B. P. BERI C J. - These six applications under section 256(2) of the income-tax Act, 1961 (hereinafter called 'the Act'), have been presented by the Additional Commissioner of Income-tax, Rajasthan, Jaipur, against the consolidated order passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, dated 24th February, 1972, praying that the Tribunal be directed to refer to this court some questions of law which arise in these cases. An identical question, which is framed in D. B. Income-tax References Nos. 142/72, 143/72 and 144/72, reads as under :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not guilty of fraud or gross or willful neglect within the meaning of the Explanation to section 271(1)(c) of the Act?'
The question which has been raised in D. B. Income-tax Cases Nos. 145 and 146 of 1972 reads :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that non-maintenance of quantitative details and proper accounts by the assessee would not be tantamount to gross or willful neglect and the resultant under-statement of the income by the assessee will not amount to concealment within the meaning of the Explanation to section 271(1)(c) ?'
The question which has been raised in D. B. Income-tax Case No. 147 of 1972 is :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that non-maintenance of proper accounts by the assessee would not be tantamount to gross or willful neglect and the resultant under-statement of the income by the assessee will not amount to concealment within the meaning of the Explanation to section 271(1)(c) ?'
It is agreed by the learned counsel that despite difference of phraseology employed in the three questions framed in the above six cases they raise substantially the same questions framed in the above six cases they raise substantially the same question dependent on the interpretation of the Explanation to section 271(1)(c). We agree and accordingly we are disposing of the applications by one order. Let us briefly survey the facts of these cases.
The facts in D. B. Income-tax Case No. 142 of 1972, No. 143 of 1972 and No. 144 of 1972 are these : The assessee is a registered firm which carries on cut-piece cloth business in retail at Jaipur. For the assessment years 1967-68, 1968-69 and 1969-70, he filed returns showing incomes in different figures. On the scrutiny of account books the Income-tax Officer discovered that no stock registers or quantitative details of the opening stock or purchases and sales were kept. In each of the years the account books were found to be complete and correct but accurate income could not be deduced therefrom due to the method of accounting. The Income-tax Officer added varying amounts to the income returned by the assessee. Appeals were preferred before the Appellate Assistant Commissioner in all the three cases. Eventually, the Tribunal in second appeal added the different sums of money to the income returned. It is not disputed that the income returned by the assessee in each of these years was less than 80 per cent. of the income to which the assessee was assessed by the Tribunal. In this state of affairs, the Income-tax Officer initiated penal proceedings but as the amount of penalty involved was more than Rs. 1,000 in each of these cases, they were referred to the Inspecting Assistant Commissioner of Income-tax who in Cases Nos. 142/72, 143/72 and 144/72 imposed penalties in the sums of Rs. 3,250, Rs. 18,040 and Rs. 20,000, respectively. The matter was taken up to the Tribunal by the assessee in appeal against the penalties and the Tribunal set aside the penalties holding, to quote the words of the Tribunal itself, that :
'It will be seen that the additions which have been sustained are on purely estimate basis, by rejecting the trading results and substituting a margin of profit different from that disclosed by the assessee. It is not possible to infer from these additions that the assessee was guilty of fraud or gross or willful neglect which resulted in the difference between the income returned and the income assessed. Accordingly, we would cancel the penalties levied for these three years and allow the appeals....'
In D. B. Civil Income-tax Case No. 145 of 1972, the assessee is a registered firm which does 'sarafa' business and in the course of which it manufactures and sells silver ornaments. Ornaments also purchased from individuals are sold either in the same condition or after re-manufacturing them. For the assessment year 1968-69 the assessee filed a return of Rs. 21,289. The Income-tax Officer found that the assessee was not maintaining proper accounts and, therefore, assessed its income at Rs. 34,800, applying the gross profit rate at 6.25 per cent. on the estimated sale. The Income-tax Officer in the course of assessment proceedings initiated penal proceedings under section 271(1)(c) of the Act but as the minimum penalty exceeded Rs. 1,000, he referred the matter to the Inspecting Assistant Commissioner under section 274(2) of the Act. The Inspecting Assistant Commissioner, Jaipur Range I, by his order dated September 28, 1970 imposed a penalty of Rs. 13,600, under section 271(1)(c) for concealment of income. The assessee appealed and the Tribunal by its order dated September 21, 1971, accepted the appeal and quashed the penalty observing : 'As regards the other appeal concerning penalty, we find that the assessed income as Rs. 34,800 as against the declared income of Rs. 21,289. All this was on an estimate basis in trading result. This could not essentially involve conscious concealment of income which would invoke the levy of penalty. It is correct that in the past also substantial increase in the assessees income was made and the Explanation to section 271 is applicable to the present case. However, the notional increase on an estimate basis in the trading result specially when the same is not very high, cannot justify a categorical finding that this was a conscious concealment of income.' The appeal was accordingly accepted.
