Arijit Pasayat, C.J.
1. Pursuant to the direction given by this court in an application under Section 256(2) of the Income-tax Act, 1961 (in short, 'the Act'), the following question has been referred for opinion by the Income-tax Appellate Tribunal, Cochin Bench (in short, 'the Tribunal') :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the levy of penalty ?'
2. The factual position, as set out in the statement of facts, is as follows : The assessee, a public limited company, is engaged in the manufactureand sale of beer. The assessment year involved is 1985-86, the relevant previous year being the calendar year 1984. In the course of assessment proceedings', the Assessing Officer noticed a sum of Rs. 9,89,200 under the head 'Machinery and electrical repairs'. Details were called for. The asses-see supported its claim by producing 16 bills of various dates from December 2, 1984, to December 31, 1984, issued by one Elgi Equipments Ltd., Coimbatore. The Assessing Officer found that the said bills issued to the assessee did not figure in their ledger and the trade balance with the asses-see was only Rs. 5,583.20 as on December 31, 1984, as against Rs. 9,98,200 appearing to their credit in the books of the assessee. The assessee, by its letter dated February 24, 1988, contended that the bills are genuine and bona fide and that they have made payments to them only in discharge of those bills. The Assessing Officer called upon Elgi Equipments to explain its stand. According to them, Elgi Equipments did not do any repairs, but had supplied one new unit of pastueriser to the assessee. The Assessing Officer had also obtained a statement from one Shri P. E. Menon, a labour contractor, attached to Elgi Equipments, stating that the old pastueriser was dismantled and after dismantling, the new unit was installed. The Assessing Officer also obtained a statement from the production engineer of Elgi Equipments in support of their stand. The Assessing Officer also collected gate passes from Elgi Equipments and referred to certain expenses claimed by Shri Menon, the labour contractor, and also certificates filed by Elgi Equipments to the effect that new pastuerising unit supplied by it on July 31, 1985, was commissioned on November 23, 1987. From these facts, the Assessing Officer concluded that no repair work was done as alleged by the assessee before December 31, 1984, and that there was a capital expenditure on a new plant incurred after the end of the account ing year and that the assessee had tried to take undue advantage of tax benefit by setting up a claim of revenue expenditure. The Assessing' Officer, thus, disallowed the sum of Rs. 9,98,251. The assessee filed an appeal against the disallowance and contended that the assessee was not given reasonable opportunity to rebut the materials collected and that there was violation of the principles of natural justice. The assessee also produced certain evidence in its defence. The Commissioner of Income-tax (Appeals) (in short, 'the CIT(A)'), declined to admit the evidence on the ground that they were produced for the first time before him. He sustained the assessment on the basis of material gathered by the Assessing Officer holding that it is not necessary for him to decide the issue whether the assessee had purchased a new plant in the subsequent year. In second appeal, the Tribunal held that the Commissioner of Income-tax (Appeals) did not entertain some material which was contained in the paper book filed in the course of appeal hearing, but the lapse on the part of the Commissioner of Income-tax (Appeals) was venial and did not go to theroot of the matter. As for failure of natural justice in not providing copies of sworn statements and the result of the private enquiries made by the Assessing Officer, the Tribunal observed that 'we would like to state that in the depositions made by Sri Amirthalingam before the Assessing Officer, he had stated only that which was conveyed to the Assessing Officer in the earlier correspondence and this earlier correspondence was shown to Sri Venkataraman, chief executive of the assessee. In such circumstances, it is difficult to conceive how the assessee could claim that there had been violation of natural justice'. In addition, the Tribunal proceeded to take notice of a letter filed by Elgi Equipments in the course of penalty proceedings, in which it was alleged that the assessee wanted that party to make 16 bills to match exactly with the amount raised in the invoice. This letter was obtained in the course of penalty proceedings. This letter was not put to the assessee. Therefore, the assessee vehemently objected in the quantum appeal to the Tribunal considering that letter. But the objections were brushed aside. Thus addition was sustained by the Tribunal. The Deputy Commissioner of Income-tax (Appeals) by letter dated March 21, 1988, called upon the assessee to show cause why penalty should not be levied for concealment of income or for having furnished inaccurate particulars of income. The assessee denied the allegation and contended that certain statements were taken behind its back and used against it and it had not been furnished with copies of the same. Overruling the objection, the Deputy Commissioner of Income-tax (Appeals) levied penalty under Section 271(1)(c) of the Act. On appeal, the Commissioner of Income-tax (Appeals) after referring to its earlier findings, observed that the explanation offered by the assessee was false and the amount added to its income represented its concealed income and the levy of penalty was justified. The assessee went in appeal before the Tribunal.
