Law:

Section:

Explanation to section 271(1)(c) of the income-tax act, 1961 [as it stood prior to 1-4-1976]-Penalty-For concealment of income-Whether in terms of explanation to section 271(1)(c), when returned income is less than so per cent of assessed income, burden of proving absence of fraud or gross or wilful neglect on his part is on assessee-Held, yes Facts The assessee-HUF filed a return on estimate basis for the assessment years 1966-67 and 1967-68. On the failure of the assessee to comply with a notice issued under section 143(2), the ITO completed best assessment under section 144 at a substantially higher amount. On appeal, the AAC reduced the assessed amount marginally. The ITO initiated penalty proceedings under section 271(1)(c ), since the returned income was less than 80 per cent of the assessed income. As the minimum penalty imposable exceeded Rs. 1,000, the ITO referred the matter to the IAC who levied penalty under the Explanation to section 271(1)(c). On further appeal, the Tribunal cancelled the penalties holding that an estimate was an estimate and the circumstances that the estimate given by the assessee was rejected and was substituted by another estimate by the departmental authorities, could not ipso facto go to show that the assessee was guilty either of fraud or gross or wilful neglect and, therefore, guilty of concealment. On reference under section 256(2): Held Whenever the returned income is less than 80 per cent of the assessed income, the burden of proving absence of fraud or gross or wilful neglect on his part is on the assessee. In the instant case, it was clear from a mere perusal of the Tribunal's order that it did not consider the question of burden of proof in the light of the Explanation to section 271(1)(c). On the contrary, the Tribunal decided the question raised as if the Explanation did not exist in the statute book. Accordingly, the Tribunal erred in failing to place the burden on the assessee as envisaged by the Explanation and in placing the burden of proving concealment on the revenue. Case review Hansraj Aggarwal v. Addl. CIT [1979] 119 ITR 688 (MP) followed. Cases referred to Addl. CIT v. Hansraj Aggarwal [1979] 119 ITR 688…

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