1998 P T D 618

[221 ITR 661]

[Gujarat High Court (India)]

Before Rajesh Balia and M. S. Shah, JJ

COMMISSIONER OF INCOME-TAX

versus

BARODA TIN WORKS

Income-tax Reference No. 351 of 1982, decided on 21/09/1995.

(a) Income-tax---

----Penalty---Concealment of Income---Cash credits-- -Assessee agreeing to inclusion of cash credits in its income for assessment year 1971-72---Income returned less than 80 per cent. of assessed income---Tribunal finding that assessee had rebutted presumption of concealment of income--Penalty could not be levied---Indian Income Tax Act, 1961, Ss.68, 69, 69-A, 69-B, 69-C & 271(1)(c).

Where the total income returned by the assessee is less than 80 per cent. of the total income as assessed, the Explanation to section 271(1)(c) of the Income Tax Act, 1961, shifts the burden to the assessee to show that the difference was not owing to fraud or gross or wilful neglect on his part. This onus is rebuttable. If, in an appropriate case, the Tribunal or the fact-finding body is satisfied on relevant and cogent material on record and draws an inference thereupon that the assessee was not guilty of gross or wilful neglect or fraud, then, in such a case the assessee cannot come within the mischief of the section and suffer penalty.

Sections 68, 69, 69-A, 69-B and 69-C are all part of the same scheme where certain amounts though not proved to be income of the assessee of the previous year concerned are for the purpose of charging to tax, deemed to be so by creating a legal fiction absolving the Department from its initial duty to prove that any such income is of the assessee. The fiction created under sections 68, 69, 69-A, 69-B and 69-C by itself cannot be extended to penalty proceedings to raise a presumption about concealment of such income.

(b) Income-tax---

----Penalty---Concealment of income---Cash credits---Law applicable to assessment---Explanation to S. 271(1)(c) inserted w.e.f. 1-4-1976 does not have retrospective effect---Indian Income Tax Act 1961, S.271(1)(c).

The Explanation to section 271(1)(c) inserted with effect from April 1, 1976, which creates a legal fiction treating incomes added to the total income as concealed income, cannot be held to be retrospective in operation.

In the previous year relevant to the assessment year 1971-72, the assessee furnished the return under section. 139 of the Act declaring an income of Rs.43,297. The return was supported by the trading account, copy of the profit and loss account and copy of the balance-sheet. The Income-tax Officer during the course of assessment proceedings noticed certain cash credits in the names of several parties. He required the assessee to produce copies of accounts of such creditors to prove the genuineness of the documents. The assessee was able to produce before the Income-tax Officer some confirmative letters from some of the creditors. The Income-tax Officer also issued summons under section 131(1) of the Act to the creditors from whom confirmative letters were made available. However, the creditors could not appear before the Income-tax Officer and they were stated to be untraceable. In the aforesaid circumstances, the assessee agreed for addition of the peak credits which worked out to be Rs.21,500 as income from undisclosed source. On the basis of these additions, notice under section 271(1)(c) initiating penalty proceedings were issued and penalty was levied. The Tribunal held that the assessee had not admitted categorically that the disputed amount was its income and that the same may be taken as concealed income. In the penalty proceedings, the assessee had again taken a clear stand that the disputed amount was not its concealed income and the assessee agreed to the addition on account of the fact that the creditors were not available at the given address at the relevant time. It cancelled the penalty as there was preponderance of probabilities which would go to show that there was no fraud or gross or wilful neglect on the part of the assessee in not returning its assessed income. On a reference:

Held, that the Tribunal was right in not sustaining penalty on the basis of alleged agreement to surrender the sum to be taxed.

CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC) applied.

CIT v. Anwar Ali (1970) 76 ITR 696 (SC); CIT v. Khoday Eswarsa & Sons (1972) 83 ITR 369 (SC); CIT (Addl.) v Noor Muhammad & Co. (1974) 97 ITR 705 (Raj.); CIT v. Vinaychand Harilal (1979) 120 ITR 752 (Guj); and Wali Muhammad v. Muhammad Baksh (1930) AIR 1930 PC 91; ref.

