Skip to content


Commissioner of Income-tax, Gujarat Vs. Suleman Abdul Sattar - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome Tax Reference No. 193 of 1976
Judge
Reported in(1982)26CTR(Guj)432; [1983]139ITR8(Guj)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax, Gujarat
RespondentSuleman Abdul Sattar
Appellant Advocate N.U. Rawal, Adv.
Respondent AdvocateNone
Excerpt:
direct taxation - assessment - section 271 (1) of income tax act, 1961 - assessee claimed to have received certain amount in crossword puzzle competition - assessee contended said income not taxable - on basis of evidence it was proved that assessee's claim was mere hoax and device to legitimize unaccounted income - disclosure in return not honest and bona fide - made to deceive taxing authorities - in absence of material on record assessee unable to prove amount earned through competition. - - the assessee, however, did not avail of the opportunity, ignored the letter and in fact failed to give any reply to this letter. the assessee, however, refused to accept the envelope containing copies of statements sent to him, the assessee also failed to submit a statement of his wealth as.....mankad, j. 1. an assessee indicated the part iv of his return of income for the assessment year 1969-70 that a receipt of rs. 44,239 in the relevant year was not taxable on the ground that it was prize money received in a competition which was of the character of casual income earned during the previous year relevant to the said assessment year, according to the assessee, the said income of rs. 44,239 represented the prize received by him in a crossword puzzle competition conducted by one kasoti sahitya harilal (hereinafter referred to as 'harifai') and, therefore, it was casual income which was not taxable, it was proved by overwhelming evidence that the story regarding winning of prize was a hoax and a device to legitimize the introduction of unaccounted money under the smoke-screen of.....
Judgment:

Mankad, J.

1. An assessee indicated the Part IV of his return of income for the assessment year 1969-70 that a receipt of Rs. 44,239 in the relevant year was not taxable on the ground that it was prize money received in a competition which was of the character of casual income earned during the previous year relevant to the said assessment year, according to the assessee, the said income of Rs. 44,239 represented the prize received by him in a crossword puzzle competition conducted by one Kasoti Sahitya Harilal (hereinafter referred to as 'Harifai') and, therefore, it was casual income which was not taxable, it was proved by overwhelming evidence that the story regarding winning of prize was a hoax and a device to legitimize the introduction of unaccounted money under the smoke-screen of the story. It was found as a matter of fact that the assessee had not received any such prize and the amount alleged to have been received as prize was in truth his unaccounted income. The statement, made by the assessee in Part IV of his return was thus proved to be factually false, and yet, the Income-tax Appellate Tribunal (hereinafter referred to as 'the Tribunal'), in the appeal preferred by the assessee against the levy of penalty under s. 271(1)(c) of the I. T. Act, 1961 (hereinafter referred to as 'the Act') by the IAC. Held that no penalty was leviable because, (i) in view of the disclosure made by the assessee in Part IV of the return, the assessee could not be said to have concealed income or furnished inaccurate particulars thereof; (ii) the Revenue had not proved that the money which the assessee was alleged to have received as prize in the crossword puzzle competition was income earned by the assessee in the aforesaid assessment year and it was a case of mere falsity of explanation given by the assessee; and (iii) there being no gross or wilful neglect or fraud on the part of the assessee, no penalty was leviable on the basis of the Explanation to s. 271(1)(c) of the Act, notwithstanding that the assessee's case was covered by the said Explanation, in our opinion for the reasons which we shall presently state, the Tribunal's view cannot be sustained.

