D.K. Kapur J.
1. This reference relating to the assessment year 1968-69 is the result of an order passed by this court on August 5, 1976, in I.T.C. No. 22 of 1975. The question referred is as follows :
'Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the penalty provision of section 271(1)(c) of the Income-tax Act, 1961, is not attracted in this case and hence in cancelling the penalty imposed by the Inspecting Assistant Commissioner ?'
2. The facts of the case are that the assessed, who is unfortunately unrepresented before us, had filed a return showing an income of Rs. 2,272. The Income-tax Officer was of the view that a sum of Rs. 13,000 had to be added as income from undisclosed sources. There were two credit entries of Rs. 5,000 and Rs. 8,000 concerning which the Income-tax Officer had made additions. Penalty proceedings under section 271(1)(c) of the Act were taken. In connection with the cash credit amount of Rs. 8,000, there were two entries, one for Rs. 2,000 in the name of the assessed's wife and Rs. 6,000 in the name of Lal Chand, the assessed's father-in-law. The Inspecting Assistant Commissioner held that it had been established that the sum of Rs. 6,000 introduced in the name of Lal Chand was the assessed's concealed income and a penalty of Rs. 9,000 was imposed.
3. During the penalty proceeding, the assessed had produced Shri Lal Chand, his father-in-law, who had explained how this sum has been given to the assessed. He had stated that he was advancing small sums to his son-in-law as saying. which rose to Rs. 13,000 which he received back by cheques. He had encased the same and given the amount to his daughter as a gift. The Inspecting Assistant Commissioner has not discussed this statement but appears to have rejected the same as Shri Lal Chand was not a man of means. Before the Income-tax Appellate Tribunal in appeal, a very short order was passed saying that in view of the decision of the Supreme Court in CIT v. Anwar Ali : 76ITR696(SC) , the penalty was not exigible.
4. In support of this reference, learned counsel for the Department has cited a large number of decisions to show that it has been doubted whether the ratio of Anwar Ali's case : 76ITR696(SC) survives after the Explanationn was added to section 271(1)(c) in 1964. The principal judgments relied upon by him are the Full Bench judgment of the Patna High Court in CIT v. Nathulal Agarwala and Sons : 153ITR292(Patna) and the Full Bench judgment of the Punjab and Harayana High Court in Vishwakarma Industries v. CIT . An examination of these judgments and other similar judgment shows that what has really been held is that after the addition the Explanationn, in a case where the returned income is less than 80% of final assessed income, statutory presumptions arise to the effect that income has been concealed and that there is fraud or willful neglect and also concealment which are to be rebutted by the assessed. Thus, the judgment of the Supreme Court in Anwar Ali's case : 76ITR696(SC) aforementioned, to the effect that the mere fact that the Explanationn of the assessed is false does not shift the onus, has in practice to be modified.
5. What has to happen is that the assessed has first to show that there is no fraud or willful neglect. If he proves the absence of fraud or willful neglect, the onus shifts back to the Department. If he fails to prove the absence of fraud and neglect, he can still prove that the concealed income is not his or that the income has not been correctly assessed. This is the view taken in the judgment cited by the counsel. The Explanationn which was added by the Finance Act, 1964, with effect from April 1, 1964, is in the following terms :
'Explanation. -Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanationn 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 willful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section.'
6. This Explanationn continued to be in operation from 1964 till April 1, 1976, when it was substituted by four other Explanationn. The Explanationn was in force in the assessment year 1968-69 with which we are concerned. As the returned income in this case was Rs. 2,272 and the correct income determined by the Income-tax Officer was Rs. 15,273, obviously the Explanationn came into effect. So, it was for the assessed to prove the absence of fraud or neglect or that the income was not his. This was not an insurmountable difficulty in the present case, because the two items which were in question were cash credit entries in the name of his own wife and in the name of his own father-in-law. Not much weight has been attached to the amount of Rs. 2,000 in the name of the assessed's wife, as it does not find any place in the penalty order. The only sum involved is the sum of Rs. 6,000 standing in the name of the father-in-law. As regards this, the father-in-law, Shri Lal Chand, himself made a statement that he had made advances at various times to his son-in-law who had returned Rs. 13,000 by cheques and that that sum had been gifted to his daughter. The Inspecting Assistant Commissioner has paid scant regard to this statement and has not at all shown how it is wrong. It appears that an assumption has been made that Lal Chand could not have had this money. It could, at the same time, be said that even the assessed could not have this money. The amount has been added to the assessed's income as income from undisclosed sources. Similarly, it could be treated as the undisclosed income of Lal Chand. We are not concerned with the source from where the money had come, but the fact that the person who is shown to have made the advance has admitted the same. This satisfies the Explanationn as far as the absence of fraud or neglect is concerned. It is now for the Department to show that the amount was actually the concealed income of the assessed and this they had failed to do in this case. We accordingly answer the question referred to us in the affirmative on the footing that Anwar Ali's case : 76ITR696(SC) applies to the facts of this case, after the Explanationn has been satisfied by showing the absence of fraud on neglect.
7. It is to be noted that Shri Lal Chand stated that he had received Rs. 13,000 by cheques but no attempt was made to show that no such cheques were received by him. Nor is there any counter-evidence of an sort available on the record. We feel that no properly informed judicial authority could disregard such a statement based on payments made be cheques, without a proper analysis of the same. The Tribunal was, thereforee, perfectly right in applying the judgment of the Supreme Court in CIT v. Anwar Ali : 76ITR696(SC) to the facts and circumstances of the case.
8. The question referred to us is answered in the affirmative in favor of the assessed, but there will be no order as to costs as the matter has been heard ex parte.