B.J. Shelat for Messrs M.R. Bhat & Co. for the Commissioner,

K. A. Puj for J.P. Shah for the Assessee

JUDGMENT

RAJESH BALIA, J.---The following question of law were referred to this Court for its decision in these proceedings by the Income-tax Appellate Tribunal, Ahmedabad Bench "A", Ahmedabad-.

"(1) ???? Whether, on the facts and in the circumstances of the case, the Appellate Tribunal has been right in law in cancelling the penalty imposed by the Income-tax Officer under section 271(1)(c) of the Income Tax Act, 1961?

(2)??????? Whether the finding of the Appellate Tribunal that the assessee had discharged its burden and there was no positive evidence before the Revenue to establish that the admitted amount represented concealed income of the assessee is correct in law?

(3)??????? Whether when the assessee had agreed to the addition of Rs. 21,500 for taxation of the same as income in the assessment year in question any further inquiry was necessary as to whether the amount agreed to be added represented concealed income of the assessee of the previous year relevant to the assessment year in question?

(4)??????? Whether the effect of the provisions of sections 68, 69 and 69-A is only fictional and not real, inasmuch as, even though the additions could be made to the income of the assessee such added amount cannot be considered as income or concealed income of the assessee in the relevant previous year?"

We have heard learned counsel for the parties. The facts of the case are that the assessee is engaged in the manufacture and sale of tin containers; drums, buckets and other tin articles. In the previous year relevant to the assessment year 1971-72, the assessee furnished the return under section 139 of the Act declaring an income of Rs.43,297. The return was supported by the trading account copy of the profit and loss account and copy of the balance-sheet. The Income-tax Officer during the course of assessment proceedings noticed certain cash credits in the names of several parties. He required the assessee to produce copies of accounts of such creditors to prove the genuineness of the documents. The assessee was able to produce before the Income-tax Officer some confirmative letters from some of the creditors. The Income-tax Officer also issued summons under section 131(1) of the Act to the creditors from whom confirmative letters were made available. However, the creditors could not appear before the Income-tax Officer and they were stated to be untraceable. In the aforesaid circumstances, the assessee agreed for addition of the peak credits which worked out to be Rs.21,500 as income from undisclosed source. On the basis of these additions, notice under section 271(1)(c) initiating penalty proceedings were issued on October 26, 1974, calling upon the assessee to explain and adduce evidence why the amount added be not treated as representing concealed income. In reply to the show-cause notice, the assessee stated that he has obtained confirmatory letters of the depositors in some cases, whose deposits were added to the total income. At the time when the said deposits were taken it is noted that the addresses of the depositors were as they were given to the assessee. In the absence of positive proof of deposits in the form of confirmatory letters of producing them before the assessing authority for examination, he agreed for adding the said deposits in the total income and when the question comes for levy of penalty, mere agreement to include the amount in the total income does not entitle the revenue to levy penalty. The assessee relied on the principle enunciated in the case of CIT v. Vinaychand Harilal (1979) 120 ITR 752 (Guj) for confirming that the deposits made by creditors are concealed income of the assessee.

The Income-tax Officer rejected the explanation offered by the assessee holding that had it not been the concealed income, the assessee would not have agreed to addition. He was of the view that the case of the assessee is covered by Explanation to section 271(1)(c) considering the difference in income in the return and assessed. Therefore, he held that the addition of Rs. 21,500 be treated as concealed income from undisclosed source and penalty was imposed.

The Appellate Assistant Commissioner in appeal found that mere consent of the appellant that impugned amount of peak credits be taxed in its hands will not tantamount to an admission on its part that what was brought to tax was either its concealed income or its business income. The Income? tax Officer ought to have established in the course of penalty proceedings that the appellant had either concealed its income or furnished inaccurate particulars of his income, which the Income-tax Officer has failed to do.

The Appellate Assistant Commissioner was further of the opinion that the facts of the present case on all fours are similar with the facts of the case decided by this Court in the case of CIT v. Vinaychand Harilal (1979) 120 ITR 752. Following the said decision the appeal of the assessee was allowed.