2. Facts leading to this reference are as follows : Some time in June, 1968, the premises of Harifai were seared under s. 132 of the Act. From the documents and material seized during the search and statements of various persons connected with the Harifai recorded during the course of the investigation, it was discovered that Harifai was conducting crossword puzzle competitions only with the object of helping the persons who had unaccounted income or money, to bring out such income or money by way of prizes at such crossword puzzle competitions. Investigation revealed that Harifai was organised to devise a scheme to give colour of legitimate source to the unaccounted money, the scheme functioned in the following manner. Persons with unaccounted money would approach the organisers of Harifai and on their paying commission, which was usually 10 per cent. of the unaccounted money, the organisers of the Harifai would declare a prize equal to the amount of the unaccounted money, which persons wanted to bring out. For winning crossword puzzle competition, which was not genuine. The documents and material on record show that within a period of two years, unaccounted money totalling to about Rs. 40 lakhs of about 30 persons from various strata of society were brought out in the form of bogus prizes. The persons who brought out their unaccounted money in the aforesaid dubious manner openly utilised the money for their business and other purposes and whenever called upon to explain the source of such money by the authorities concerned, their explanation was that they had won a prize at the crossword puzzle competition. It was in this manner that the organisers of Harifai helped the persons with unaccounted money to give colour of legitimate source to their unaccounted money. It appears that one Navnitlal S. Patel was the proprietor of Harifai. This Navnitlal S. Patel conducted such dubious crossword puzzle competitions also in the name of Makkam Harifai and Kundan Shabda Spardha. The assessee was one of the persons in whose favour Harifai had declared a prize. The evidence disclosed that the prize which was declared in favour of the assessee was Rs. 46,959 and not Rs. 44,239 as stated by the assessee had paid Rs. 4,695, being 10 per cent. commission to the organisers of Harifai. For getting the prize declared. According to the Revenue, both these amounts represented the unaccounted money or income of the assessee.

3. In his return of income for the year under reference, the assessee disclosed the prize money received by him from Harifai and agricultural income which were claimed to be not taxable in Part IV of his return, the particulars of his income declared in Part IV of the return are as follows :

Particulars Amount Reasons why not taxableLottery receipts Rs.44,239 casual incomeAgricultural income Rs. 3,434 -----

4. The ITO by a letter called upon the assessee to produce evidence in support of the claim made in Part IV of the return. The assessee, however, did not avail of the opportunity, ignored the letter and in fact failed to give any reply to this letter. Thereafter, the ITO issued notices under ss. 142(2) and 143(2) of the Act, calling upon the assessee to appear before him. The assessee was also called upon to produce the organiser of Harifai with his books of account to establish his claim for exemption for the sum of Rs. 44,239 mentioned in Part IV of his return. The assessee was also called upon to furnish a statement of his total wealth as on different dates, the ITO called for information in respect of a number of matters, details whereof need not be mentioned for the present purposes. The ITO also made detailed enquiries regarding the prize money alleged to have been received by the assessee which were claimed as exempt and his enquiry showed that the prize was not genuine. The information, which the ITO had collected in the course of the enquiry and copies of statements of various persons which he had recorded in the course of the enquiry. Which he proposed to use against the assessee, were sent to the assessee to give him an opportunity to rebut or explain the evidence which was to be used against him. The assessee, however, refused to accept the envelope containing copies of statements sent to him, the assessee also failed to submit a statement of his wealth as required by s. 142(1) of the Act. The ITO, therefore, proceeded to make assessment under s. 144 of the Act and determined the total income of the assessee at Rs. 72,260, details of which are as follows :

Rs.'Cash credits as discussed in para. 9 of theassessment order 11,000Claim of lottery receipt made in Part IV ofthe return. This amount is in reality for thealleged prize from Shri Kasoti Sahitya Harifai 46,959Commission payment 4,695For low household expenses - para 8 2,000Amount paid for purchase of land not accountedfor in books 3,251Income from boarding house as declared 3,069Income from weaving business estimated- para.10 2,189---------73,163Deduction for LIP 903---------Total income 72,260---------

