the Revenue did not even attempt to discharge, much less discharge, the onus that the assessee was guilty of concealing his income by filing wrong particulars of his income and that the order of the Appellate Assistant Commissioner cancelling the penalty did not suffer from any infirmity calling for interference by the Tribunal. In the statement of the case submitted by the Tribunal, it is again observed as under:
' On the contrary, it is because of the strict construction of the Explanation to Section 271(1)(c) that we have held that the assessee must be projected (sic) the charge that the Revenue intended to levy penalty with the help of the Explanation in which case, the onus would be on the assessee and which onus is different in character from the one to be discharged by the Revenue if it takes upon itself to prove the charge under Section 271(1)(c).'
6. Having heard learned counsel for both the parties, we are of the view that the Tribunal seriously erred in taking the above view. The language of the Explanation to Section 271(1)(c) indicates that where the returned income is less than 80% of the assessed income, the provisions of the Explanation become at once applicable with the resultant attraction of the presumption against the assessee. It is apt to reproduce here the view taken by the Full Bench of this court in Vishwakarma Industries v. CIT (headnote at pp. 653 and 654):
' Once the Explanation is held to be applicable to the case of an assessee, it straightaway raises three legal presumptions, viz.:
(i) that the amount of the assessed income is the correct income andit is in fact the income of the assessee himself;
(ii) that the failure of the assessee to return the correct assessed income was due to fraud ; or
(iii) that the failure of the assessee to return the correct assessed income was due to gross or wilful neglect on his part.
7. From the factum of the presumptions spelled out, in essence, the Explanation becomes a rule of evidence. But, the presumptions raised by the Explanation are not conclusive presumptions and they are rebuttable. As is the rule under the civil law, the initial burden of discharging the onus of rebuttal is on the assessee. However, once he does so, he would be out ol the mischief of the Explanation until and unless the Department is able to establish afresh that the assessee in fact had concealed his income or furnished inaccurate particulars thereof. The nature of the initial onus placed on the assessee under the Explanation is like the ordinary burden of proof placed on either party in judicial proceedings. The basic rule of evidence is that if the person on whom the onus to prove lies is unable to discharge the same, his case would fail. However, the presumption raised is only an initial presumption which is rebuttable.'
8. It is also proper to refer to the judgment of the Gujarat High Court in Kantilal Manilal v. CIT : 130ITR411(Guj) , wherein it has been held as under (headnote):
' The Explanation to Section 271(1)(c) of the Income-tax Act, 1961, enacts a rule of evidence and the authority which imposes penalty is competent to invoke its aid in reaching the final conclusion on the question of concealment, although it may not have been resorted to at the stage when the reference was made to the authority imposing the penalty. Therefore, merely because the Explanation has not been referred to in the show-cause notices, there is no legal bar against invoking the Explanation during the course of the penalty proceedings.'
9. The Division Bench of the Gujarat High Court has held in CIT v. Drapco Electric Corporation : 122ITR341(Guj) , that (headnote at p. 344):
' Since the Explanation enacts merely a rule of evidence, it is competent to the authority which imposes the penalty to invoke its aid in reaching the final conclusion on the question of concealment, although the Income-tax Officer may not have resorted to it at the stage when he made the reference to the authority.'
10. In CIT v. Laxmi Auto Stores : 106ITR626(Orissa) , where the Tribunal had deleted the penalty agreeing with the contention of theassessee based on the decision of the Supreme Court in CIT v. Anwar Ali : 76ITR696(SC) , that the mere fact of inclusion of certain cash credits in the assessment did not automatically lead to the inference that the amounts were concealed income, which view was taken by the Supreme Court on the provisions of Section 271(1)(c) before its amendment by the Finance Act, 1964, which deleted the word 'deliberately' from Section 271(1)(c) and added the Explanation thereto, a Division Bench of the Orissa High Court held that the assessee cannot contend that since the question of presumption in accordance with the Explanation to Section 271(1)(c) had never been raised before the Tribunal, the High Court was precluded from taking notice of such a contention based on the Explanation because the question that was being canvassed before the Appellate Tribunal was in regard to the assessee's liability for penalty under Section 271(1)(c) of the Act on the footing that the assessee had concealed its true income. It was further held that the Explanation to Section 271(1)(c) being the law applicable to the case must be deemed to have been canvassed before the authorities below.
11. In view of the above discussion, we hold that when a plea of presumption based on the Explanation to Section 271(1)(c) of the Act was raised before the Tribunal, the same could not be ruled out of consideration when in the case in hand the income returned by the assessee was less than 80 per cent. of the income assessed and the Explanation was attracted. The Tribunal could not reject this contention on the ground that the Explanation to Section 271(1)(c) was not taken support of by the Income-tax Officer and was not pleaded before the Appellate Assistant Commissioner, Consequently, we answer the question in the negative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs.