JUDGMENT
Narain, J.
1. Under the orders of this court dated 7th March, 1973, passed in Tax Cases Nos. 198 and 199 of 1971, upon applications filed by the Commissioner of Income-tax, Bihar, the Income-tax Appellate Tribunal, Bihar, has submitted a consolidated statement of the cases which relate to two assessment years, viz., 1962-63 and 1963-64, and has referred the following question of law for the opinion of this court :
” Whether, on the facts and in the circumstances of the case, the view of the Appellate Tribunal that penalty under Section 271(1)(c) of the Income-tax Act, 1961, could not be imposed on the assessee, is correct in law ? ”
2. The relevant facts are these. The assessee, P. A. Patel, was assessed by the ITO, Dhanbad, on a total income of Rs. 21,954 and Rs. 20,300 for the assessment years 1962-63 and 1963-64, respectively, after including under the provisions of Section 64 of the I.T. Act, 1961 (hereinafter called ” the Act “), in that income the income of the wife of the assessee amounting to Rs. 3,418 in the assessment year 1962-63 and Rs. 4,687 in the assessment year 1963-64 in the return submitted, as the assessee had not shown the aforesaid income of the wife in the returns submitted by him for the two assessment years. The assessments of both the years were confirmed by the AAC on appeal by a common order dated March 31, 1967.
3. While making the assessment for two years, the ITO, Dhanbad, had issued notices asking the assessee to show cause why penalty should not be imposed under Section 271(1)(c) of the Act for concealing the income. The assessee filed a written reply showing cause against the imposition of penalty. The ITO, however, rejected the cause shown and imposed penalties of Rs. 1,500 and Rs. 1,000 for the assessment years 1962-63 and 1963-64, respectively. The order imposing penalty was confirmed in appeal by the Assistant Commissioner by his order dated August 7, 1969. The assessee appealed to the Income-tax Appellate Tribunal against the aforesaid order.
4. The Tribunal held that there was a legal obligation on the assessee to include the aforesaid income of the wife in the return filed by the assessee, but Section 271(1)(c) of the Act did not cover a wife’s income which had to be included in the income of the husband-assessee in view of the provisions of Section 64 of the Act because that income was not ” his income ” within the meaning of the expression as used in Section 271 of the Act, and, therefore, the levy of penalty was unwarranted. The Tribunal further held that notwithstanding the conclusion reached in the assessment proceedings, the onus was on the revenue to establish in the penalty proceedings that the amount of income alleged to have been concealed was the income of the assessee and that he had concealed the same and that the revenue had not established in the penalty proceedings that the income in respect of which the penalty was sought to be levied arose to the wife as a result of transfer of assets by the assessee directly or indirectly to his wife otherwise than for adequate consideration and, therefore, the revenue had failed to establish that the aforesaid amount had to be included in the income of the assessee by virtue of the provisions of Section 64 of the Act. For both these reasons, the Tribunal held the imposition of penalty to be unjustified, allowed the appeal and set aside the orders imposing the penalty.
5. Sri B. P. Rajgarhia, learned standing counsel for the petitioner, has urged before us that the decision of the Tribunal that the income of the wife of the assessee which has, in view of the provisions of Section 64 of the Act, to be included in the income of the assessee is not ” his income ” within the meaning of the expression as used in Section 271(1)(c) of the Act is incorrect. The argument put forward is that if the income has to be included in the income of the assessee, by virtue of the provisions of Section 64 of the Act, it becomes by statutory fiction the income of the assessee for the purposes of assessment and imposition of penalty and on the ordinary principle of interpretation, the statutory fiction must be given full effect to, and, therefore, the expression ” his income ” includes within its ambit the income of the wife of the assessee which has to be included in his income by virtue of the provisions of Section 64 of the Act. The next contention of Shri Rajgarhia is that the finding of the Tribunal that the revenue had failed to establish that the income of the wife which was not included in the return filed by the assessee was includible in the income of the assessee by virtue of the provisions of Section 64 of the Act, and, therefore, had failed to establish that the assessee had concealed the same, was erroneous in law, inasmuch as the Tribunal had wrongly placed on the revenue the onus of establishing that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income even though this was a case to which the Explanation to Section 271(1)of the Act applied, and the assessee should have been deemed to have concealed the particulars of his income and furnished inaccurate particulars of such income for the purposes of Clause (c) of Section 271(1) of the Act.
