Dwarka Prasad Gupta, J.
1. This is an application under Section 256(2) of the I.T. Act, 1961 (hereinafter referred to as ' the Act '), and arises in the following circumstances :
The ITO, ' C ' Ward, Kota (hereinafter called ' the assessing authority '), while proceeding to assess Smt. Gulab Sundari Bai Bapna (hereinafter called 'the assessee') in respect of the assessment year 1968-69 found that there were two items, along with some others, for which the assessee was unable to furnish a reasonable explanation. One of the items, relating to which the explanation of the assessee was not accepted by the assessing authority, was in respect of a sum of Rs. 24,000. The case of the assessee in respect thereof was that the said amount had been obtained as a loan from the Life Insurance Corporation of India. No evidence was furnished on behalf of the assessee before the assessing authority to show that the said sum of Rs. 24,000 represented a loan from the LIC or that any loan at all was taken by the assessee from the LIC during the relevant accounting year. The other amount was a sum of Rs. 6,500, in respect of which the explanation furnished by the assessee was that the same was kept in the tijori of the assessee. Disbelieving the assessee's explanation, the assessing authority added both the amounts of Rs. 24,000 and Rs. 6,500 to the total income of the assessee, considering the same as her income from undisclosed sources. An appeal preferred by the assessee to the AAC and a further appeal to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, were of no avail and were dismissed. The Income-tax Appellate Tribunal by its order dated December 29, 1973, held that the assessee had failed to furnish proper explanation with regard to the sum of Rs. 6,500 and accordingly held that the amount was rightly considered to be the income of the assessee from undisclosed sources. Regarding the amount of Rs. 24,000, the Income-tax Appellate Tribunal held that the assessee was required by the assessing authority to produce evidence regarding the alleged loan from the LIC of India, but no evidence was produced before him and that the assessing authority was, therefore, right in not accepting the explanation furnished by the assessee. The Tribunal held that the assessee did not produce any evidence at any stage to show that any such loan was ever taken by the assessee from the LIC and, in the absence of any such material on record, the finding arrived at by the assessing authority and the AAC on this question was fully justified.
2. While finalising the assessment of the assessee for the assessment year 1968-69, the assessing authority directed on March 22, 1972, that notice under Section 271(1)(c) of the Act be issued to the assessee. After considering the explanation furnished by the assessee in the penalty proceedings, the IAC, Range II, Jaipur, by his order dated March 18, 1974, held that these amounts of Rs. 24,000 and Rs. 6,500 represented the concealed income of the assessee along with other amounts of Rs. 10,000, and penalty was imposed in respect thereof. On appeal, the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated July 23, 1975, accepted the appeal of the assessee in respect of the other amount of Rs. 10,000. But, so far as these two amounts of Rs. 24,000 and Rs. 6,500 were concerned, it was observed by the Tribunal that no fresh evidence was led by the assessee in respect thereof even during the penalty proceeding, and that the explanation offered by the assessee was not convincing. The Tribunal held that they were not prepared to presume that a loan could have been taken by the assessee from the LIC without there being any evidence in respect thereof. Similarly, the explanation of the assessee in respect of the amount oi Rs. 6,500 was also held to be improbable. The result was that the Tribunal upheld the imposition of penalty upon the assessee in respect of these two amounts. Thereafter, the assessee moved the Appellate Tribunal for making a reference to this court, but the Tribunal refused to refer the questions suggested by the assessee to this court on the ground that no question of law was involved. That is how this application under Section 256(2) of the Act has been moved before this court. The assessee has prayed that as many as 14 questions may be got referred to this court.
3. The principal argument advanced by the learned counsel appearing for the assessee before us was that as the IAC did not rely upon the Explanation annexed to Section 271(1)(c) for imposing penalty, the Appellate Tribunal, while hearing the appeal, could not have shifted the burden of proof to the assessee. The argument of the learned counsel was that the burden of proof in the penalty proceedings lay upon the department and as no evidence was led by the department to show that there was any fraud or any gross or wilful neglect on the part of the assessee, any imposition of penalty in such circumstances was unjustified.
4. Under Section 271(1)(c), penalty can be imposed in a case where the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income and in such a case, the penalty imposed shall not exceed twice the amount of tax sought to be evaded, by reason of concealment of particulars of income or the furnishing of inaccurate particulars of such income. The Explanation, which was added to Section 271 by the Finance Act, 1964, with effect from 1st April, 1964, reads as under :
' Explanation.--Where the total income returned by any person is less than eighty per cent, of the total income (hereinafter in this Explanation 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 wilful 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 subsection.'
5. Palkhivala in his treatise on the Income Tax Act has dealt with the matter as under:
' There are two ways of approaching this question, both of which converge on the same conclusion:
(a) As is established by the cases cited above, in order to justify the levy of *a penalty two factors must co-exist I (i) there must be some materials or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income, it being not enough for the purposes of penalty that the amount has been assessed as income ; and (ii) the circumstances must show that there was animus, i. e,, conscious concealment or conscious furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on (i), but it has a bearing only on (ii). The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. For example, if an assessee gives an explanation which is unproved, but not disproved, i. e., it is not accepted but the circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the department because there would be no material to show that the amount in question was the income of the assessee. On the other hand, where the income returned is less than eighty per cent, of the income assessed and the amount assessed is proved by the department to represent the income of the assessee, the Explanation puts the burden squarely on the assessee to show that there was no fraud or gross or wilful neglect on his part in furnishing his return of income.