5. Proceedings for the levy of penalty under s. 271(1)(c) of the Act for the concealment of income or furnishing inaccurate particulars thereof were initiated against the assessee. It appears that the proceedings were initiated for additions made on account of unexplained cash credits, bogus prize alleged to have been received at the crossword puzzle competition, commission payment and amount paid for purchase of land which was not accounted for in the books, so far as the present reference is concerned, the only addition which is relevant is the addition made on account of bogus prize alleged to have been received by the assessee at the crossword puzzle competition, as no penalty has been levied for other additions, it may also be mentioned that the addition of Rs. 3,251, which was made on account of unexplained investment in purchase of land, was deleted by the Tribunal in the appeal preferred by the assessee against the order of the AAC, confirming the assessment framed by the ITO, the IAC, to whom penalty proceedings were referred, as the concealed income exceeded Rs. 25,000, called upon the assessee to show cause why penalty should not be imposed for concealing income or furnishing inaccurate particulars thereof, in response to this notice, the defence of the assessee was that the crossword puzzle competition, in which, according to him he had participated and won a prize. Was genuine competition. He contended that the prize which he had received by cheque was a genuine prize. According to the assessee, he had filled in entry forms and paid the prescribed fee to take part in the competition. He further contended that he was in no way concerned with the object with which the organiser of Harifai were conducting the crossword puzzle competition, so far as he was concerned, he was a genuine competitor and that a prize was genuinely won by him in truth. Therefore, according to him, he was not guilty of having concealed the income or furnishing inaccurate particulars thereof, the assessee further contended that there was absolutely no evidence to prove that the prize money which he had received from Harifai represented his unaccounted income, or money.

6. The IAC gave opportunity to the assessee to lead evidence to prove the genuineness of the prize received by him and to rebut the evidence which was collected by the Revenue authorities. The assessee, however, did not produce any evidence. He, however, raised preliminary objections against the validity of the proceedings initiated against him.

7. The IAC, in his elaborate and well-reasoned order, overruled the preliminary objections raised on behalf of the assessee and on an appreciation of the evidence and material on record, came to the conclusion to the effect that the crossword puzzle competition conducted by Harifai was merely a device to convert unaccounted money into accounted money under the smoke-screen of competition giving it the appearance of prize money. He found as a matter of fact that participation by the assessee in the crossword puzzle competition was not genuine and the prize of Rs. 46,959 which was stated to have been received by him was camouflage and a deliberate device to convert his unaccounted money into ostensible prize money with a view to claiming exemption under the provisions of the Act. The IAC further held that the assessee's case was covered by the Explanation to s. 271(1)(c) of the Act, as the difference between the income returned and that assessed was more than 20 per cent. Is pointed out above, the income returned was Rs. 1,892 while the income assessed was Rs. 69,009 (after giving effect to the Tribunal's order). The IAC observed that the Explanation to s. 271(1)(c) prescribes a rule of evidence and raises a presumption of concealment of income and filing of inaccurate particulars of the income when the differences between the returned income of the assessee and the assessed income is more than 20 per cent. The presumption was no doubt rebuttable, if the assessee could prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In the opinion of the IAC, however, the assessee had filed to dislodge the presumption and, consequently, he was to be deemed to have concealed the particulars of income or furnished inaccurate particulars thereof for the purpose of clause (c) of s. 271(1). In the result, the IAC levied a penalty of Rs. 60,000 as against the maximum penalty of Rs. 1,09,810 leviable under the said provision.

8. Being aggrieved by the penalty imposed by the IAC, the assessee carried the matter in appeal to the Tribunal. The Tribunal, following its decision in the case of Jogibhai Mangalbhai, Nani-Damanv. ITO, in appeal (I.T.A. No. 373/AHD/74-75 decided on October 18, 1975) held that levy of penalty for concealment of income or furnishing inaccurate particulars thereof was not justified as the assessee had disclosed income in question in Part IV of his return of income. The Tribunal further held that all that the revenue authorities had been able to establish was that the explanation given by the assessee as regards the money as received by him by way of a prize from the crossward puzzle competition was false, however, mere falsity of the explanation was not enough to attract penalty under s. 271(1)(c). The Tribunal observed that the Revenue had failed to prove that the money which the assessee had shown as prize money was the assessee's income earned during the year under reference. The Tribunal further found that even though the assessee's fell within the purview of the Explanation to s. 271(1)(c), no penalty was leviable inasmuch as the assessee had proved that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In the opinion of the tribunal, the disclosure made by the assessee in Part IV of his return 'would take the case out of the charge of gross or wilful neglect'. While dealing with the question whether there was any fraud on the part of the assessee, the Tribunal held that since the Revenue had failed to establish that the income disclosed by the assessee in Part IV of his return was the income of the assessee earned during the year under reference, the penalty under s. 271(1)(c) could not be sustained. In the result, the Tribunal quashed the order of the IAC levying penalty under s. 271(1)(c) on the assessee and directed the ITO to refund the amount of penalty, if paid. The Revenue has challenged the legality and validity of the order passed by the Tribunal and at its instance the following questions are referred to us for our opinion under s. 256(1) of the Act :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that due to disclosure made by the assessee in Part IV of the return, the assessee could not said to have furnished inaccurate particulars of income within the meaning of s. 271(1)(c) of the Act, and, consequently. The levy of penalty under said section was not justified

