- (1.) THE Income-tax Appellate Tribunal, Delhi Bench, has referred the following question of law for the opinion of this court under Section 256(1) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax, Lucknow : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty imposed upon the assessee on the ground that the assessee had discharged his onus under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961 ?"
(2.) THE assessee was a partner in two firms, namely Janta Ice and Cold Storage, Moradabad, and Swantantra Grin Nirman Rastriya Udyog, Moradabad. In the assessment year 1971-72 two additions of Rs. 61,500 and Rs. 60,000 were made to the income of the assessee as income from undisclosed sources, respectively, under the heads (i) agricultural account, and (ii) Smt. Mukhtary Begum. Likewise in the assessment year 1972-75 an amount of Rs. 20,000 was added as income from undisclosed sources under "Agricultural account". On appeal to the Income-tax Appellate Tribunal in due course, on the quantum side, the amount of Rs. 60,000 under the head "Smt. Mukhtary Begum" assessed in the assessment year 1971-72 was deleted. However, the addition of the other amounts was upheld in both the assessment years. During the course of assessment proceedings, penalty proceedings for concealment of income under Section 271(1)(c) were initiated and the assessee was subjected to a separate penalty, in both the assessment years under dispute by a common order passed by the Inspecting Assistant Commissioner of Income-tax mainly relying upon the Explanation to Section 271(1)(c) as it stood at the relevant time, that the difference between the total income returned was less than eighty per cent. of the total assessed income and the failure to return the correct income was on account of fraud or gross or wilful neglect on the part of the assessee. The assessee brought the matter in appeal before the Income-tax Appellate Tribunal which let off the penalties. Hence this reference at the instance of the Revenue.
(3.) WE have heard learned counsel for the parties. It may be observed that the two amounts which were sustained as income from undisclosed sources, according to the assessee, were received from one Ram Swarup, who was produced before the Income-tax Officer and his statement was also recorded. He accepted that the amounts in dispute were given by him to the assessee. It is not disputed that Ram Swarup was cultivating the land of the assessee. According to the assessee, he owned 3 1/2 acres of land which was under dispute with the Municipal Board for the past seven years and was in the possession of Sri Ram Swarup from the time of the assessee's father, who died in May 1965. According to the assessee, he entered into a written agreement dated July 15, 1969, for a period of 12 years with Ram Swarup under which he was required to pay Rs. 80,000 to the assessee out of the sale of agricultural produce together with some vegetables which had to be grown in the land. Sri Ram Swarup in his statement before the Income-tax Officer testified to the payment of Rs. 81,500 having been made by him and his explanation was that the money was available with him out of the sale proceeds of the land which he had sold for Rs. 70,848 by a sale deed dated December 27, 1968. While deleting the penalty, the Tribunal recorded its finding as under ; "The assessee had done all that was in his power to prove the genuineness of the deposits in question. It was not doubted that the assessee did own 3 1/4 acres of land. Shri Ram Swarup, to whom this land was leased was also undisputably cultivating and was in possession of these lands, It is, therefore, not clear as to how could it be held that Shri Ram Swarup had no income from the land and he did not make any payment to the assessee. Shri Ram Swarup had also given the source of payments and that was the sale proceeds of his own land in terms of sale deed dated December 27, 1968, for a consideration of Rs. 70,848. We are of the view that this evidence is sufficient to raise probabilities and create doubts, the benefit of which can be given to the assessee in the course of the penalty proceedings. In the circumstances, we hold that the onus that lay on the assessee under the Explanation to Section 271(1)(c) was discharged. Hence, we cancel the impugned penalties." ;