6. I will take up the second contention first. For, if it is not established-either with reference to the Explanation to Section 271(1) of the Act or otherwise that the assessee had concealed the particulars of his income or had furnished inaccurate particulars of such income, it must be held that, on the facts and in the circumstances of these cases, the view of the Tribunal that penalty could not be imposed on the assessee is correct in law. Though an argument was advanced by Shri Jain appearing on behalf of the assessee that the Explanation was not attracted because the statement of case does not contain a finding that the returns were filed after April 1, 1964, when the amended Section 271 which contains the Explanation came into force, I will assume for the purposes of this case that the amended Section 271(1) which includes the Explanation applies to this case. Section 271(1)(c) of the Act as amended by Act 5 of 1964 empowers the ITO, etc., to impose the penalty if he is satisfied that any person ” has concealed the particulars of his income or has furnished inaccurate particulars of such income……” The newly added Explanation to Section 271(1) runs thus :
” 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 Section 143 or Section 144 or Section 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 Clause (c) of this sub-section.”
7. The true import of the amended Explanation was thus explained by Untwalia C.J., speaking for a Bench of this court, in CIT v. Patna Timber Works [1977] 106 ITR 452, 459 :
” If a case is not covered by the Explanation, the burden to prove facts to attract the imposition of penalty under Section 271(1)(c) is still on the department. But in a case which is covered by the Explanation, the burden has been thrown on the assessee to prove absence of certain ingredients ; otherwise it will be permissible to draw the presumption of fact that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income…… As soon as it is found that there was a difference of more than 20 per cent. in the income returned and the income assessed, Clause (c) comes into operation by the rule of presumption, in other words, by the rule of evidence engrafted in the Explanation, and it is for the assessee to prove that the failure to return the correct income, i.e., the assessed income, did not arise from any fraud or gross or wilful neglect on his part. If he succeeds in discharging that onus, even though the difference in the amount of the returned income and the assessed income was more than 20 per cent., no penalty can be imposed under Section 271(1)(c). And, that, in my opinion, clearly gives a key to the interpretation of the main provisions contained in Clause (c) after its amendment in 1964. If a case is not covered by the Explanation then charge of furnishing inaccurate particulars of such income can be founded by recording a finding that the assessee had furnished such particulars due to his fraud, that means, deliberately or consciously, or such furnishing was a result of gross or wilful neglect on his part. The word ‘ furnished ‘ also imports some positive act on the part of the assessee. The dictionary meaning of the word ‘ furnish ‘, according to the Chambers Dictionary, is ‘ to fill up or supply completely or with what is necessary ; to supply, provide ; to equip ‘. If, therefore, the assessee while supplying the particulars of his income gives inaccurate particulars as a result of his fraud or gross or wilful neglect then and then only he can be subjected to the imposition of penalty under the second part of Clause (c)–otherwise not. Unless such ingredients are found, on the finding of a mere difference in the particulars of the income given and the figure of the income assessed it cannot be said that the assessee furnished inaccurate particulars of such income.”
8. Thereafter, the learned Chief Justice concluded (p. 460) :
” In my opinion, when a case is covered by the Explanation then, on the failure of the assessee to discharge the onus of proving absence of certain ingredients, the rule of presumption not only covers the matter of conscious concealment or furnishing of inaccurate particulars on the part of the assessee but, on a plain and grammatical meaning of the expression, it also ropes in the presumption of the assessed income being that of the assessee.”
9. Though, in both the cases, the difference between the returned income and the assessed income is more than 20%, the presumption under the Explanation is not attracted because, in my opinion, the assessee has established that the failure to return the correct income did not arise from fraud or gross or wilful neglect on his part. As pointed out by Untwalia C. J. in CIT v. Patna Timber Works [1977] 106 ITR 452 (Pat), to prove the absence of fraud or gross or wilful neglect (p. 462) : ” ordinarily and generally there cannot be any direct evidence…. The assessee merely has to place materials of the primary facts or the circumstances which in all reasonable probability would show that he was not guilty of any fraud or gross or wilful neglect. He may discharge this onus by placing the facts found in the assessment order to show that the facts found therein had not in the least given an inkling of fraud or gross or wilful neglect on the part of the assessee and, therefore, it must be held without proof of any other fact that there was no fraud committed by the assessee in his failure to return the correct income nor was he acting grossly or wilfully negligently “. His Lordship also pointed out that on the facts of a particular case, ” the denial of the assessee or its representative at the
time of argument ” may be sufficient proof of the fact of absence of fraud, gross or wilful neglect.