(2) Whether the Tribunal was right in law in holding that there was no gross or wilful neglect on the part of the assessee, nor was it a case of fraud, and, therefore, levy of penalty on the basis of the Explanation to section 271(1)(c) of the Act on the facts of the case was not justified ?'

9. It passes our comprehension as to how the assessee can escape payment of penalty for concealing income or furnishing inaccurate particulars thereof, in view of the admitted facts, merely because of the statement incorporated in Part IV of his return, which statement is proved to be a false one. The inclusion in Part IV throws a protective armour when with candour, frankness and truthfulness income is indicated by giving true facts in view of a bona fide belief that such an income is not taxable. Non-inclusion in return may be justifiable if it involves interpretation for some provision or decision on a debatable point of law. It must, however, be admitted that it is income and its true nature, character and source must be stated. Of course, having made a true disclosure, he can say that according to his interpretation such income is not taxable because of his bona fide doubt about its includibility under law, the belief may or may not turn out to be right. The protection will be available. But when he states that it is prize won at, say, lottery, and that statement is false to his knowledge and found to be false as a matter of fact, he cannot earn immunity, that would be placing dishonesty and prevarication of tax dodgers at a premium. It could not have been (and we do not believe it ever was) the intention of the Legislature to protect perpetrators of frauds and falsehood. It is not an amulet for cheats. It is an armour for the honest taxpayer who need not anticipate an interpretation or view against himself and may bona fide interpret in his favour requiring the Revenue to prove that his interpretation is wishful or over-optimistic but untenable. It is not possible to comprehend how the assessee can claim immunity by falsely indicating Part IV of his return that he had earned an income of casual nature by way of winning a prize was ever won and that it was hoax and it was, therefore, not a casual income by way of prize money, remains unchallenged and undisturbed. It may be recalled that the assessee did not disclose the income as taxable income, but as casual income which was not taxable, by making a false statement that it was prize money. Receipts of casual and non-recurring nature were not includible in computing the total income of a previous year of any person under s. 10(3) of the Act before its amendment by the Finance Act, 1972, with effect from April 1, 1972. It was only after the amendment of s. 10(3) by the Finance Act, 1972, that winnings from lotteries became includible in computing the total income of any person. With the amendment of s. 10(3) by the Finance Act, 1972, corresponding amendment of s. 2(24), the income is artificially declared to include various items. The definition of 'income' in this clause is inclusive and not exhaustive. This clause was amended by the Finance Act, 1972, and sub-clause (ix) was inserted with effect from April 1, 1972. Under sub-clause (ix), any winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever were included in the definition of 'income'. Thus, as a result of the amendment of s. 2(24) and s. 10 (3) by the Finance Act, 1972, winnings, from crossword puzzles became includible in the taxable income. However, prior to this amendment, winnings from crossword puzzle competitions were considered to be income of casual and non-recurring nature, which were not includible in the taxable income and did not fall within the definition of 'income' as defined in s. 2(24). It was in view of this legal position that the assessee claimed in his return of income for the assessment year 1969-70 that the prize money received by him from the crossword puzzle was casual income which was not taxable. The claim made by the assessee that it was prize money and casual income was proved to be false. It was proved that he had not participated in any genuine crossword puzzle competition and the prize which he was alleged to have won at such crossword puzzle competition was not a genuine prize. In view of the fact that the assessee had shown the prize money in Para IV of his return, there was clear admission on his part that he had earned the income shown therein in the year under consideration. He showed the prize money as a casual income earned in the year in question. However, the Revenue was able to positively establish by evidence that the income which the assessee had disclosed in Part IV of his return as casual income was not really casual income. That it was income, earned in the year in question, was not disputed by the assessee. Since he failed to prove that it was income which was exempt, or which did not fall within the definition of 'income' as defined in s. 2(24) as it then stood, this income became taxable. Since it was established that the assessee had not genuinely won any prize at any genuine crossword puzzle competition, but the whole thing was a hoax, the only inference that can be legitimately drawn is that he had sought to introduce his unaccounted income earned during the year under reference under the guise of prize money which he disclosed in Part IV of his return as such. This income, since it was not proved to be of a casual and non-recurring nature, was not to be excluded in the computation of total income of the assessee in the year under reference. The assessee. However, attempted to practice a fraud and to mislead the Revenue authorities by showing this income in Part IV of his return, it is obvious that the showing this income in Part IV of his return. It is obvious that the assessee attempted to conceal his income which was liable to tax and to evade payment of tax. In the face of the evidence on record, the only conclusion which can be reached is that the assessee concealed his income. When we say that he concealed his income, what we mean is that he concealed that income which was taxable. In any case, the assessee must be ground guilty of having furnished inaccurate particulars of his income. He deliberately and intentionally showed income which was taxable as casual income in Part IV of his return. The disclosure, which he made in Part IV of his return was false, fraudulent and deliberately made with a view to mislead the Revenue authorities. Had the ITO accepted the return filed by the assessee as correct, the above income would have escaped assessment and payment of tax. In our opinion, therefore, the mere fact that the assessee had disclosed the above income in Part IV of his return cannot and does not absolve him of the liability to pay penalty under s. 271(1)(c) of the Act. Particularly when it is established that false statements were deliberately made therein : (i) that it was prize money, and (ii) it was income of a casual nature on that account, when in fact it was not prize money as has been conclusively established. We, therefore, find ourselves unable to uphold the view taken by the Tribunal, which, in our opinion, is patently an impossible view.

