- (1.) This reference has been made on account of the directions of this Court made in Income Tax Case No. 35 of 1973, vide its order dated April 26, 1974, (Reported as Commissioner of Income Tax, Patiala-I v. Bharat tubewell Stores, 1975 100 ITR 678. It was observed by this Court that since the matter rests on the determination as to on whom the onus lies to prove that the concealment was deliberate or not and on the true effect of the Explanation to Section 27(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act), the question of law did arise on the facts and in the circumstances of the case. Consequently, the following question of law was referred to this Court :- "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that penalty was not exigible and in deleting the same ?"
(2.) The relevant facts giving rise to this Reference are that the assessee - M/s. Bharat Tubewell Stores, Sirsa, is a 'registered firm' consisting of four parents and a minor admitted to the benefits. The firm was constituted on October 4, 1967, and it derived its income from sale of tubewell material, saria, patti etc. The assessment year is 1968-69, ending on March 31, 1968. The return furnished on November 1, 1968, declared an income of Rs. 13,589/-. The Income Tax Officer completed the assessment at a total income of Rs. 33,600/- after making an addition of Rs. 20,000/-. He found that payments of at least that amount had been made to M/s. Bharat Steel Tubes Ltd., (partly on 17th October, 1967 and partly on 28th October, 1967) by the assessee out of cash lying outside the assesse's books of account. Entries regarding these payments were made in assessee's books only on November 11, 1967. The assessee's explanation was that one, Om Parkash (a brother of two of the partners of the assessee firm) used to advance to the assessee firm loans without any interest, without any security and without any instrument or even without an entry in the assessee's books, either regarding receipt of loan or regarding the repayment thereof. Entries pertaining to the payment and receipt of the two amounts aggregating to Rs. 20,000/- did appear in the account books of the said Om Parkash. The Income Tax Officer suspected the genuineness of the entries in the books of Shri Om Parkash and he impounded those books. The Income Tax Officer further rejected as unsatisfactory and assessee's explanation as to the nature and source of the sum of Rs. 20,000/- in question. The assessee being aggrieved went up in appeal before the Appellate Assistant Commissioner, but he confirmed the order of the Income Tax Officer. In second appeal before the Appellate Tribunal also, it failed. Thus the said addition of Rs. 20,000/- as income from undisclosed sources was sustained and confirmed.
(3.) On a reference under Section 274(2) of the Act, the Inspecting Assistant Commissioner initiated penalty proceedings against the assessee for concealment of the particulars of income in respect of the aforesaid amount of Rs. 20,000/- and he after invoking the provisions of the Explanation occurring below Section 27(1), imposed a penalty of Rs. 20,000/-. He took the view that since the Appellate Assistant Commissioner had after giving elaborate reasons dismissed the assessee's explanation in respect of the said sum of Rs. 20,000/- in the quantum appeal, the assessee was liable to penality and imposed Rs. 20,000/- as such. The Appellate Tribunal vide its order dated December 16, 1972, allowed the appeal of the assessee and thus deleted the penalty. The relevant observations therein by the Tribunal read as under :- "In the ultimate, the case of the Revenue is firstly that there is gross or wilful neglect on the part of the assessee as the borrowing from Shri Om Parkash and repayment of the same to him have not been incorporated in the account books of the assessee and, secondly, a charge has been levied against the assessee that he was concealed the particulars of income and furnished inaccurate particulars thereof. In the ultimate, the assessee's story has not been believed by the Revenue Authorities and so is the case with us. All the explanations given by the assessee before the authorities below and before us having not been believed or the explanations having proved to be false. But is that enough for imposition of penalty ? For imposition of penalty & the sustenance thereof the REvenue has to establish not by mere falsity of the explanation of the assessee or no explanation on the part of the assessee that the subject matter of assessment is the concealed income of the assessee, but the burden lies on the Revenue to establish the charge of concealment and the absence of an explanation or the falsity of an explanation cannot be construed as establishment of concealment. The totality of circumstances do not establish that this is the concealed income of assessee. This is what their Lordships of the Supreme Court in Anwar Ali s case, 1970 76 ITR 696 have observed, and we are of the view that the penalty is not eligible because the concealment has not been established by the Department and for this we rely on Anwar Ali s case, 1970 76 ITR 696 and Khoday Eswarsa case, 1972 83 ITR 369, both decided by their Lordships of the Supreme Court. The learned counsel for the assessee also relied on the two judgments of the Supreme Court, namely, Mohd. Hanif case, 1972 83 ITR 215 and Hindustan Steel Works, 1972 83 ITR 26. But we need not go into these citations because we are of the view that the Revenue have not been able to establish the concealment on the part of the asseee. More assessment of an amount for assessment purposes is not by itself enough to establish the concealment. We, therefore, hold that no penalty is exigible in the instant case which is deleted, and the appeal allowed.";