C.S.P. Singh, J. - (1.) IN pursuance of directions issued by this court, the INcome-tax Appellate Tribunal, Delhi Bench C, has referred the following question for our opinion : "Whether, on the facts and in the circumstances of the case and having regard to the Explanation to Section 271(1)(c) of the I.T. Act, 1961, the Tribunal was legally correct in holding that the onus of proving the deposits as assessee's income lay on the department ?"
(2.) THE assessment year in question is the year 1964-65. THE assessee who carried on money-lending business filed a return showing an income of Rs. 1,326 from property and a loss of Rs. 255 from business. THE ITO, however, completed the assessment on a total income of Rs. 52,931. This amount was computed by making the following addition : Rs. 25,000 on account of unexplained investment treated as income from undisclosed sources; Rs. 14,748 on account of difference in the balance-sheet; Rs. 6,000 for low rate of interest shown; Rs. 5,000 disallowed out of expenses claimed. The assessee filed an appeal against the assessment order. The AAC deleted both the additions of Rs. 5,000 and Rs. 6,000 and also reduced the addition of Rs. 14,748 on account of difference in the balance-sheet to Rs. 1,505 only. As a result of this, the additions that survived were to the tune of Rs. 25,000 on account of unexplained investment treated as income from undisclosed sources and Rs. 1,505 on account of difference in the balance-sheet. The appeal filed by the assessee before the Tribunal failed. After making the assessment, the ITO initiated, penalty proceedings under Section 271(1)(c) of the Act, and referred the case to the IAC as the penalty .imposable exceeded Rs. 1,000. The assessee's explanation to the show-cause penalty notice was that the item of Rs. 25,000 was made up from withdrawals made by the assessee at the rate of Rs. 300 per month from the assessment year 1942-43 till 1950-51 and further withdrawals of Rs. 4,500 during the assessment years 1951-52 to 1964-65. It was contended that the assessee had been able to save an amount of Rs. 25,000 out of these withdrawals during the period which covered a period of 23 years and that this amount was deposited by her during the accounting year relevant to the assessment year. In regard to the addition for difference in the balance-sheet, it was stated that the discrepancy was attributable to totalling mistake. As regards the other additions, the asses-see's case was that they were arbitrary and unjustified. The IAC rejected the explanation of the assessee. He held that it was not probable that the assessee would have withdrawn this amount solely for the purposes of keeping it in the form of cash at her home. In his view, the withdrawals in the earlier years were utilised for the purpose for which they were made. He also took the view that inasmuch as the returned income was less than 80% of the assessed income, the Explanation to Section 271(1)(c) of the Act applied, and the onus lay upon the assessee, which had not been discharged by her. In view of this finding, he imposed a penalty of Rs. 15,000.
(3.) THE assessee preferred an appeal to the Tribunal. THE Tribunal held that although the explanation of the assessee in respect of the deposit made was rejected for assessment purposes, that by itself would not justify inclusion of the amount for levy of penalty. Following the decision of the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696, it held that the onus of proving that the case fell within Section 271(1)(c) lay upon the department and as in its view the department had failed to discharge that onus the order levying penalty could not be sustained. It accordingly allowed the appeal. Section 271(1)(c) of the Act has been the subject-matter of a number of amendments but fqr the purposes of the present case, it is necessary only to notice two amendments. Up to the 1st April, 1964, Section 271(1)(c) read as under: "has concealed the particulars of income or deliberately furnished inaccurate particulars of such income....." ;