(1.) THE Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short, "the Tribunal"), has referred the following two questions of law along with the statement of the case, for the opinion of this court :
(2.) FOR the assessment year 1967-68, relevant to the accounting period ending March 31, 1967, the assessee filed its return of income on August 24, 1971, declaring a total income of Rs. 17,180. Claiming a brought forward loss of Rs. 70,172 against the above income, a net loss of Rs. 52,992 was declared by the assessee. The Income-tax Officer required the assessee to produce its books of account in support of the income/loss shown in the return of income. The assessee did not comply with the requirement of the Income-tax Officer and did not produce the books of account. The Income-tax Officer examined both the partners of the firm, namely, Tilak Raj and Sat Pal, and both of them denied having the possession of the books of account. The Income-tax Officer specifically made the two partners aware of the consequences which could follow in case the books of account were not produced, but, despite several opportunities and enough time allowed, the books of account were not produced before the Income-tax Officer for examination. The Income-tax Officer, under the circumstances, completed the assessment under Section 144 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), to the best of his judgment on a net income of Rs. 50,000. He also initiated penalty proceedings under Section 271 of the Act and as the minimum penalty imposable exceeded a sum of Rs. 1,000, he referred the case to the Inspecting Assistant Commissioner under Section 274 (2) of the Act. The orders passed by the Income-tax Officer in the quantum case were affirmed in appeal.
(3.) AGGRIEVED by the order of penalty passed by the Inspecting Assistant Commissioner, the assessee went in appeal before the Tribunal. After hearing both the parties and after going through the record, the Tribunal cancelled the penalty of Rs. 70,000 imposed by the Inspecting Assistant Commissioner under Section 271 (1) (c) of the Act. It was held by the Tribunal that the assessment in this case was completed under Section 144 on an estimated income of Rs. 50,000 on account of the failure on the part of the assessee to produce its books of account for examination before the Income-tax Officer, and there being no evidence to show that there was any positive concealment on the part of the assessee, the penalty imposed under the Explanation to section 271 (1) (c) of the Act was not sustainable as there was no element of mens rea or conscious concealment on the part of the assessee. Holding that the penalty proceedings partake of the character of criminal prosecution and the onus squarely lies on the Department to bring home the offence of concealment on the part of the assessee, which the Department failed to discharge, the penalty levied was cancelled. For this, reliance was placed on a judgment of the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696 and a judgment of this court in Addl. CIT v. Karnail Singh v. Kaleran [1974] 94 ITR 505. In both these judgments, it was held that the onus to prove that there was any concealment of income was on the Department and as the Department had failed to discharge the onus, the penalty could not be levied.