COMMISSIONER OF INCOME TAX Vs. ASHOK KUMAR JHA

JUDGEMENT

(1.) The Income-tax Appellate Tribunal has referred the following questions of law pursuant to the order of this court for its opinion under Section 256(2) of the Income-tax Act, 1961, at the instance of the Revenue :

(2.) The material facts are as follows : The assessee filed returns showing income of Rs. 9,400 and Rs. 4,500 from truck business for the assessment years 1966-67 and 1967-68, respectively. The Income-tax Officer, in the course of assessment proceedings, found that the assessee had made investment of Rs. 42,100 for purchase of the truck. As to the source of investment, it was the case of the assessee before the Income-tax Officer that Motor and General Finance Limited, New Delhi, had arranged finance and the assessee had made payment to the financier by instalments. The Income-tax Officer noted that 12 instalments of the total value of Rs. 17,000, had been paid to the financier during the assessment year 1966-67 and, likewise, 12 instalments of the value of Rs. 20,400 had been paid during the assessment year 1967-68. In the absence of any supporting evidence, the Income-tax Officer took the view that the assessee had paid the instalments from his current income and, accordingly, he assessed the income of the assessee at Rs. 24,400 and Rs. 21,000, respectively, subject to depreciation. He, in the circumstances, initiated penalty proceedings under Section 271(1)(c) of the Act and finally imposed penalty of Rs. 1,831 and Rs. 1,405 for the two years which were later enhanced to Rs. 4,500 and Rs. 9,003 after rectification as returns had been filed on September 27, 1972, and as per the law then applicable the penalty was to be levied on the basis of the concealed income and not on the basis of the tax sought to be evaded.

(3.) The assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner deleted the penalties for both the years. In so doing, he took the view that mere rejection of the explanation as to non-submission/concealment of income was not sufficient for imposing the penalty under Section 271(1)(c) and the onus lay on the Department to prove the fact that the assessee had deliberately concealed the income or had furnished the incorrect particulars. He also observed that no element of mens rea had been found on the part of the assessee, by the Income-tax Officer. On appeal by the Department, the Income-tax Appellate Tribunal while upholding the order of the Appellate Assistant Commissioner observed that there was no material on record from which it could be inferred that the assessee had either concealed his income or committed fraud or gross or wilful neglect in returning the assessed income.