JUDGMENT
Dipak Kumar Sen, J.
1. Messrs Rameshwarlal Sewdatrai, the assessee, is a partnership firm. It carries on business in grocery at Kalna in the Burdwan District of West Bengal. The assessee was assessed to income-tax in the assessment year 1970-71, the accounting year ending on April 14, 1970. In the proceedings for the assessment, the Income-tax Officer detected certain defects and irregularities in the accounts in respect of transactions of the assessee relating to sugar. It was found that the assessee had disclosed purchases of sugar one day before the closing of the accounting period and also that the assesse had not shown any closing stock at the end of the accounting year. It was also found that up to a certain point in the accounting year, the assessee had sold certain quantity of sugar in respect of which no purchases were disclosed nor was any opening stock shown. The Income-tax Officer came to the conclusion that the goods purchased had been suppressed and that the sources for the purchases had not been disclosed. He came to the conclusion that the assessee had suppressed profits in its accounts which he estimated to be Rs. 9,200. The Income-tax Officer also estimated profits in respect of other transactions of the assessee at a higher rate on a turnover higher than that disclosed by the assessee and estimated the profits.
2. In view of the additions to the income in the assessment, the Income-tax Officer referred the matter to the Inspecting Assistant Commissioner for levy of penalty.
3. The assessee preferred an appeal against the assessment before the Appellate Assistant Commissioner who upheld the assessment of the Income-tax Officer. The assessee did not pursue the matter any further.
4. In the penalty proceedings initiated by the Income-tax Officer, the Inspecting Assistant Commissioner issued notice to the assessee to furnish explanation in respect of the allegation suppressing purchases and sales of sugar and consequent concealment of income. The assessee did not appear before the Inspecting Assistant Commissioner in spite of such opportunity being given. The proceedings were adjourned at the instance of the assessee four times by the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner finally disposed of the penalty proceedings ex parte. He came to the conclusion that the assessee had concealed the particulars of its income or had furnished inaccurate particulars thereof and was guilty not only of fraud but also of gross or wilful neglect in furnishing its return. He held that on the facts of this case, the penal provision of Section 271(1)(c) of the Income-tax Act, 1961, was attracted and he imposed a penalty of Rs. 18,400.
5. Being aggrieved, the assessee preferred an appeal against the order of penalty before the Appellate Tribunal. It was contended on behalf of the assessee before the Tribunal that the finding of the Income-tax Officer that as no stocks had been disclosed by the assessee, the assessee had not only concealed the purchases but also the sales, was erroneous. The transactions, it was admitted, were not fully entered in the accounts. It was contended that when the goods were purchased by the assessee, the bills were not received. But purchases were recorded in the books when the bills were received. Goods had been received in the meantime under challans. It was conceded on behalf of the assessee that the challans showing the receipts of the goods by the assessee had not been produced either before the Income-tax Officer or before the Appellate Assistant Commissioner. It was submitted that the assessee was entitled to produce fresh evidence in the penalty proceedings. It was further contended that the assessee had not been given proper opportunity to submit his explanation and that it was incumbent on the Inspecting Assistant Commissioner to see that the suppression of purchases and sales by the assessee were proved by independent enquiries and investigations.
6. The Tribunal held, in the facts and circumstances, that the assessee had not made any purchases whereas it had made sales in respect of sugar, It was found further by the Tribunal that the explanation of the assessee could not be accepted at the appeal stage before the Tribunal. Following a decision of the Kerala High Court in P.M.C. Subramaniam Chettiar v. CIT , the Tribunal held that as the assessee had
failed to produce the relevant evidence in the shape of vouchers and other documents, the case of the Revenue that income had been suppressed was established. The Tribunal concluded that the assessee had concealed its income by suppressing purchases as also sales and on the facts, the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, was applicable. It was held that the assessee had not discharged its onus which the assessee was required to do under the said Explanation and had failed to disclose material facts throughout the proceedings below. The Tribunal accordingly upheld the order of penalty passed by the Inspecting Assistant Commissioner except that it reduced the quantum of penalty from Rs. 18,400 to Rs. 12,500.
7. On an application of the assessee under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question as a question of law arising out of its order for the opinion of this court:
“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in sustaining to the extent of Rs, 12,500, the penalty levied by the Inspecting Assistant Commissioner, holding that the Explanation to Section 271(1)(c) was attracted ?”
8. At the hearing before us, the learned advocate for the assessee submitted that the Tribunal in partly affirming the order of penalty passed by the Inspecting Assistant Commissioner had fallen into an error inasmuch as the assessee furnished its explanation and sought to produce evidence before the Tribunal. Though the same had not been produced earlier, the Tribunal should have accepted such evidence or should have remanded the matter to the authority below for consideration of the same. The learned advocate for the assessee submitted that in the facts and circumstances, it was not established that the assessee had the necessary mens rea and it could not be held that the assessee had deliberately concealed or suppressed its income or had furnished inaccurate particulars of its income deliberately or fraudulently.
9. In support of his contentions, the learned advocate for the assessee cited the following decisions :
(a) CIT v. Tara Trading Co. [1980] 123 ITR 97 (Orissa). In this case, a Division Bench of the Orissa High Court upheld the decision of the Tribunal directing deletion of a penalty on the ground that the assessee in appeal before the Appellate Assistant Commissioner had explained the delay in the submission of his returns which were accepted by the Appellate Assistant Commissioner. The assessee had failed to furnish any explanation before the Income-tax Officer who had imposed the penalty under Section 271(1)(c) of the Income-tax Act, 1961.