10. Now what are the facts of this case ? According to the assessment order of both the years, it is manifest that the only income which the assessee is alleged to have concealed or in regard to which he is alleged to have furnished inaccurate particulars, is the income of the wife which by virtue of Section 64 of the Act has to be included for the purposes of the assessment in the income of the assessee. The assessee denied that he had concealed any part of his income and this necessarily involved a plea that in his view the income of the wife was not his income within the meaning of the expression as used in Section 271(1)(c) of the Act and an argument to that effect was advanced on his behalf. His plea, therefore, was that he believed that the income of his wife was not the income which he was obliged to show in the return. I may mention here that at the time the returns were filed by the assessee, there was a specific column in the form of return in which the income of the wife which had to be included under Section 64 of the Act had to be shown. There was similarly a guidance note stating that such income should be included in the return. Under the Indian I.T. Act, 1922, in spite of the existence of such a guidance note, but in the absence of the specific column aforesaid, it was held by the Supreme Court in Muthiah Chettiar v. CIT [1969] 74 ITR 183 that there was no legal obligation on the part of the assessee to include in his return the income of the wife which, for the purpose of the assessment, would be liable to be included under Section 16(3) of the Act. In the cases covered by the present I.T. Act, 1961, also it has been held that there is no such legal obligation to include in the return the income liable to be included in assessment under Section 64 (see the decisions) in Radheshyam Ladia v. ITO [1971] 82 ITR 247 (Cal), CIT v. Smt. Rani Duleiya [1972] 84 ITR 770 (MP) and CIT v. Biju Patnaik [1976] 103 ITR 713 (Orissa). In these circumstances, it seems highly probable that the assessee bone fide believed that he was not required to include the income of his wife in his income. And, if the assessee has succeeded in showing that he bona fide believed that he was not required to show that income in his return, he has certainly succeeded in proving the absence of fraud. As it was not yet clear, whether such income had or had not to be included, he has also succeeded in proving the absence of gross and wilful neligence.
11. And, in view of the legal position as explained in the Patna Timber case [1977] 106 ITR 452 (Pat), it is manifest that if the presumption contained in the Explanation cannot be raised, the onus is on the revenue to establish that the assessee has deliberately concealed the particulars of his income due to fraud or gross or wilful neglect, and that the revenue has failed to discharge that onus. The finding that the failure to disclose the entire income or to furnish full particulars of the income was due to a bona fide belief of the asscssee not attributable to any gross or wilful ngligence, that the income omitted to be included was not his income which had to be included in his return precludes a finding that he had deliberately concealed that income or furnished inaccurate particulars of his income as a result of fraud or gross or wilful neglect. The only material is the order of assessment and that cannot show that the assessee deliberately concealed or furnished inaccurate particulars as a result of fraud or gross or wilful neglect. The particulars furnished by the assessee in his return have not been shown to be incorrect.
12. Thus, though the Tribunal has not referred to the Explanation and has given no reasons for holding that the Explanation to Section 271(1) of the Act is in the facts and circumstances of the case not applicable, the conclusion of the Tribunal that the revenue has failed to discharge the onus which lay upon it is correct in law. Upon the finding that it has not been established that the assessee ” has concealed the particulars of his income or furnished inaccurate particulars of his income within the meaning of the expression as used in Section 271(1)(c), the order of the Tribunal setting aside the order of imposition of penalty must be regarded as correct in law even if the first contention put forward on behalf of the revenue is correct. In this view of the matter, I do not think it necessary to consider and decide the correctness of the first contention of Shri Rajgarhia.
13. For these reasons, I would answer the question referred to us in the affirmative in both the cases. The assessee shall be entitled to costs. Hearing fee rupees one hundred only.
S.K. Jha, J.
14. I agree.