10. Under the Explanation to s. 271(1)(c)(as it stood at the relevant time), where the total income returned by any person was less than eighty per cent. of the total income as assessed, such person was deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c), unless he proved that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, therefore, once it was proved that the difference between the returned income and the assessed income was more than 20 per cent., the presumption, no doubt rebuttable, arose that the assessee had concealed the particulars of his income or furnished inaccurate particulars thereof. Presumption could be dislodged, if the assessee proved that failure to return the correct income did not arise from any fraud or gross or wilful neglect. In the instant case, as pointed out above, the income which the assessee had returned in his return of income was Rs. 1,892, while the income as assessed after giving effect to the order of the Tribunal was Rs. 69,009. There was thus clearly a difference of more than 20 per cent. between the income returned and the income assessed, the Explanation to s. 271(1)(c) would, therefore, be attracted.

11. It was not disputed before the Tribunal that the Expln. to s. 271(1)(c) was applicable to the facts of the case. The Tribunal. However, declined to levy penalty even with the aid of the Explanation on two grounds, namely, (i) it was a case of mere falsity of explanation and as the Revenue had failed to prove that the prize money shown by the assessee in Part IV of his return was income earned by the assessee in the year in question; and (ii) in any case, since the assessee had disclosed the above income in Part IV of his return, it must be held that the failure to return the income did not arise on account of any fraud or gross or wilful neglect on the part of the assessee, both the grounds which appealed to the Tribunal are devoid of any substance.