(b) CIT v. P.A. Patel [1981] 127 ITR 390 (Pat). This decision of a Division Bench of the Patna High Court was cited for the proposition that where an assessee had failed to disclose an item in his return on the ground that he bona fide believed that the said item was not required to be shown in the return as his own income and where it was found that it was a matter of controversy whether such item was required to be included in his return or not, it could not be held that the assessee was guilty of gross or wilful negligence or that he had deliberately concealed the income or furnished inaccurate particulars thereof fraudulently or under gross or wilful negligence.
(c) M. Radha Krishniah v. CIT [1984] 147 ITR 133 (Mad). In this case, additions had been made on estimate to the income of the assessee on the ground that there was discrepancy in stock. A penalty was levied in respect of the addition to the income of the assessee. On these facts, a Division Bench of the Madras High Court held that a mere estimate of a figure for the purpose of assessment does not represent the amount of income in respect of which particulars have been concealed within the meaning of Section 271(1) of the Income-tax Act, 1961. The High Court held further that on such facts, penalty proceedings could no doubt be initiated. But in actually imposing the penalty, the authority concerned must be in a position to hold that the penalty was being levied with reference to the amount of income, particulars of which had been concealed.
(d) CIT v. M. B. Engineering Works (P.) Ltd. . This decision of a Division Bench of this court was cited for the following observations on the Explanation to Section 271(1)(c) of the Income-tax Act, 1961 (at pages 517 and 518):
“Explanation to Section 271(1)(c) presumes fraud or gross or wilful neglect on the part of the assessee in the circumstances stated therein. The presumption is a rebuttable presumption. The assessee is to discharge the onus. The presumption would be inoperative if it is rebutted by evidence. The onus then shifts to the Department to prove that the assessee has concealed the income or has furnished inaccurate particulars thereof. The assessee has to explain the reasons for the difference in returning the correct income if the income returned is less than 80% of the income assessed. At this stage, the assessee is only required to explain the gap between the income returned and the income assessed. The explanation may be accepted or rejected by the Department. But mere rejection of the explanation even in respect of the gap or difference cannot ipso facto prove that there has been concealment. The circumstances must lead to the only reasonable and positive inference that the explanation of the assessee is false. As a matter of fact, the Explanation to Section 271(1)(c) has a
material bearing on the question of mental element or mens rea. The mental element or mens rea is an integral part of Section 271(1)(c) read with the Explanation. The circumstances must show that there was animus. The onus of proof has been shifted in certain contingencies to the assessee by reason of rebuttable presumption introduced by the Explanation, The presence or absence of mental element has to be proved. The shifting of onus under certain circumstances has not materially affected the law even after the introduction of the Explanation”
(e) CIT v. H. Abdul Bakshi & Bros. . This decision of a Full Bench of the Andhra Pradesh High Court was cited for the proposition that under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, rebuttable presumptions would be raised, namely, that the amount of the assessed income is the correct income and it is in fact the income of the assessee and that the failure of the assessee to return the correct assessed income was due to fraud or gross or wilful neglect on the part of the assessee. These presumptions are, however, rebuttable and if the assessee discharges the initial burden by furnishing suitable explanation, the burden shifts to the Revenue to establish that the assessee had concealed the income. It is open to the assessee to discharge the initial burden by relying on the facts showing the necessary probabilities and also by adducing fresh evidence. The High Court held further that the findings in the assessment proceedings might be relevant but were not conclusive in penalty proceedings which were separate from the assessment proceedings.
10. It appears to us that on the facts of this case, the assessee did not furnish any explanation at the initial stage before the Inspecting Assistant Commissioner. In the absence of any explanation of the assessee, the Inspecting Assistant Commissioner, in our view, was justified in drawing the presumption against the assessee under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961. Before the Tribunal, no doubt, the assessee came with a case that the purchases were not duly recorded in the books of account as the bills had arrived later. But this was a mere submission on behalf of the assessee. No evidence was produced or sought to be tendered before the Tribunal. Such evidence, if it was in the possession of the assessee, ought to have been produced but was not produced at any stage. There was no explanation why such evidence was not produced earlier.
11. In our view, it appears that the assessee did not give any explanation nor furnish any evidence in support of its case that it had not deliberately concealed its income or had furnished inaccurate particulars of its income fraudulently or negligently.
12. In the absence of any evidence or even an explanation on the facts on records, the assessee, in our view, comes within the mischief of Section 271(1)(c). It cannot be held that the Revenue authorities in imposing the penalty on the assessee acted erroneously or improperly. The assessee did not choose to adduce evidence or give any adequate explanation when called upon to do and the consequences in law must follow. We have taken the same view in our unreported judgment in (I.T. Ref. No. 19 of 1983) Buddhadeb Dutta v. CIT— since reported in [1987] 166 ITR 428.
13. For the reasons as above, the assesses cannot succeed in this reference. The question referred is answered in the affirmative and in favour of the Revenue.
14. There will, however, be no order as to costs.
Monjula Bose, J.
15. I agree.