Madhya Pradesh H.C : Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the assessee had discharged the onus cast on it under the statutory Explanation below s. 271(1)(c) of the IT Act, 1961 ?

Counsel Appeared

B.K. Rawat, for the Revenue : B.L. Nema, for the Assessee

N.D. OJHA, C.J.:

The Tribunal, Jabalpur Bench, Jabalpur, has referred the following two questions to this Court for its opinion:

” (1) Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the assessee had discharged the onus cast on it under the statutory Explanation below s. 271(1)(c) of the IT Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in cancelling the penalty of Rs. 20,000 imposed under s. 271 (1)(c) of the IT Act, 1961 ? “

2. The facts of the case, in a nutshell, are that in proceedings for determination of assessment, a best judgment assessment was made by the ITO. Ultimately, the matter was taken up before the Tribunal and the Tribunal confirmed the total income of Rs. 73,407 determined by the ITO. The assessee, in its return, had for the relevant assessment year, disclosed its total income as Rs. 24,387. Thus the total income disclosed by the assessee was less than 80 per cent of the total income assessed and the provisions of the Explanation to s. 271(1)(c) of the IT Act, 1961 (hereinafter referred to as ” the Act “), were attracted. The ITO made a reference to the IAC, who imposed a penalty of Rs. 20,000 under s. 271 (1)(c) of the Act. The matter was taken up by the assessee before the Tribunal. The appeal was allowed by the Tribunal and while doing so, it recorded the following finding : ” The penalty in this case has been levied on the basis of estimate of income which, in our view, cannot lead us to conclude that there was conscious concealment on the part of the assessee. In our view, it is not a fit case for levy of penalty, more so, when the assessee discharged the initial onus cast upon it in view of the application of the provisions of the Explanation to s. 271(1)(c) of the Act. It was for the Revenue to prove by cogent evidence that the assessee concealed the particulars of income and was guilty of fraud or gross or wilful neglect on its part. “

3. It has been urged by learned counsel for the Revenue that while reversing the order of the IAC and while recording a finding that the assessee had discharged the initial onus cast upon it, the Tribunal has not referred to any material whatsoever in support of the finding that the assessee had discharged the initial onus. Consequently, the questions referred to this Court deserve to be answered in favour of the Revenue. For the assessee, on the other hand, it was urged by its learned counsel that the finding as to whether the initial onus cast upon the assessee had been discharged by it or not, is a finding of fact and on that finding no question of law arises.

4. Having considered the respective submissions made by counsel for the parties, we are of opinion that the submission made by learned counsel for the Revenue that the order of reversal passed by the Tribunal as well as its finding that the assessee had discharged the initial onus, is based on no other circumstance or material, except the circumstance that it was a case of a best judgment assessment. The question which falls for consideration is whether in law it was possible for the Tribunal to hold that the case of a best judgment assessment stands on a different footing in the matter of imposition of penalty. In our opinion, the Tribunal committed an error in taking the view which it did. Addl. CIT vs. Lakshmi Industries and Cold Storage Co. Ltd. (1983) 32 CTR (All) 195 : (1984) 146 ITR 492 (All) was also a case of best judgment assessment and it was held in that case that the provisions of s. 271 (1)(c) of the Act were applicable. Similar view was taken by a Division Bench of this Court in Hansraj Aggarwal vs. Addl. CIT (1979) 119 ITR 688 (MP). The only circumstance on the basis of which the Tribunal came to the conclusion that the initial onus had been discharged by the assessee, namely, that it was a case of a best judgment assessment, is no circumstance in the eye of law. It is settled law that a finding based on no evidence or a finding to which no reasonable person, properly instructed in law, could have come, would be a perverse finding. If a finding is perverse, it is not possible to say that the Tribunal was right on the basis of such a finding to come to the conclusion that the initial onus had been discharged by the assessee.

