Ajtt K. Sengupta, J.
1. For the assessment year 1963-64, the following questions of law have been referred by the Tribunal under Section 256(2) of the Income-tax Act, 1961:
'1. Whether, on the facts and in the circumstances of the case, the Tribunal relied on irrelevant materials to hold that the assessee had discharged the onus that lay on it under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961
2. Whether, on the facts and in the circumstances of the case, the Tribunal had any evidence to come to the finding that the assessee was not guilty of fraud or any gross or wilful neglect in not returning the correct income within the meaning of the Explanation to Section 271(1)(c) of the Income-tax Act, 1961
3. If the answer to question No. 2 is in the negative, then, whether, on the facts and in the circumstances of the case and on a correct interpretation of the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, the Tribunal was justified in cancelling the order of penalty made under the said section '
2. The assessee is a firm registered under the Income-tax Act and the relevant assessment year is 1963-64. The return of income was filed on August 20, 1963, showing income of Rs. 57,174 but subsequently on May 12, 1966, a revised return was filed declaring an income of Rs. 50,141. In the course of the assessment proceedings, the Income-tax Officer noticed several cash credits. The assessee was required to explain the nature and source of the cash credits. Confirmatory letters from the creditors and discharged hundis of the creditors were filed and the addresses of the parties were also furnished. The Income-tax Officer was not satisfied with the evidence tendered before him and the peak credit of the loans, i.e., Rs. 1,14,000, was included as the assessee's income from undisclosed sources. With reference to this addition, penalty proceedings were initiated under Section 271(1)(c) and since the penalty imposable exceeded Rs. 1,000, the penalty proceedings were transferred to the Inspecting Assistant Commissioner in accordance with the provisions of Section 274(2) of the Act. After giving a show-cause notice to the assessee and hearing its representative, the Inspecting Assistant Commissioner held that the assessee had not discharged its onus and was, therefore, guilty of concealment on the basis of the Explanation to Section 271(1)(c) of the Act. A penalty of Rs. 84,000 was thus imposed.
3. Being aggrieved, the assessee preferred an appeal to the Appellate Tribunal. The Tribunal held that the assessee had discharged the onus. The Department has not placed any evidence to rebut the material evidenceproduced by the assessee. According to the Tribunal, the Department has not proved that the assessee had been guilty of concealment of income. The Tribunal accordingly cancelled the order of penalty. The question is whether, on the facts and in the circumstances, the Tribunal was right in its conclusion that the onus that lay on the assessee under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, was discharged. The said Explanation presumes gross or wilful neglect on the part of the assessee in the circumstances stated therein. The presumption is a rebuttable presumption. The assessee has first to discharge the onus. If the presumption is rebutted by evidence, then the onus is shifted to the Department to prove that the assessee has concealed the income or has furnished inaccurate particulars thereof. The assessee has to explain the reason for the difference in the correct income. If there is a difference of more than 20% between the income returned and the income assessed, at that stage the assessee is only concerned to explain the gap between 'the returned income and the assessed income'. The explantion may be accepted or rejected by the Department. But mere rejection of the explanation even in respect of the gap or difference cannot by itself prove that the assessee concealed the income. The assessee has to show that the difference was not attributable to either fraud or any gross or wilful neglect. The authority cannot proceed to impose penalty solely on the rejection as regards the difference between the assessed income and the returned income. The burden would still lie on the Revenue to establish that the addition which has been made to the income of the assessee is his income and the assessee has concealed such income or particulars thereof. In the instant case, the assessee produced the confirmatory letters. The assessee also furnished the particulars of the cheques where the assessee received payments by cheques. The assessee also produced the discharged hundis. The addresses of the creditors had been furnished. No enquiry was thereafter made by the Department to show that the contents of the confirmatory letters were not true. The Department has not also enquired into the payments received by the assessee by cheques, which they could have done from the concerned bank. It is not the case of the Department that the creditors were not found in the given addresses or they did not respond to the summons issued to them under Section 131 of the Income-tax Act, 1961. The Tribunal after taking into consideration the entire facts and circumstances came to the conclusion that the assessee had discharged the onus and the Department had not placed any evidence to rebut the material evidence produced by the assessee. It cannot be said that in arriving at the said conclusion, the Tribunal relied on any irrelevant material. The view taken by the Tribunal cannot be said to be either perverse or unreasonable.
4. In the premises, we answer the first question in the negative and the second question in the affirmative and in favour of the assesses. In view of our answer to the second question, we decline to answer question No. 3.
5. There will be no order as to costs.
Dipak Kumar Sen , J.
6. I agree.