On further appeal before the Tribunal, the Tribunal recorded its finding as- under:

"From the evidence on record it is clear that the assessee maintains books in the ordinary course of business. The deposits in question were recorded in the different accounts. At the time of filing' of the return, the assessee filed the copies of accounts of such creditors. Even copies of the trading account, profit and loss account and the balance-sheet were furnished. Some of the confirmatory letters from the depositors were filed. In cases where such confirmatory letters were not available request was made to the learned Income-tax Officer to summon the creditors and accordingly they were summoned. Unfortunately, the said creditors were not available on the given address at the relevant time. The learned Income-tax Officer did not require the assessee to do what he could not do in the circumstances it was not possible for him physically to produce the depositors before the taxing authority. The learned Income-tax Officer recorded the statement of one of the partners. He also stated that the cash credits were genuine. He was quite categorical in saying that since the depositors could not be produced, the assessee agreed for the addition, so in substance the consistent stand of the assessee has been that all such cash credits are genuine. They were duly recorded in the books maintained in the ordinary course of the business. On account of the circumstances discussed above the assessee agreed for the addition. So it is not a case in which assessee has admitted categorically that the disputed amount was its income and the same may be taken as concealed income. In the penalty proceeding the assessee has again taken a clear stand that the disputed amount was not its concealed income and the assessee agreed to the addition on the circumstances discussed above.

For the reasons discussed above, it is proved that there were preponderance of probabilities which would go to show that there was no fraud or gross or wilful neglect on the part of the assessee in not returning its assessed income. So initially the legal burden which was on the assessee was fully discharged."

In view of the aforesaid finding, the Tribunal applied the ratio of the decision on Vinaychand Harilal (1979) 120 ITR 752 (Guj) and affirmed the decision of the Appellate Assistance Commissioner.

It was contended before us by learned counsel for the Revenue that certain cash credits were found in the books of account of the assessee for the previous year related to the assessment year 1971-72. Admittedly, the assessee has failed to furnish satisfactory explanation before the Assessing Officer and, therefore, he agreed to the addition of the peak amount of cash credit during the year to be added in its total income. Under the provisions of section 68 of the Income-tax Act, wherein the explanation offered by the assessee in respect of credits found in the books of account maintained by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Relying on this provision, learned counsel contends that as under the statute the unexplained credits are deemed to be the income for the previous year. The ratio in Anwar Ali, s case (1970) 76 ITR 696 (SC) is not applicable to the case arising after the explanation was inserted in section 271(1)(c) that is to say after April 1, 1964, and once the same is treated to be an income within the meaning of section 68 to be charged to tax, in the penalty proceedings, the Revenue is not further under any obligation to prove the same as income of the previous year for the purpose of levying penalty. Learned counsel further sought to distinguish the decision of this Court in Vinaychand Harilal's case (1979) 120 ITR 752 on the ground that the same pertains to the provisions, vis-a-vis the additions made with the aid of section 69-A of the Income-tax Act which related to the' cases where the assessee is found to be the owner of any asset enumerated under section 69-A in respect of which the assessee has not been able to offer satisfactory explanation and the case of unexplained cash credit cannot be equated with the case of Vinaychand Harilal's case (1979) 120 ITR 752 (Guj).

Learned counsel appearing for the assessee reiterated that the case is fully covered by the decision in Vinaychand Harilal's case (1979) 120 ITR 752 of this Court.

We have carefully considered the rival contentions. It is true that in Anwar Ali's case (1970) 76 ITR 696, the apex Court was concerned with law as was in force before the enactment of the Income-tax Act, 1961, as the same arose under the Indian Income-tax Act, 1922. The Court enunciated, where no aid of statutory provision was available, in the matter of levying penalty for concealment as under (headnote):

"Proceedings under section 28 of the Indian Income Tax Act, 1922, are penal in character. The gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. "

The principle was reiterated in the case of CIT v. Khoday Eswarsa & Sons (1972) 83 ITR 369 (SC).