In support of his submission that the finding as to whether the initial onus had been discharged or not, is a finding of fact, learned counsel for the assessee has placed reliance on a decision of this Court in Mohammad Shabbir vs. CIT (1984) 41 CTR (MP) 320 : (1984) 148 ITR 111. Having gone through this decision, we are of the opinion that this case instead of supporting the submission made by counsel for the assessee, really goes against the assessee. That was a case where, after decision of the quantum appeal, penalty proceedings were initiated, where the assessee had a chance of furnishing “fresh material or evidence to prove availability of funds. No attempt was made by him and no fresh material was produced. In this background, it was pointed out that the presumption raised by the Explanation to s. 271 (1)(c) of the Act was not displaced by the assessee by showing that there was no fraud or gross or wilful neglect on his part. It was held that, in these circumstances, the authorities below had no option but to hold that under the Explanation, the assessee would be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of cl. (c) of sub-s. (1) of s. 271. It was in connection with this finding that it was ultimately held that the finding was a finding of fact. As will be seen in the instant case, after the decision of the quantum appeal by the Tribunal, no attempt was made by the assessee and no fresh material was produced and, at any rate, none has been pointed out by the Tribunal on the basis of which it could be said that the assessee had succeeded in rebutting the presumption. Consequently, as pointed out in the case of Mohammed Shabbir vs. CIT (supra), the only conclusion, in the circumstances, which the Tribunal could have come to, was that the assessee had failed to rebut the presumption.

Learned counsel for the assessee then placed reliance on the decision in CIT vs. Pradeep Shantaram Padgaonkar (1983) 143 ITR 785 (MP). In that case also, there was material on the basis of which the Tribunal recorded its finding. The Tribunal had found that the materials placed on record by the assessee, i.e., the certificate of the Secretary of the Maharani, showing that gifts and donations were made by the Maharani to the assessee from time to time, was not considered while imposing penalty on the assessee. This is one circumstance which weighed with the Tribunal in recording that finding. The Tribunal also held that even if the Explanation to s. 271(1)(c) of the Act was invoked, there was nothing to indicate that the assessee was guilty of fraud or gross or wilful neglect in returning the income and, in these circumstances, it could be said that since the finding recorded by the Tribunal setting aside the order imposing penalty was based on material produced on record, it was a finding of fact. In the instant case, as seen above, the finding is based on no material whatsoever, except the circumstance that it was a case of best judgment assessment. The circumstance has been found to be of no consequence in the eye of law.

Lastly, reliance was placed by learned counsel for the assessee on a decision of the Rajasthan High Court in Addl. CIT vs. Thahrayamal Balchand 1977 CTR (Raj) 219 : (1980) 124 ITR 111 (Raj). In that case also, there was material on record and it was on consideration of that material that the finding in regard to the presumption being rebutted was recorded. There is thus distinction between the cases cited by learned counsel for the assessee and this case. Whereas in those cases, the finding was recorded on an appraisal of the material on record and obviously such a finding would be a finding of fact, in the instant case, the finding recorded by the Tribunal is perverse, in the sense that it is based on no material whatsoever, as already pointed out above, and consequently no reasonable person, properly instructed in law, could have come to that finding. On the facts and in the circumstances of the instant case to which the Explanation to s. 271(1)(c) was applicable, the Tribunal also seems to have been under a misapprehension that it was for the Revenue to prove that the assessee did not furnish accurate particulars of income and was guilty of fraud or gross or wilful neglect on his part.

8. In view of the foregoing discussion, our answer to question No. 1, referred to us, is that, on the facts and circumstances of the case, the Tribunal was not justified in law in holding that the assessee had discharged the onus cast on it under the statutory Explanation below s. 271(1)(c) of the IT Act, 1961. Our answer to question No. 2 is that, on the facts and in the circumstances of the case, the Tribunal was not correct in law in cancelling the penalty of Rs. 20,000 imposed under s. 271(1)(c) of the IT Act, 1961. In other words, both the questions referred to us are answered in the negative, in favour of the Revenue and against the assessee. The Tribunal shall now determine the quantum of penalty in accordance with law. In the circumstances of the case, however, the parties shall bear their own costs.

[Citation : 170 ITR 48]