ADDITIONAL COMMISSIONER OF INCOME TAX Vs. BIHAR STATE CO OPERATIVE MARKETING UNION LIMITED

JUDGEMENT

(1.) THIS is a reference under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The question that falls for consideration and referred to us is :

(2.) THE facts, in brief, are that the assessee filed its original return showing an income of Rs. 4,65,965. THEreafter, a revised return was filed showing loss of Rs. 1,00,415. THE assessment was ultimately made on an income of Rs. 7,97,638. This figure was arrived at by certain additions and disallowance of deductions claimed. THE Income-tax Officer, finding concealment of income, initiated proceedings for levy of penalty. THE penalty liable to be levied being a sum exceeding rupees one thousand, the matter was referred to the Inspecting Assistant Commissioner. THE latter levied a penalty of Rs. 86,500. THE assessee being aggrieved by the levy of penalty by the Inspecting Assistant Commissioner appealed to the Appellate Tribunal. THE Tribunal set aside the penalty on two counts, firstly, that there was no mens rea in the concealment, which was essential for the imposition of penalty and, secondly, that the additions and disallowances were just made on estimate and that they had not been proved by cogent materials by the Department that the assessee earned some profits other than those shown in the books which were not accounted for. THE Tribunal based its decision upon CIT v. Anwar Ali [1970] 76 ITR 696 (SC). From the order of the Tribunal, it appears that it was of the view that the onus to prove the concealment was upon the Department and that there was no mens rea on the part of the assessee. THEse considerations are irrelevant now, after the amendment of Section 271(1)(c) of the Act and incorporation of the Explanation to that provision of law. THE scope and ambit of the Explanation vis-a-vis the onus cast upon the assessee and the Department came up for consideration before a Full Bench of this court presided over by Hon'ble the Chief Justice in CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292. (Tax case No. 65 of 1974, disposed of on 12th March, 1985). THE decision of Sandhawalia C.J., which was the leading judgment, laid down as follows (at page 302) :