COMMISSIONER OF INCOME TAX Vs. GULAB CHAND KESHARI

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act. The present reference arises out of a proceeding initiated against the assessee. The bone of contention was a house property standing in the name of the assessee's wife. When called upon to explain the sources of income for purchase of the house, the assessee took the stand in the assessment proceeding that the house had been purchased by his wife out of her own funds- The investment was explained in the manner that Rs. 10,000 was money received by his wife from her father-in-law, Rs. 8,000 had been gifted to her by her father and Rs. 7,000 was her personal domestic saving and from money-lending. The stand of the assessee was rejected in the assessment proceeding. There being a difference of more than 20 per cent, between the assessed sum and the returned income, penalty proceeding was initiated against the assessee. In the assessment proceeding, the plea that the house was the property of his wife was not accepted. The stand of the assessee in the penalty proceeding was that in earlier years between 1955-56 to 1961-62, the assessee had been assessed to an income of 38,000. They were claimed to be intangible additions which provided the sources for investment in the purchase of the house. The Inspecting Assistant Commissioner accepted the stand of the assessee in part inasmuch as credit was given for Rs. 10,000 out of past saving as held by the Income-tax Officer as well. In regard to the balance sum of Rs. 15,000, no reasonable explanation having been advanced, the Inspecting Assistant Commissioner imposed a penalty of Rs. 15,000. The assessee, being aggrieved by the order of the Inspecting Assistant Commissioner, appealed to the Appellate Tribunal. No one appeared at the time of hearing of the appeal on behalf of the assessee. A telegram had been received on behalf of the assessee for adjourning the hearing of the appeal. The prayer for adjournment was rejected. The Tribunal thereafter proceeded to dispose of the appeal ex parte. The Tribunal set aside the order of penalty on the authority of the case of CIT v. Anwar Ali [1970] 76 ITR 696 (SC). The Revenue being aggrieved by the order of the Tribunal setting aside the penalty, moved the Tribunal for making a reference to this court. The Tribunal acceded to the prayer and has forwarded the following question for our opinion :

(2.) NO one has appeared on behalf of the assessee before us despite service of notice. We have, therefore, heard Mr. B. P. Rajgarhia, standing counsel, Income-tax Department. From the facts narrated above, it will be seen that the Tribunal deleted the penalty on the basis of the decision in the case of Anwar Ali [1970] 76 ITR 696 (SC). This court in Taxation Case NO. 65 of 1974, disposed of on March 12, 1985 (CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292 [FB]) has held that after the enactment of the Explanation to Section 271(1)(c) of the Income-tax Act, Anwar Ali's case is no longer the law of the land. The Tribunal did not record any finding that the explanation of the assessee in regard to undisclosed sources of income was reasonable. The law is that in terms of the Explanation to Section 271(1)(c), the onus of explaining undisclosed income lies squarely upon the assessee. If the assessee advances reasonable explanation, then the onus may shift back to the Revenue. In the instant case, nothing was produced or shown before the Inspecting Assistant Commissioner that the assessee had advanced any reasonable explanation whereby the undisclosed income of Rs. 15,000 could be explained. The Inspecting Assistant Commissioner in unmistakable terms held that the assessee was guilty of concealing an income of Rs. 15,000. The Tribunal did not reject that finding. The conclusion, therefore, must be that the Tribunal was in agreement with the finding of fact of the Inspecting Assistant Commissioner. The Tribunal set aside the penalty observing as follows :