COMMISSIONER OF INCOME TAX Vs. DEVENDRA SINGH S

JUDGEMENT

(1.) ONE Sri Balwant Singh had income from various sources including income from business, interest from securities, income from salary as managing director of a company and as a member of the U. P. Legislative Council. The Income-tax Officer did not accept the return and made huge additions in the business income and on account of income from undisclosed sources. He also included a sum of Rs. 2,400 on account of salary received from the Government. He also initiated proceedings under Section 271(1)(c) of the Income-tax Act. As the minimum penalty imposable exceeded Rs. 1,000, he referred the matter to the Inspecting Assistant Commissioner of Income-tax under Section 274(2) of the Act, The Inspect-ing Assistant Commissioner of Income-tax came to the conclusion that the Explanation to Section 271(1)(c) was attracted as the income returned by the assessee was less than 80 per cent. of the income assessed. He levied a penalty of Rs. 26,000. It may be mentioned here that Balwant Singh after filing the return died and the assessment proceedings as also the penalty proceedings were continued against his legal representative, S. Devendra Singh, who is the assessee in the present case.

(2.) IT appears that although huge additions were made to the income by the Income-tax Officer yet most of them were knocked off on appeal, The Inspecting Assistant Commissioner of Income-tax had levied penalty with reference to the total income as computed by the Income-tax Officer but as the major additions had been knocked off on appeal the department confined its case for the purposes of penalty to the item of Rs. 2,400 received by the assessee as his salary from the U.P. Legislative Council. One of the questions that was raised before the Tribunal was as to whether the legal representative of a deceased person could be held liable for penalty for concealment when the return had been filed by the deceased during his lifetime. The Tribunal did not decide this question as in its opinion no case of concealment had been made out against the assessee in respect of salary of Rs. 2,400 which had not been included in the return. The Tribunal further found that the Explanation to Section 271(1)(c) was not applicable as the assessment year involved was 1962-63 and the Explanation was added after the expiry of the assessment year. The Tribunal, accordingly, cancelled the penalty. The Commissioner was aggrieved and applied for a reference under Section 256(1) of the Act. That application was rejected. Thereafter, the Commissioner approached this court under Section 256(2) of the Act and in pursuance of the directions of this court, the Tribunal has referred the following two questions for the opinion of this court :

(3.) NOW the findings recorded by the Tribunal that the assessee was not guilty of concealment is a finding of fact and based as it is on relevant circumstances and material cannot be challenged in a reference. The fact that the Explanation was applicable also makes no difference. The Explanation merely provides that where the income returned by an assessee is less than 80 per cent. of the income assessed as reduced by the deductions bona fide claimed and disallowed by the Income-tax Officer, the assessee shall be deemed to have concealed the particulars of his income unless he proves that the omission was not due to any fraud or wilful neglect on his part. NOW the learned counsel for the department concedes that the Explanation does not create a legal fiction so that in cases where the Explanation is applicable an assessee shall be deemed to be guilty of concealment. The Explanation raises merely a presumption which is rebuttable. It merely shifts the burden of proof from the department to the assessee. But when the question of concealment is decided on the evidence on record the question of burden of proof becomes immaterial. The Tribunal having come to the conclusion that the omission to include Rs. 2,400 in the return was accidental and was not due to any deliberate design, it could be safely presumed that the presumption raised by the Explanation stood rebutted. The presumption can be rebutted not only by direct evidence but also by circumstantial evidence. The result is that even though the Explanation was applicable the presumption raised by the Explanation stood rebutted by the circumstances of the case. This view finds full support from a decision of the Rajasthan High Court in Additional Commissioner of Income-tax v. Gem Palace [1975] 98 ITR 640 (Raj). In the end we must hold that the second question is really concluded by a finding of fact recorded by the Tribunal and its finding is supported by ample material. In our opinion, the second question is not a question of law. However, since the question has been called for by this court, we might answer it by saying that, on the facts and in the circumstances of the case, the Tribunal was correct in cancelling the penalty.