When the Income-tax Act, 1961, was brought into force with effect from April 1, 1962, repealing the Indian Income-tax Act, 1922, section 271 corresponded to section 28 of the repealed. Act. With effect from April 1, 1964, section 271 was amended. For the present purposes with this amendment in subsection (1)(c), the word "deliberately" was omitted and the Explanation was added. The Explanation meant 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 wilful or gross neglect on his part he is deemed to be guilty of concealment or furnishing inaccurate particulars. A rebuttable presumption was allowed to be raised about concealment of income in case of substantial understatement of income., vis-a-vis, assessed income. However, no presumption of any particular part of assessed income being concealed income of that year was raised. Obviously, it could not be raised merely on the basis of difference of returned and assessed income. It could not be said that where returned income is less that 80 per cent. of the assessed income, no concealment has taken place, though no presumption under the Explanation could be raised, nor could it be said in the absence of any statutory provision, that every part of the difference between the assessed and returned income is concealed income. Moreover, on establishing the absence of fraud or wilful or gross neglect on the part of the assessee, F no presumption under the Explanation could survive to treat the assessee as guilty of concealment of income. The amount of proof needed for rebutting the presumption would depend on facts and circumstances of each case. No rigid rule could be applied. Whether in a given case the presumption has been rebutted or not is a finding of fact depending on facts and circumstances of each case.

The position of law after insertion of the Explanation to section 271 (1)(c) came to be considered by the Supreme Court in the case of CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14, wherein the Court has held as under (headnote):

"Where the total income returned by the assessee is less than 80 per cent. of the total income as assessed, the Explanation to section 271 (1)(c) of the Income Tax Act, 1961, shifts the burden to the assessee to show that the difference was not owing to fraud or gross or wilful neglect on his part. This onus is rebuttable. If, in an appropriate case, the Tribunal or the fact-finding body is satisfied on relevant and cogent material on record and draws an inference thereupon that the assessee was not guilty of gross or wilful neglect or fraud, then, in such a case, the assessee cannot come within the mischief of the section and suffer penalty. The conclusion of the Tribunal is conclusion of fact and no question of law arises."

This Court in CIT v. Vinaychand Harilal (1979) 120 ITR 752 has held that normally, the Revenue must establish that the receipt of the amount in question constituted the income of the assessee. The Explanation to section 271(1)(c) of the Act enables the Revenue to discharge this burden of proof laid on it if the condition regarding the returned income being less than 80 per cent. of the assessed income is satisfied. But the presumption can be rebutted by the assessee. The Court further held that in order to rebut the presumption raised by the Explanation to section 271(1)(c), it is open to the assessee to bring to the notice all materials on record which would enable him to show that he had not concealed the particular income or furnished inaccurate particulars.

In this connection, it was further said that it is also not necessary that any positive material should be produced by the assessee in order to discharge his burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings, irrespective of whether it is produced by him or by the Revenue.

It may be noticed in this connection that where presumption of concealment of particulars of income is, raised under the Explanation to section 271(1)(c) on account of additions having been made or deductions being disallowed in the returned income, the burden of the assessee is to prove that the failure to return the correct (assessed) income did not arise from any fraud or any gross or wilful neglect on his part. Establishing such absence of fraud or gross or wilful neglect on the part of the assessee results in discharge of the burden placed on the assessee under the Explanation and once that burden is discharged the position reverts to as it was before the insertion of the Explanation. That is to say that on a finding that return of income which is less than 80 per cent. of the assessed income is not the result of fraud or gross or wilful neglect, the penalty cannot be sustained by raising a presumption of concealment of income under the Explanation.

In this connection, we may refer to the decision of the Rajasthan High Court in the case of Addl. CIT v. Noor Muhammad & Co. (1974) 97 ITR 705. The Court said (page 714):

"In subsection (1)(c) the word 'deliberately' was omitted and the Explanation was added to subsection (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 goss or wilful neglect on his part, be deemed to have been guilty of concealment or furnishing inaccurate particulars. In the 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 gross neglect. "

The Court further considered that the Explanation gives rise to a rebuttable presumption and what evidence would be sufficient to rebut that presumption, it observed (page 714):

"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 given set of facts does not admit of any rigid rule."

We find that the enunciation of the aforesaid principle about raising of the rebuttable presumption under the Explanation and the amount of proof required to rebut the same expressed in the two decisions referred to above have found echo in the case of CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC).

Whether the onus of proving a fact has been discharged or not has always been held to be a question of fact. As far back as in 1930, in the case of Wali Mohammad v. Mohammad Baksh, AIR 1930 PC 91, the Board said that:

"The question whether the onus had been discharged or not is primarily a question of fact and it raises no question of law."

The same principle applies when it comes to whether a presumption of fact stands rebutted or not.