3. After adverting to the facts and circumstances of the case and enquiries made by the Assessing Officer, it was observed by the Tribunal that there was failure of natural justice. It was also noticed that the Commissioner of Income-tax (Appeals) after calling for a remand report on materials furnished by the assessee in support of its stand did not advert to such materials in the course of his order in the quantum appeal. The Revenue had utilised before the Tribunal in the quantum appeal a letter written by one Shri Amirthalingam addressed to the Assessing Officer in the course of penally proceedings and the contents of that letter had not been put to the assessee. As such the assessee was kept in total darkness. However, in the course of the quantum appeal, the Tribunal had taken notice of that letter in the course of its finding against the assessee. In penalty proceedings, there was gross failure of natural justice and the penalty order was passed on enquiry reports and information gathered behind the back of the asses-see though they were not put to the assessee. In the context of failure to comply with the principles of natural justice, levy of penalty is not maintainable. The Tribunal also referred to some other materials on record apart from grounds of failure of natural justice. One such material was the communication issued by the Assessing Officer in 46-008-CO-5848/IAC(A) TCR, dated June 1, 1988, addressed to Elgi Equipments Ltd. The Tribunal observed that the Assessing Officer himself had admitted that the assessee had discharged the onus and shifted the blame and the burden of proving was put on Elgi Equipments Ltd. The Tribunal referred to the reply put in by Sri Amuthalingam in his letter dated June 10, 1988. On analysing the contents of communication from Sri Amuthalingam of Elgi Equipments Ltd. in his letter dated June 10, 1988, it was observed that there were inconsistencies and contradictions. The Tribunal was of the view that Elgi Equipments Ltd., which is a manufacturer of capital goods, did not even have a 'works order' or 'job order' for making a new pasteuriser for the assessee as alleged by it. Serious reservations were expressed by the Tribunal about the claim of Elgi Equipments Ltd. Ultimately, it was held that the explanation given by the assessee supported by 16 bills of repairs issued by Elgi Equipments Ltd. payments for some of which have been specifically made against those repair bills, substantiated its explanation and that levy was unjustified.
4. Learned counsel for the Revenue submitted that the Tribunal's conclusions are absolutely erroneous and untenable in law. Modus operands adopted by the assessee to give a wrong picture has been fully established. The conclusion that there was non-observance of the principles of natural justice is clearly erroneous and contrary and against the materials on record. The onus to prove that there was no concealment or furnishing of required materials squarely lies on the assessee and it was not discharged. In other words, it is submitted that the conclusions have been arrived at by ignoring relevant materials and relying on irrelevant materials. Learned counsel for the assessee, on the other hand, submitted that the Tribunal has arrived at a conclusion on the facts that there was no concealment, and as such, no question of law arises. It is submitted that though in the quantum appeal certain conclusions have been arrived at, they are not conclusive and at the most may be persuasive. This is so because assessment proceedings and penalty proceedings are different and the nature of consideration is different.
5. First, we shall deal with the conclusions of the Tribunal vis-a-vis the question relating to natural justice. On that aspect, it is necessary to take note of certain observations made by this court while dealing with the reference relating to the quantum appeal. They are as follows :
'The contention that the Assessing Officer did not give an opportunity for cross-examination and materials were gathered behind the back ofthe assessee without disclosing it to him can be considered first. Admittedly, the assessee did not ask for cross-examining or summoning any person before the Assessing Officer. All the evidence put forward by the assessee was considered by the Assessing Officer. Entire contentions raised by the assessee were considered by the Assessing Officer. The assessee was asked to reconcile the difference in the trade balance with Elgi Equipments Ltd. and the number of bills based on which the charges were raised. The assessee was also asked to explain regarding the cost of machinery and why the cost of such machinery was put as revenue expenditure. The explanation offered by the assessee was considered by the Assessing Officer. The Tribunal considered the contention that the Assessing Officer has not relied on materials behind the back of the assessee and found as follows : 'The material collected was all placed before the assessee and the same was material for the enquiry.' '
6. The Tribunal further held as follows :
'We would like to state that in the deposition made by Mr. Amutalingam before the Assessing Officer the earlier correspondence and this correspondence was shown to Shri Venkataraman, the chief executive of the assessee. In such circumstances, it is difficult to conceive how the assessee could claim that there has been violation of natural justice.'
7. After perusing the records we also agree that there was no violation of the principles of natural justice by the assessing authority. No material was collected behind the back of the assessee and the assessee was aware of the materials and no opportunity was asked for by the assessee for cross-examining any of the persons from Elgi Equipments Ltd. or production of any documents. Therefore, there is no basis for the contentions of the assessee that the Assessing Officer has violated the principles of natural justice.
