M.C. Agarwal, J. - (1.) IN pursuance of the directions of this court under Section 256(2) of the INcome-tax Act, 1961, the INcome-tax Appellate Tribunal (Delhi Bench 'D.', Delhi), has referred the following questions for the opinion of this court : "(i) Whether the assessee can, in law, be said to have discharged its onus under Explanation to Section 271(1)(c) of the Act ? (ii) Whether, on the facts and in the circumstances of the case, penalty is exigible under the provisions of Section 271(1)(c) of the INcome-tax Act, 1961 ? (iii) Whether the Tribunal is in law justified in deciding the appeal without going into applicability of Explanation to Section 271(1)(c) to the assessee's case ?"
(2.) WE have heard Sri Shekhar Srivastava, learned counsel for the Revenue, and Sri Sakeel Ahmad, learned counsel for the assessee. The proceedings relate to the assessment year 1969-70 for which the assessee filed a return declaring an income of Rs. 18,139. The income finally determined was, however, Rs. 55,767. The Inspecting Assistant Commissioner levied a penalty of Rs. 38,000 calling in aid the Explanation to Section 271(1)(c) of the Act. The assessee appealed to the Income-tax Appellate Tribunal which allowed the appeal holding that the Revenue had not discharged its onus. The Income-tax Appellate Tribunal observed as follows : "If the assessee cannot prove his case, the assessment is justified. But in order to impose the penalty, the Revenue authorities cannot merely say that the penalty is attracted because the assessee has not been able to prove its case. On the other hand, the Revenue authorities have to disprove the assessee's case and disproving is not on the mere ipsi dixit of the Revenue authorities but on the basis of the material brought on record. And what is the material on record, the Inspecting Assistant Commissioner's order indicates the unexplained investment as sustained by the Tribunal. That hardly constitutes the material because that amounts to merely relying on the fact that the assessee has not been able to prove its case, while the law enjoins that the Revenue must disprove the assessee's case. The Revenue authorities failed to disprove the assessee's case and establish by material on record that the addition as sustained by the Tribunal is the assessee's income from concealed sources. Therefore, the penalty cannot be imposed by the Revenue because the Revenue has not discharged its onus."
(3.) ADMITTEDLY, in this case, the income returned by the assessee was less than 80 per cent. of the income assessed. The Explanation to Section 271(1)(c) of the Act reads as below ; "Explanation.--Where the total income returned by any person is less than 80 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 sub-section." Learned counsel for the Revenue placed reliance on the judgment of the Supreme Court in CIT v. Mussadilal Ram Bharose, 1987 165 ITR 14 in which it was held that in a case to which the Explanation aforesaid applies, the burden shifts to the assessee to show that the difference was not owing to fraud or gross or wilful neglect on its part. This view was repeated in CIT v. K.R. Sadayappan [1990] 185 ITR 49 (SC).;