(b) Alternatively, even treating the Explanation as dealing with both the ingredients (i) and (ii) set out above, where the circumstances do not lead to the reasonable and positive inference that the assessee's explanation is false, the assessee must be held to have proved that there was no fraud or gross or wilful neglect on his part. Even in this view of the matter, the Explanation cannot justify the levy of a penalty. Absence of proof acceptable to the department cannot be equated with fraud or wilful neglect. A fortiori, no penalty can be levied in cases of mere inadvertence or innocent mistake.'
6. Thus, if the returned income was less than 80% of the assessed income then, according to the aforesaid Explanation, it was for such 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 and in the absence of any such proof, it would be deemed that the assessee concealed the particulars of his income or furnished inaccurate particulars of such income, for the purposes of Clause (c) of Section 271(1) of the Act.
7. If the returned income is less than 80% of the assessed income and the amount assessed is proved by the department to represent the income of the assessee, the Explanation puts the burden squarely on the assessee to show that there was no fraud or gross or wilful neglect on his part in furnishing his return. In Addl. CIT v. Noor Mohd. & Co. this court held that the Explanation raises a rebuttable presumption and that in the ultimate analysis the question which confronted the Tribunal in such matters was whether the facts and circumstances appearing on the records of the case are adequate to presume fraud or wilful or gross neglect. If the Tribunal found the same in the negative, the presumption stood rebutted. Following the decision of their Lordships of the Privy Council in Wali Mohammad v. Mohammed Baksh, this court held that the question, whether the statutory presumption is rebutted by evidence or not, is always a question of fact and that in such cases no question of law arises. The same view was again expressed by this court in Addl. CIT v. Gem Palace . In C1T v. Khoday Eswarsa & Sons : 83ITR369(SC) their Lordships of the Supreme Court held that the conclusion drawn by the Appellate Tribunal with regard to concealment of income by the assessee was a question of fact and no question of law arose for a reference being made to the High Court. Thus, it is firmly settled that the question whether there is or is not any concealment of income for the purposes of levy of penalty under Section 271(1)(c), is essentially a question of fact and such a conclusion arrived at by the Appellate Tribunal may raise a question of law only if the findings of the Tribunal are perverse or are based on mere surmises and conjectures.
8. Learned counsel for the assessee was unable to show in the present case that the findings arrived at by the Tribunal in respect of the two items of Rs. 24,000 and Rs. 6,500 was based on mere surmises or conjectures or that the said finding was perverse. It has been held by their Lordships of the Supreme Court in CIT v. Anwar Ali : 76ITR696(SC) that the finding given in the assessment proceedings for determining or computing the tax is good evidence in respect of penalty proceedings, although the same is not conclusive. The order given in the assessment proceedings that the aforesaid amount represented the assessee's income from undisclosed sources and adding the said two amounts to the total income of the assessee was a piece of evidence which could be relied upon by the concerned authorities in the penalty proceedings, although the assessee had every right and was also afforded an opportunity to prove to the contrary. It may be observed that the Explanation to Section 271 was already on the statute book and when Section 271 was referred to, the entire section, including the Explanation thereof, was referred. The Explanation need not be referred to separately and it automatically came into play in a case where the returned income was less than 80% of the assessed income. In the present case, the assessee led no evidence about the source of the two amounts of Rs. 24,000 and Rs. 6,500 either before the assessing authority or before the Appellate Tribunal even in the penalty proceedings. No material was placed on record in support of the assertion of the assessee that Rs. 24,000 represented a loan from the LIC. We asked the learned counsel for the assessee as to whether there was any material in the the possession of the assessee so as to indicate is to whether any loan was at all taken by the assessee from the LIC during the relevant accounting year. But he expressed his inability to produce any such material even before us. Similarly, for the amount of Rs. 6,500 not only that no evidence has been produced by the assessee in the penalty proceedings, but the explanation furnished by the assessee is on its very face not plausible and cannot be accepted. Thus, the Tribunal was right in coming to the conclusion that the assessee's explanation in respect of the aforesaid two amounts of Rs. 24,000 and Rs. 6,500 appeared to be false. In the present case, the decision of the Tribunal is not based merely on the abstract doctrine relating to burden of proof but, in our view, the Tribunal has decided the question on the totality of the facts and circumstances of the record in the case.
9. In these circumstances, apart from the question of burden of proof, we are satisfied that the Tribunal was justified in holding that the aforesaid two amounts represented the concealed income of the assessee and, thus, no question of law arose out of the order of the Appellate Tribunal. The reference application has no merit and is, consequently, dismissed. But, in the facts and circumstances of the case, the parties are left to bear their own costs.