In D. B. Income-tax Case No. 146 of 1972, the facts are that the assessee in this case is a registered firm doing wholesale business in 'kirana' at Jaipur. For the year 1968-69, he declared his income at Rs. 15,992, inclusive of Rs. 6,000 as estimated additional income. On scrutiny the income-tax officer found that the accounts were not supported by quantitative details and the sales were not fully vouched. Accordingly, he found the income of the assessee at Rs. 33,494. During the assessment proceedings the Income-tax Officer issued a notice to the assessee to show cause why penalty should not be levied against him under section 271(1)(c) of the Act for concealment of the income. But the minimum penalty being leviable was more than Rs. 1,000, the Income-tax Officer referred the case of penalty to the Inspecting Assistant Commissioner under section 274(2) of the Act. The assessee appealed against his assessment and the figure of Rs. 33,494, on appeal, was reduced to Rs. 25,088. The assessee appealed against the penalty imposed by the Inspecting Assistant Commissioner of Income-tax by his order dated December 28, 1970, in, the sum of Rs. 9,100. The Tribunal by its order dated 7th September, 1971, held :
'We have given our due consideration to the circumstances and find that the addition sustained in the assessees income has been on estimate basis. The same was on notional basis as it was found that quantitative tally was not available and the account books otherwise too were not much reliable. All this (sic) coupled with the circumstance that in the past, assessment has been made on an estimate basis and the assessee had also conceded in his declaration that the account version represented by the books was not trustworthy and of its own made an estimated addition of Rs. 6,000 in its income were justifiable inference to make additions during the assessment proceedings. However, they would not by themselves be enough to sustain the imposition of penalty specially when the addition is not too high. Such proceedings are of quasi-criminal in nature, and something more was required to show that the assessee consciously concealed the particulars of income or furnished inaccurate return. In our view negligence in the maintenance of proper accounts is not synonymous with the concealment of income as envisaged by section 271(1)(c). It is correct that the Explanation mentioned in this section as incorporated on April 1, 1964, placed the onus of proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect on the part of the assessee, but the same again cannot be treated at par with the negligence in the maintenance of accounts. We are, therefore, unable to categorically hold that there was conscious concealment of income by the assessee which could justify the levy of penalty.'
In D. B. Income-tax Case No. 147 of 1972, the assessee is a registered firm which mostly deals in precious stones. For the assessment year 1967-68, the assessee filed a return showing its total income at Rs. 91,900. On scrutiny the Income-tax Officer found that the quantitative details of the purchase and sale have not been maintained by the assessee, and in the absence of such details it was not possible to ascertain whether all the opening stock and purchases have been accounted for in sale and closing stock. The Income-tax Officer, therefore, applied section 145 of the Act and assessed the income of the assessee at Rs. 1,33,532 on an estimate basis by applying the gross profit rate at 20 per cent. on the estimated turnover. This led to an addition of Rs. 41,132 to the returned income. The assessee remained content with this assessment, but the Income-tax Officer initiated penal proceedings and because the amount involved was more than Rs. 1,000 he refereed the case to the Inspecting Assistant Commissioner under section 274(2) of the Act. The said Commissioner by its order dated July 17, 1970, imposed a penalty of Rs. 15,000 under section 271(1)(c) of the Act for concealment of income. The assessee appealed and the Income-tax Appellate Tribunal by its order dated 7th September, 1971, ordered :
'We are, however, of the opinion that though the defects found in the accounts of the assessee justified the additions during the assessment proceedings and the finding given therein was relevant for the present proceedings, the same was not conclusive and could not alone justify penalty. After all, the additions were made on notional basis, and they do not enable us to hold categorically that there was conscious concealment of income. The assessee pointed out before us that though the gross profit rate declared in this year was between 5 to 7 per cent. less than the earlier years, the total sales had increased by almost 400 per cent. For this spurt in sales activity, it claims that it had to reconcile with lesser levied rate. In our view, the explanation submitted by the assessee could not be treated totally out of mark. Further, the failure to maintain proper accounts cannot be treated as synonymous for concealment of income or furnishing inaccurate particulars in the return.
It is correct that by virtue of the Explanation added to section 271 on September 14, 1964, the onus of proving the absence of fraud or gross or wilful neglect in the filing of the proper return in such circumstance rests with the assessee. However, the addition made in the profits on estimate basis, especially when the addition is not very high vis-a-vis the declared income, would not alone justify the levy of penalty.'
The department made applications under section 256(1) of the Act to the Tribunal to refer the questions of law which it claimed arose in these six cases. The Tribunal by its consolidated order dated 24th February, 1972, rejected all the six applications of the department. The Tribunal noticed the Explanation added to section 271 of the Act with effect from April 1, 1964, and observed by reference to Sree Meenakshi Mills Ltd, v. Commissioner of Income-tax that 'when the finding is one of fact, the fact that it is itself an inference from the other basic facts will not alter its character as one of fact'. The learned Members of the Tribunal by reference to Basant Lal Om Prakash v. Commissioner of Income-tax held that the imposition of penalty had to be found on the material on record and it is essentially a question of fact whether in a certain case penalty is called for or not. The Tribunal also relied on Commissioner of Income-tax v. Sankarsons & Co. which explained the purpose of the Explanation in section 271 Kerala High Court that the presumption could be displaced by the assessee proving that the failure to return the correct income did not arise from any fraud or gross or wilful neglect. The quantum of proof, added the learned judges of the Kerala High Court, necessary would be that required in a civil case, namely, preponderance of probability. In this view of the matter, the learned Members observed that they were of the considered opinion that the findings given by the Tribunal while quashing the penalty were entirely based on the facts and inference drawn therefrom and no question of law arose warranting any reference to this court under section 256(1) of the Act.
In all these six cases in which reference was refused by the Tribunal the Additional Commissioner of Income-tax has made applications under section 256(2) of the Act praying that the Tribunal be directed to refer the above-mentioned questions.
Mr. S. K. Mal Lodha, learned counsel for the revenue, urged that the Explanation added to section 271 of the Act raised a presumption of fraud, wilful or gross neglect if the amount returned by an assessee was less than 80 per cent. of the total income which was assessed. It was the duty of the assessee to rebut this presumption. This approach of the learned Tribunal in all these six cases was as if it was for the department to prove that the assessee was guilty of fraud, gross or wilful neglect. If the approach of the Tribunal was accepted then it would appear that in all cases where income was estimated, no penal proceedings could be taken. If the approach is erroneous, added the learned counsel, it raises a question of law and he placed reliance on Ramachandra Ayyar v. Ramalingam Chettiar and Omar Salay Mohamed Sait v. Commissioner of Income-tax. He urged that it was not the stage decide whether the assessee was guilty or not guilty of fraud, gross or wilful neglect. The short question on which concentration was necessary at this stage was whether a question of law arises or not, in the circumstances, in each of these cases.
Mr. N. M. Ranka, learned counsel for the assessee, in all the six cases urged that there was no statutory obligation to maintain books of account; that the assessment in these cases was made under the proviso to sub-section (1) of section 145 of the Act where the account books were treated as complete and correct but as the income was not deducible due to the lack of the supporting data such as of stock register, the income was assessed on a basis of estimate and having regard to this circumstance the learned Members of the Tribunal held that no case of wilful or gross neglect was found against assessee. The allegation of fraud finds no mention in the order of the Inspection Assistant Commissioner and, therefore, the simple question which emerges for consideration is whether having regard to the Explanation and the presumption raised therein, if the Tribunal held that the presumption stood displaced in view of the circumstances of these cases, whether rebuttal was sufficient or not was a question of law or one of fact. Placing reliance on Wail Mohammad v. Mohammad Baksh, he urged that whether the onus had been discharged or not is primarily a question of fact and it raises no question of law. He also invited our attention to J. K. Cotton Spg. & Wvg. Mills Co. Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. Sankarsons & Co. His further submission was that the displacement of the presumption may be by evidence which was direct or circumstantial or probability of a case and when all these matters were considered by the Tribunal no question of law arose. He made reference to Abdullabhai Abdul Kadar v. Commissioner of Income-tax, Commissioner of Income-tax v. Heeralal Maliram, Commissioner of Income-tax v. Vrajlal Manilal & Co. and Basant Lal Om Parkash v. Commissioner of Income-tax. Question of negligence is one of fact, added the learned counsel, and he placed reliance on Raghunandan Gir v. Deoraj Gir, Julien Marret v. Mahomed Khaleel Shirazi & Sons and Raruha Singh v. Achal Singh. He further submitted that the reasons given by the Tribunal declining to refer the question to this court could be looked into, for it was the same Tribunal which applied its mind to the circumstances of the case. Penal proceedings, he added, were quasi-criminal in nature and the law should be strictly construed in favour of the subject. He urged that our jurisdiction under section 256(2) was merely advisory and it should be sparingly used and only if there was a substantial question of law of general importance. He placed reliance on Mathura Prasad v. Commissioner of Income-tax, Hanuman Motor Service v. Commissioner of Income-tax and Shadi Ram Ganga Prasad v. Commissioner of Income-tax. The department having not urged that there was no material before the Tribunal to come to a conclusion which it did, it cannot now be permitted to do so. And, lastly, he urged that the Appellate Tribunals in India have been consistently taking the view taken in these six cases by the Tribunal.
The short question which emerges at this stage for our consideration is whether any one of these cases raises a question of law which requires to be referred to this court for answer. In Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax the analysis which the head-note contains succinctly put the four points by reference to which it could be determined whether the question raised is one of law or not. They read :
'(1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66 (1).
(ii) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviwed by the court.
(iii) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse.
(iv) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.'
The Tribunal has expressed the opinion that the questions raised are covered by the fourth proposition. Mr. Lodhas argument, however, is that it is the wrong approach on the question of burden of proof which raises a question of law. Probably the learned counsel hinted that it was the third proposition which was attracted. Strong reliance was placed by the learned counsel on Ramachandra Ayyar v. Ramalingam Chettiar, where their Lordships of the Supreme Court have observed :
'On the other hand, if in dealing with a question of fact, the lower appelate court has placed the onus on a wrong party and its finding of fact is the result, subtantially, of this wrong approach, that may be regarded as a defect in procedure;.........'
In our opinion, this authority does not assist the learned counsel. The onus was not wrongly placed in the cases before us. We shall presently see that it was found to have been discharged. Section 271(1)(c) when extracted for our purposes reads :
'Section 271(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act is satisfied that any person -...
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,
he may direct that such person shall pay by way of penalty......
Explanation. - Where the total income returned by any person is less than 80 per cent. of the total income (herein after in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147...... 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 purpose of clause (c) of this sub-section.'
In sub-section (1) (c) the word 'deliberately' was omitted and the Explanation was added to sub-section (1) by the Finance Act, 1964, with effect from 1st of April, 1964. The Explanation means that where the total income returned is less than 80 per cent. of the total income assessed the assessee 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 been guilty of concealment or furnishing inaccurate particulars. In other words, where the income, returned is less than 80 per cent. of the income assessed the burden of proof would be on the assessee to show that this disparity was not the result of any fraud or wilful or to show that this disparity was not the result of any fraud or wilful or gross neglect. We have no doubt in our minds that when the Tribunal set aside the imposition of the penalty in these cases it was aware of the existence of the Explanation, the purpose it served and its applicability to the cases in hand. The disparity between the incomes returned and the incomes assessed was less than 80 per cent. and they related to the assessment years which were governed by the Explanation. In fact the Tribunal has referred to the Explanation in so many words. The Tribunal, however, felt satisfied that the presumption raised by the Explanation stood rebutted because the additions made to the incomes returned were merely estimated or notional and the difference was also not substantial and the Tribunal was not prepared to conclude fraud, wilful or gross neglect. The evidence which satisfied the Tribunal were the facts and circumstances of the cases which it had decided itself. The evidence may be direct or circumstantial or both. Mere statement of the assessee may be enough in some cases. What quantum of evidence would rebut a legal presumption in a give set of facts does not admit of any rigid rule. Nor does it raise a question of law. No single fact but the cumulative impact of all the facts affords the answer. We have quoted the relevant excerpts from the order setting aside the penalties. The factors have been considered in the light of the presumption. We may perhaps concede that the conclusions could be differently expressed. But that does not detract from the spirit of the conclusions. In the ultimate analysis the question which confronted the Tribunal was whether the facts and circumstances appearing on the records of the cases were adequate to rebut the presumption of fraud, wilful or gross neglect. The Tribunal found in the negative. The presumption stood rebutted. In Wali Mohammad v. Mohammad Baksh their Lordships of the Privy Council have firmly ruled that the question whether the statutory presumption is rebutted by evidence or not is always a question of fact. We are, therefore, clearly of the opinion that no question of law arises in these cases.
Again whether negligence is inferable from a given set of facts and circumstances and whether such negligence is wilful or gross are basically questions of fact and do not raise any question of law. Reference in this connection may profitably be made to Julien Marret v. Mohamed Khaleel Shirazi & Sons.
The learned counsel for the revenue argued that if the premises employed by the Tribunal were permitted, in no case of estimated income penalties could ever be imposed. The apprehension is not well-founded. The Tribunal has not laid down any general proposition. Each case will be regulated by its own facts. At the risk of repetition we may add that it is the totality of circumstances which will determine whether the presumption has or has not been rebutted. Where the accounts are complete, i.e., full and correct, i.e., true as envisaged by the proviso to section 145(1) of the Act, that factor could also be considered while judging the questions of fraud or wilful or gross neglect.
In the result, in none of the six cases any question of law arises because whether the presumption raised by the Explanation to section 271(1)(c) has been rebutted or not is essentially a question of fact and we decline to direct the Tribunal to refer any question to us. The applications are rejected with no orders as to costs.