8. The Commissioner of Income-tax (Appeals) did not admit some of the documents filed in the appeal proceedings as they were not produced before the assessing authority. It cannot be called a violation of the principles of natural justice. The assessee was having these documents before the Assessing Officer passed the order and nothing prevented the assessee from producing the same before the assessing authority. In any event, the Tribunal also considered these documents and found as follows :
'The papers which formed part of the paper book giving the minutes of the various meetings held by the members of the top management do not throw any light which could go to decide the issue one way or the other. The other thing that is evident is that the management was aware that the repair and renovation cost could exceed the cost of a new plant. In the light of these discussions, it would appear that either the assessee or Elgi Equipments Ltd. have a lot to hide but if the materials as culled outabove are properly marshalled there could be no other inference except that payment to Elgi Equipments Ltd. was for erection of a new pasteuriser plant and not for repairs and renovation'.
9. In any event, the deduction claimed as revenue expenditure for repairs and renovation it was for the assessee to prove the same and the assessee did not prove the same. The Tribunal also has considered the entire matter and agreed with the Assessing Officer and the appellate authority had also further found that there was no violation of the principles of natural justice by these authorities. After holding that no repair work was carried out in support of the contentions, the Tribunal referred to the letter dated June 10, 1988, of Elgi Equipments Ltd. filed in the course of penalty proceedings. With regard to the letter, according to the Tribunal :
'. . . once again clarified that the plant was completed and cleared from the Central excise, despatched to Premier Breweries Ltd., supported by a single sale Bill No. 1183. It was also alleged in the letter that the assessee wanted this party to make 16 bills to match exactly with the amount raised in their invoice. Elgi Equipments Ltd., it was claimed, was closely advised and guided by the assessee in preparing 'the substitute sixteen bills' and their accounts manager even specified the wordings to be incorporated in the sixteen bills. Though this letter was received by the Assessing Officer after the completion of the assessment its relevance cannot be lost sight of.'
10. But the finding' was arrived at by the Tribunal on other materials itself. The Tribunal also pointed out that :
'We may further point out that the gate passes showing transportation of material were with the assessee and it is an admitted fact that along with the challans there was a copy of the invoice. Yet the assessee could not give any details regarding the materials that were brought into the assessee's factory premises and why there was an invoice attached to the challans. We, in the circumstances have no hesitation in rejecting the feeble explanation that Elgi Equipments Ltd. was under a warranty and that the materials brought in by the lorries probably was to replace some components which Elgi Equipments Ltd. was required to do during the warranty period. It required seven lorries to transport material to keep the plant functioning after it was set right as claimed by the assessee, there would be similar transportation of material when the repair and renovation work was carried out. The procedure followed for the transportation of material necessary for alleged repair and renovation work had to be the same and in such circumstances the transportation has to be supported by gate passes. No such passes were available with the assessee. At any rate, none was produced. Thus, it is evident that the assessee had no worthwhile material to support its claim. As has been rightly contended by the learned Departmental representative, where a deduction is claimed, theonus is squarely on the assessee to prove its claim. Apart from the 16 bills which Elg'i Equipments Ltd. claimed to be estimate or advance bilks sub mitted at the request of the assessee and an entry in the store register showing issue of a conveyor chain there is no other evidence to support the claim.'
Therefore, the Tribunal independently considered the evidence and agreed with the findings of the earlier authorities that no repairing' work was carried out by the assessee during the calendar year, 1984, so as to claim deduction for the assessment year 1985-86. While arriving at the conclusions, the Tribunal has also considered all the points put forward by the assessee and the finding that no repairing work was carried out in the year, 1984, is a finding of fact concurrently found by the Assessing Officer, the Commissioner of Income-tax (Appeals) and the Appellate Tribunal. We are not sitting in appeal in the advisory jurisdiction while answering the reference under Section 256(1). There is no violation of the principles of natural justice as contended by the assessee. The findings are not perverse and are not based on inadmissible evidence. There is also no denial of reasonable opportunity as contended by the assessee. Therefore, we are of the opinion that the order of the Tribunal is sustainable in law and there is no legal infirmity as contended by the assessee.'
11. It is somewhat surprising that the Tribunal, while dealing with the penalty appeal, arrived at conclusions which are clearly and diametrically at variance with its earlier conclusions arrived at in the quantum appeal. True it is, assessment proceedings and penalty proceedings are different. But it is not conceivable that diametrically opposite findings would be recorded on the same set of facts during assessment proceeding's and penalty proceedings. The criticism attached by the Tribunal to the conduct of E3gi Equipments Ltd. is somewhat confusing when one considers the Tribunal's views expressed in the quantum appeal, some of which have been extracted above, vis-a-vis those recorded in the penalty appeal.
12. It has to be borne in mind that the change in language of Section 271(1)(c) brought in by amendment by the Finance Act, 1964, makes a lot of difference. The Explanation to Section 271(1)(c) of the Act introduced by the Finance Act as indicated above creates a presumption of law, which is, no doubt, rebuttable, to the effect that where the total income returned by the assessee is less than 80 per cent. of his total assessed income, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of Section 271(1)(c). 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. The Explanation thus, shifts the burden to the assessee in the situation covered by it. If he fails to establish the same, the presumption will become a finding and itwould be open to the authority to levy the penalty. But if the assessee establishes that his failure to return the correct income was not on account of any fraud or any gross or wilful neglect on his part, it is evident, no penalty can be levied. Even after the amendment of 1964, the penalty proceedings continue to be penal proceedings. Similarly, the question whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of his income continues to remain a question of fact. Where the Explanation has made a difference is while deciding that question the presumption created by it has to be applied, which has the effect of shifting the burden or proof. The rule regarding burden of proof enunciated in CIT v. Anwar Ali : [1970]76ITR696(SC) , is no longer valid (see CIT (Addl) v. Jeevan Lal Sah : [1994]205ITR244(SC) ). Whether it is a case of undisclosed or unexplained cash deposit or any other concealment, the standard is the same. The principle enunciated in Anwar Ali's case : [1970]76ITR696(SC) , that mere rejection of the explanation of the assessee is not sufficient for levying penalty no longer holds good and it is no longer necessary that the Department must go further and establish that there was conscious concealment of particulars of income or a deliberate failure to furnish accurate particulars. The entire materials on record have to be considered keeping in mind the presumption in view of the Explanation and finding recorded. As was observed in CIT v. Mussadilal Ram Bharose : [1987]165ITR14(SC) , the position in law as to the effect that if the returned income is less than 80 per cent. of the total assessed income, the presumption is that the assessee had concealed the particulars of his income. However, this presumption can be rebutted. The rubuttal must be on relevant facts. It is for the fact-finding authority to see the relevancy and sufficiency of the materials and if such a fact-finding body, bearing the aforesaid principles in mind, comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact and no question of law arises. To similar effect is the decision in CIT v. K. R. Sadayappan : [1990]185ITR49(SC) . In the aforesaid background, it has to be seen how far the assessee has discharged the onus and correctness of the Tribunal's conclusions regarding discharge of such onus.
13. The Tribunal seems to have been swayed by certain aspects in coming to the conclusion that in many areas, the conduct of Elgi Equipments Ltd. was baffling. That question had also been dealt with in the quantum appeal. Whether Elgi Equipments Ltd. acted properly was not to be decided in the appeal by the Tribunal. What was necessary to be adjudicated was whether the assessee's stand was justifiable. Clear findings were recorded that the assessee had claimed certain expenditures which had not been incurred. The assessee's claim was that the work carried out by Elgi Equipments Ltd., is purely in the nature of repair works and thatmaterials described in 16 bills were used on or before December 21, 1984, and no sale of plant had been made as per Invoice No. 1188, dated July 30, 1985. This plea was dearly contrary to the materials placed by Elgi Equipments Ltd. It had stated that they have issued only one single invoice which accompanied lorry loads of new pasteuriser plant evidenced by gate pass in GPI 2176 issued by the Central Excise Department authorities on July 30, 1985. A new pasteuriser unit was fabricated in their factory as per oral order issued and the same was delivered to the assessee in several lorry loads evidenced by duly attested transport documents as per Invoice No. LG 1188, dated July 30, 1985. The new pasteuriser unit supplied on July 31, 1985, was commissioned on November 23, 1987. It is not the case of the assessee that another unit has been received subsequently which was commissioned in November, 1987. Certain documents, including one file containing documents relating to the new unit sent by Elgi Equipments Ltd. as per invoice dated July 30, 1985, were also referred to in that connection. These documents were checked by the sales tax authorities as would be evident from official seals. With reference to these documents, the Revenue authorities came to the conclusion that Invoice No. 1188, raised by Elgi Equipments Ltd. is the only document by which the entire pasteuriser unit had been documented. The Tribunal had not taken note of relevant materials and had based its conclusions on irrelevant materials, presumptions and surmises. That gives rise to a question of law relating to the validity of the Tribunal's judgment and conclusions contained therein. Though the conclusions may have a colour of factual finding, but, in view of the inevitable conclusion that it has been arrived at without considering the relevant materials, makes it unreasonable and perverse. That being so, the conclusions of the Tribunal cannot be said to be in order.
14. Reference is accordingly answered in favour of the Revenue and against the assessee.