12. We are unable to see how the doctrine of mere falsity of on the facts of each case, for instance, in a case of an unexplained cash credit, the mere fact that the explanation offered by the assessee that it was a dowry amount paid at the time of his son's marriage which was lying in his cupboard, is found to be untrue, in such a case, perhaps the doctrine may be resorted to. It depends on the facts of each case. It is not the equivalent of an 'open sesame', so that all that one needs to say is that 'false explanation' is the valid answer, which takes away the power to levy penalty, it has been proved to the hilt in the present case that the assessee had not won any prize at the crossword puzzle competition. The crossword puzzle competition in which he was alleged to have participated and won the prize, was not a genuine competition. No competition, in fact, was held and the so-called competition was merely a device to help the assessee to bring out his unaccounted money or income as an ostensible prize won at the competition. The above finding, recorded by the ITO, was confirmed in appeals by the AAC and the Tribunal, the IAC reappreciated the evidence which was placed on record, in the course of the assessment proceedings. And also closely examined the evidence and material which was produced before him and reached the same conclusion which was reached in the assessment proceedings by the ITO, the AAC and the Tribunal. In other words, the IAC, on considering the evidence on record afresh, held that the crossword puzzle considering the evidence on record afresh, held that the crossword puzzle competition, in which the assessee was alleged to have participated and won the prize, was not a genuine prize. It was proved beyond any shadow of doubt that the assessee had, in conspiracy with the organisers of Harifai, made arrangement to give colour to his unaccountef income or money of prize money won at the competition. In the face of this overwhelming evidence, we are unable to see how this is a case of mere falsity of explanation as held by the Tribunal. If the view taken by the Tribunal is correct, in no case could the Revenue succeed, even with the aid of the Explanation to s. 271(1)(c), ultimately what would be proved would be that the explanation given by the assessee was false. In the instant case, the assessee himself had shown the prize money as his casual income earned in the year under reference, if the income which the assessee described as the casual income was not the income earned by the assessee in the year under reference. There was no reason to show that income in the return of his income for the said years It was because the assessee had earned that income in the year under reference that he disclosed it in Part IV of his return. Therefore, on the assessee's own admission, it was income earned in the year under reference. The assessee's assertion that the above income was casual income was proved to be false. It was the assessee who was claiming exemption from payment of tax in respect of his income on the ground that it was casual income. He, however, did not choose to lead any evidence to establish his claim, on the other hand, the evidence led on behalf of the Revenue not only proved that the claim made by the assessee was false, but that it was as a part of a design or device to deceive and mislead the authorities concerned that the unaccounted money of the assessee was given the colour of prize money. If the assessee had a satisfactory explanation for the money which he had shown as prize money, he could have certainly come forward with such explanation. Having regard to the evidence on record the only inference which could be drawn is that the assessee sought to bring out his unaccounted income as ostensible prize money. The prize money was also not correctly shown in the return. The prize which he had won was not Rs. 44,239, as disclosed by him in Part IV of his return, but it was proved to be Rs. 46,959. The evidence also showed that the assessee had paid a commission of Rs. 4,695 to the organisers of the Harifai for conducting false crossword puzzle competition to bring out his unaccounted money. The evidence and the statement made in Part IV of the return, filed by the assessee, proved that the sum of Rs. 46,959 received by the assessee as so-called prize money was clearly the assessee's income earned in the year under reference. The assessee's assertion that the above income was casual income was proved to be false. It was the assessee who was claiming exemption from payment of tax in respect of his income on the ground that it was casual income. He, however, did not choose to lead any evidence to establish his claim, on the other hand, the evidence led on behalf of the Revenue not only proved that the claim made by the assessee was false, but that it was a part of a design or device to deceive and mislead the authorities concerned that the unaccounted money of the assessee was given the colour of prize money, if the assessee had a satisfactory explanation for the money which he had shown as prize money. He could have certainly come forward with such explanation. Having regard to the evidence on record the only inference which could as ostensible prize money, the prize money was also not correctly shown in the return. The prize which he had won was not Rs. 44,239, as disclosed by him in Part IV of his return, but it was proved to be Rs. 46,959. The evidence also showed that the assessee had paid a commission of Rs. 4,695 to the organisers of the Harifai for conducting false crossword puzzle competition to bring out his unaccounted money. The evidence and the statement made in Part IV of the return, filed by the assessee, proved that the sum of Rs. 46,959 received by the assessee so-called prize money was clearly the assessee's income earned in the year under reference. In our opinion, the Revenue has proved beyond doubt that this amount of Rs. 46,959 was the income of the assessee earned in the year under reference. We are, therefore, unable to agree with the conclusion reached by the Tribunal.

