High Court Of Allahabad
CIT vs. Ajay Dal Mill
Sections 271(1)(c), Expln.
Dr. B.S. Chauhan & K.N. Ojha, JJ.
IT Ref. No. 310 of 1982
29th April, 2003
Counsel Appeared
Bharatji Agrawal, for the Revenue : None, for the Assessee
JUDGMENT
By the court :
This is a reference under s. 256(1) of the IT Act, 1961, wherein the following questions have been framed :
“(i) Whether, on the facts and in the circumstances of the case, the Tribunal’s finding regarding revised return dt. 15th Oct., 1976, having been filed before detection of discrepancy by the ITO was perverse in view of suchdiscrepancy having been pointed out by the ITO on an earlier date, namely, 10th Sept., 1976?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the question of the provisions of the Explanation below s. 271(1)(c) being attracted in the case had to be decided not with reference to the income declared as per the original return, but with reference to the income declared as per the revised return ?
(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in cancelling the penalty imposed under s. 271(1)(c) of the Act ?”
In spite of service of notice nobody appeared for the assessee. On behalf of the applicant, Shri Bharatji Agrawal, senior advocate, appeared. The assessee is a partnership firm, which carries on business in the manufacture and sale of “dal”. The return under the IT Act was filed on 10th March, 1975, showing the income Rs. 9,722. Subsequently, while examining the books of account of the firm on 18th Sept., 1976, the ITO found that although last purchase of “masoor” amounting to Rs. 16,452 was on 27th Feb., 1974, yet the assessee had shown a closing stock of Rs. 2,795 only. Therefore, it was pointed out by the ITO that the IT return filed on 10th March, 1975, was not correct. A revised return was filed on 15th Oct., 1976, enhancing the stock by Rs. 10,000 and the income was accordingly reported as Rs. 19,722. The ground for filing the revised return was stated to be a clerical error. But the assessing authority rejected the assessee’s contention. This has been a case of evasion of tax and filing of the revised return was not accepted to be voluntary on the basis of errors on the ground that the earlier return has been filed on some clerical errors. This addition by the assessing authority has been upheld up to the Tribunal. While considering the issue of imposition of penalty under the Explanation to s. 271(1)(c) of the Act, it was held that the proceedings were penal in character and the Department has to prove the case. The ITO rejected the explanation and held that he deliberately furnished inaccurate particulars of income by suppression of sale proceeds of “masoor” purchased on 27th Feb., 1974, and hence the penalty to the tune of Rs. 16,115 was imposed, and the Explanation added by the Finance Act, 1964, w.e.f. 1st April, 1964, was held to be applicable.
The said Explanation reads as under :
“Explanation.—”Where the total income returned by any person is less than eighty per cent of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under s. 143 or s. 144 or s. 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of cl. (c) of this sub-section.”
4. Against this order, the appeal of the assessee was dismissed. However, the Tribunal while allowing the second appeal on the issue of penalty allowed the appeal and set aside the penalty so imposed. The Tribunal committed an error in taking a note of the date as 14th Jan., 1977, for discrepancy in account, etc., for it was 18th Sept., 1976. In reply, the return has been filed on 15th Oct., 1976. Therefore, it could not be held to be a case of filing the revised return voluntarily for the reason that the discrepancy, etc., has been explained to him as pointed out by the assessing authority on 18th Sept., 1976. Since the Explanation was applicable in the instant case and the burden was on the assessee, the Tribunal has wrongly shifted the burden of proof on the Revenue.
5. The Explanation aforementioned clearly applies to this case in view of the judgment of the Supreme Court (this Court) in Durga Dutt Chunni Lal vs. CIT (1979) 120 ITR 319 (All). Our view stands fortified by a Division Bench judgment of this Court in CIT vs. Gyan Prakash (1979) 8 CTR (All) 197 : (1979) 116 ITR 513 (All), wherein it has been held that if the Explanation is applicable, the burden of proof lies on the assessee and not upon the Revenue. As in the original return income has been shown on Rs. 9,722 and assessed income was Rs. 26,250 and being a difference of more than 80 per cent as Explanation says, and the burden of proof was shifted to the Revenue (Assessee). Accordingly, all the three questions are decided in favour of the Revenue.
[Citation : 263 ITR 66]
