COMMISSIONER OF INCOME TAX Vs. CHOTA NAGPUR GLASS WORKS

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Patna Bench, has stated a case and referred to this court under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as " the Act "), the following question of law:

(2.) I may take the necessary facts from the statement of the case. In respect of the assessment year 1965-66, the ITO noted certain cash credits and the assessee was called upon to explain the genuineness of these credits. The assessee gave an explanation in respect of some of these credits and they were accepted. But in respect of three credits in the names of Shri Surendranath Deogharia, Bujjan Kumar Khetan and Ramjatanjee Chaturvedi, the asessee submitted that though they were genuine loans, the parties were not in a position to come forward and depose before the ITO regarding those credits; it was further stated by the assessee that he was not in a position to give further evidence in support of the genuineness of these credits and he was agreeable to be assessed in respect of the three credits of those amounts. The ITO added Rs. 43,000 as the assessee's income from undisclosed sources, as that was the peak credit of those three accounts.

(3.) IT is well settled that, under the provisions of Section 271(l)(c) of the I.T. Act, 1961, read with the Explanation thereto, as soon as it is found that there was a difference of more than 20% between the income returned and the income assessed, Clause (c) comes into operation by the rule of presumption engrafted in the Explanation and it is for the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. If he succeeds in discharging that onus, no penalty can be imposed under Section 271(l)(c) of the Act. When a case is covered by the Explanation, then, on the failure of the assessee to discharge the onus of proving absence of certain ingredients the rule of presumption not only covers the matter of conscious concealment or furnishing of incorrect particulars on the part of the assessee, but on a plain and grammatical meaning of the provision it also ropes in the presumption of the assessed income being that of the assessee, it is difficult to bifurcate the rule of presumption into two and to say that it only affects the first part and not the second. If the assessee while supplying the particulars of his income gives inaccurate particulars as a result of his fraud or gross or wilful neglect then and then only he can be subjected to the imposition of penalty under the second part of Clause (c). Unless such ingredients are found on the finding of a mere difference in the particulars of income and the figure of income assessed, it cannot be said that the assessee furnished inaccurate particulars of such income. When it will amount to furnishing of inaccurate particulars with an element of fraud or gross or wilful neglect on the part of the assessee will depend on the facts and circumstances of each case. Mere negligence in furnishing the particulars which are found to be inaccurate is not enough. The neglect must be either wilful or at least gross. The expression " wilful neglect " again imports neglect of a kind where the neglect is mixed with a conscious, wilful or deliberate act of the assessee. The standard of proof applicable to prove a positive fact, and the one which is required to prove a negative fact cannot be the same. A high standard is always applied for the proof of a positive fact while the standard of preponderant probabilities is sufficient to prove a negative fact. The assessee, within the" meaning of the Explanation, is required to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. IT the assessee succeeds in discharging the initial onus on him, then the onus shifts back to the Department to prove the positive fact that the failure to return the correct income on the part of the assessee was as a result of his fraud or gross or wilful neglect.