13. In CIT v. S. P. Bhatt : [1974]97ITR440(Guj) , the question of the nature and extent of the burden of proof, in a case covered by the Explanation, was examined and the following pertinent observations were made by this court (p. 445) :

'The fact of the total returned income being less than eighty per cent. of the total income assessed is sufficient to bring the assessee within the penal provision enacted in section 271(1)(c). That is achieved by the legal fiction enacted in the Explanation...... If the assessee wants to repel the legal fiction and throw the burden of bringing the case within section 271(1)(c) again on the Revenue, as it would be in the absence of the Explanation, the assessee has to show-and this burden is upon him-that his failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part.... It is a burden akin to that in a civil case where the determination is made on a preponderance of probabilities. It is also not necessary that any positive material should be produced by the assessee in order to discharge this burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings, irrespective of whether it is produced by him or by the Revenue. The only question to which the income-tax authority has to address itself is, whether, on the material on record in the penalty proceedings, can it be said, on a preponderance of probabilities, that the failure to return the total assessed income has not arisen on account of any fraud or any gross or wilful neglect on the part of the assessee, if the answer to the question is in the affirmative, the legal fiction enacted in the Explanation cannot arise and the Revenue must fail in its attempt to impose penalty on the assessee.'

14. In CIT v. Drapco Electric Corporation : [1980]122ITR341(Guj) , this court had an occasion to consider the true content and effect of this Explanation; it was observed (p. 354) :

'The Explanation consists of two parts. The first part sets out the facts which. It proved, give rise to a rebuttable presumption. It provides, in order to raise the presumption, that the case must be one where the total income returned by any person is less than eighty per cent. of the total income as assessed under s. 143 or s. 144 or s. 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). If these facts are shown to exist, a presumption would be raised that such person shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of clause (c) of s. 271(1). This presumption would of course be a rebuttable presumption and it would be open to such person to establish that despite there being a difference of more than twenty per cent. between the income returned and the income assessed (such difference having been arrived at in the manner indicated in the first part of the Explanation), the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. It is only if he fails to discharge the burden of displacing the presumption in the manner aforesaid on the basis of preponderance of probabilities by leading evidence or by relying on the material which is already on record that the penalty under s. 271(1)(c) for concealment of income would be attracted.'

15. As pointed out in the aforesaid decisions, as the total income returned by the assessee was less than eighty per cent. of the total income as assessed, a rebuttable presumption that the assessee had concealed particulars of income or furnished inaccurate particulars thereof would arise. As observed above, the presumption would be rebutted if the assessee succeeds in proving that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. In the instant case, the view taken by the Tribunal is that the assessee has rebutted the presumption, the finding which the Tribunal has recorded is again founded on the disclosure made by the assessee in Part IV of his return that it shut its eyes to the evidence on record and the glaring facts established by such evidence. The disclosure in Part IV of the return was not an honest and bona fide disclosure. It was made to throw dust in the eyes of the taxing authorities and to conceal the real source of the unaccounted income to the extent of Rs. 46,959. There was no crossword puzzle competition and there was no prize won at such competition, in the face of these glaring facts established by the evidence on record, we are unable to understand how one can reasonably come to the conclusion that failure to return the correct income did not arise on account of fraud or any gross or wilful neglect on the part of the to a case of gross or wilful neglect on the part of the assssee, since the assessee, with the intention to practice deceit, had instead of showing the above income as taxable income, showed it as casual income which was not taxable. In our opinion, therefore. The view taken by the Tribunal is unreasonable and unsustainable. The assessee has failed to discharge the burden which lay on him to prove that failure to return the correct income did not arise on account of any fraud or any gross or wilful neglect on his part. Besides making a statement in Part IV of his return which was proved to be false, the assessee has not led any evidence nor is there any material on record to rebut the presumption which arose under the Explanation to s. 271(1)(c). The Tribunal, therefore, erred in holding that the assessee had rebutted the presumption and, therefore, was not liable to pay any penalty under s. 271(1)(c). In our opinion, the findings and conclusions reached by the IAC, in his well-reasoned order, is unassailable and no other view is possible.

16. In the result, we answer both the questions referred to us in the negative and against the assessee.

17. Reference answered accordingly with costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //