V.K. SINGHAL, J. - (1.) THE Tribunal has referred the following two questions of law arising out of its order dt. 24th July, 1984 in respect of asst. yr. 1969-70 under s. 256(1) of the IT Act, 1961: "Whether, on the facts and circumstances of the case and on the true interpretation of s. 271(1)(c) as inserted by Finance Act, 1964 or Expln. 1 as substituted w.e.f. 1st April, 1976, the Tribunal was correct in law in laying down that the assessee must establish that there was no concealment and whether the burden of proof had not been established by him at all and whether the penalty was justified ? 2. Whether, the Tribunal was justified in holding that the penalty was to be quantified as per law in force in October, 1971?"
(2.) THE brief facts of the case are that the assessee filed return in respect of asst. yr. 1969-70 declaring the total income of Rs. 12,814 in 1971. Subsequently said return was revised in 1976 wherein the assessee surrendered a sum of R.s 30,000 on the basis of certain discrepancies which were found in the books of account/bank account. THEreafter, another revised return was filed in 1977 wherein the surrender of Rs. 30,000 which was included in the return filed in 1976 was deleted. THE ITO observed that in the assessment proceedings after considering the various explanations in regard to the investments in banks, etc., a sum of Rs. 16,000 was held as unexplained investment and was added to the income of the assessee. A request was made by the assessee for inspection of the records, but on the appointed date of inspection no one turned up for inspection. THE ITO came to the conclusion that concealment is proved. This fact was further supported from another fact that the assessee has not preferred any appeal in respect of the said addition. In the penalty proceedings, it was found that the original return was filed on 30th Oct., 1971 in response to the notice issued under s. 148 wherein the income of Rs. 12,814 was declared. In the assessment proceedings the ITO went into the details of investment and the sources disclosed by the assessee. THE state ment of Birbal, the brother of the assessee, was recorded in the presence of the assessee and his counsel and a query was made that an FDR of Rs 28,000 was taken in the name of Smt. Alka Chaudhary from Dena Bank and the cash available was only Rs. 11,000. THErefore, the source of investment was asked and it was asked as to why the balance of Rs. 16,600 be not treated as unexplained investment. After this query the assessee filed revised return. THE ITO made further more queries and further notice was issued and an ex parte order was made on 10th March, 1976 as no compliance was made of the notice issued. THE assessment was reopened under s. 146 and reassessment proceedings were commenced and the ITO again asked the assessee to explain the source of deposit of the FDR for Rs. 28,000. No such entry was made in the books of the assessee. A reply was filed on 10th Dec., 1976 by the authorised representative of the assessee that there was a mistake in writing the books and the investment was from the amount borrowed from Birbal Singh. It was on this basis that the return was further revised on 4th March, 1977 and in creased income was reduced to Rs. 12,814. Again there was dis crepancy with regard to the dates and ultimately the assessee submitted that the amount did not come from Birbal Singh but the assessee himself had sufficient cash balance. In the reassessment order dt. 12th April, 1977, the ITO found that the assessee could not explain Rs. 16,000 which was added to the income of the assessee. Notice was issued on 24th April, 1977 for initiating the penalty proceedings. Another notice was issued on 18th May, 1982 on which the application for inspection for record was made. THE assessee was given opportunity but no one turned up for inspection till 21st July, 1982. On the basis of the finding recorded that the cash book was not containing the sufficient amount for FD of Rs. 28,000 and the receipt in cash from Birbal Singh stands vanished on the basis of statement recorded and the fact that the amounts were withdrawn by him from the commission agent subsequent to the purchase of the FD receipt, therefore, the penalty of Rs. 16,000 was levied by the ITO. In appeal it was found that the case of the assessee is covered by Expln. to sub-s. (1) which was operative during the period from 1st April, 1964 to 31st March, 1976. THE AAC found that the explanation given by the assessee was false and concealment has been proved at the assessment stage, the assessment proceedings having become final and no evidence was produced in the penalty proceedings, it was held that the assessee has not discharged the burden and thus he is liable to penalty. In the second appeal before the Tribunal, the Tribunal said that in view of the Expln. to s. 271(1)(c) which is attracted the assessee must establish the fact that there has been no concealment at all. THE assessee could not establish the fact as to from what source the moneys have come. THE order of penalty was upheld with the direction to the ITO to calculate and levy the penalty in accordance with law in force on the date when the return was filed which in the instant case is 31st Oct., 1971. Learned counsel for the assessee has pressed before us only the first question, namely, that simply because the explanation of the assessee has not been accepted the assessee cannot be subjected to penalty. We have considered over the matter. From a perusal of Expln. to s. 271(1)(c), it is clear that the burden was on the assessee to prove that the failure to return the correct income was not on account of any fraud, gross or wilful negligence of the assessee. It is not in dispute that the income returned is less than 80% of the total income assessed. The said Explanation, therefore, is clearly attracted. The assessee has not discharged his burden that there was no fraud or gross or wilful negligence on his part. In these circumstances, the Tribunal was justified in laying down that the assessee must establish that there was no concealment and the burden of proof had not been discharged by him and the penalty was justified. Consequently, the reference is answered in favour of the Revenue and against the assessee. No order as to costs. ;