Applying the aforesaid principle, we find in the present case the Tribunal has considered the entire evidence and material on record and has come to a positive finding that it is proved that there were preponderance of probabilities which go to show that there was no fraud or gross or wilful neglect on the part of the assessee in not returning assessed income. This is the finding of fact and does not give rise to any question of law unless it is specifically challenged on the grounds on which the finding of fact can be challenged.

We may reiterate at this stage at the cost of repetition that the Supreme Court has said in unequivocal terms that if in an appropriate case the Tribunal or fact-finding authority is satisfied that there is no fraud or gross or wilful neglect on the part of assessee in submitting his return, then in such a case the assessee cannot be found within the mischief of the Explanation. At best additions made on account of the provisions of sections 68, 69, 69-A, 69-B and 69-C become relevant at the time of raising the presumption under the Explanation to section 271(1)(c) on account of difference between the assessed income and the returned income. Once the presumption of concealment or concealed income stands rebutted, it is for the Department to establish that the income which the assessee is alleged to have concealed, is in fact, his income as distinguished from deemed income of the assessee which he failed to disclose in his returns.

So far as the contention of learned counsel for the Revenue that in view of the provisions of section 68 for treating unexplained cash credits in the books of account of the assessee as income of the previous year relevant to the assessment years in question, the further question of proving that the additions were income of the assessee of the relevant previous year for the purpose of penalty proceeding does not arise, after a close scrutiny we are unable to accept it.

Sections 68, 69, 69-A, 69-B, and 69-C are all part of the same scheme where certain amounts though not proved to be the income of the assessee of the previous year concerned are for the purpose of charging to tax are deemed to be so by creating legal fiction absolving the Department from its initial duty to prove that any such is the income of the assessee. But for these provisions, it was for the Revenue to prove that any sum, not disclosed by the assessee but which is sought to be taxed as income of the assessee: is the income of the assessee for the previous year relevant to the assessment year.

The law is sell-settled that though the finding recorded in the assessment orders are relevant evidence to support the allegation of concealment, but these cannot be the foundation for holding the assessee guilty of concealment. Under section 68 as under section 69-A no such legal fiction has been, created to treat such additions as concealed income of the assessee for the purpose of penalty proceedings. This conclusion is further strengthened by the fact that such fiction has been created by the present Explanation 1 to section 271(1)(c) in the following form which was inserted with effect from April 1 1976, by the Finance Act 1975:

"Explanation 1.----Where in respect of any facts material to the computation of the total income of any person under this Act,

(A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) to be false, or

(B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him,

then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed."

The above Explanation was substituted for the Explanation which was in existence at the relevant time when the returns in the present case were filed and was the governing provision. Obviously, the Explanation which was inserted in section 271(1)(c) with effect from April 1, 1976, cannot be held to be retrospective in operation to govern the case coming earlier. This fact goes to show that prior to the insertion of this Explanation it was not open to the Assessing Officer to raise any presumption about specific sums added or deductions disallowed, to consider it as income in respect of which particulars of income have been concealed merely on the ground of non-submission of explanation or explanation furnished but not found satisfactory though in such an event the amount could be added or deduction disallowed by resorting to other deeming provisions. It is to be noticed that falsity of explanation was expressly put differently from mere unsatisfactory nature of explanation offered. So also a clear distinction was drawn between an explanation which is not satisfactory and which is not bona fide. The former was sufficient to include the disputed sum in the computation of income of the assessee as falsity of explanation, inheres wilful non-disclosure. In the latter case, though explanation offered by the assessee in respect of such additions or disallowance may be not satisfactory in the opinion of the Income-tax Officer, it may be sufficient to include it in income, but still if the assessee establishes his bona fides about the explanation submitted by him, penalty could not be imposed by invoking the Explanation.

However, as the present case is governed by the Explanation as it existed prior to the above referred provision, the only presumption that could be raised was that in case returned income is less than 80 per cent. of the assessed income, the assessee could be deemed to have concealed particulars of income. Once the assessee's showing that the difference was not owing to fraud or gross of wilful neglect on his part the presumption stood rebutted.

The fiction created under sections 68, 69, 69--A, 69-B and 69-C by itself cannot be extended to penalty proceedings to raise the presumption about concealment of such income.

This court has categorically held in Vinaychand Harilal's case (1979) 120 ITR 752 arising on account of additions being made on the mandate of section 69-A and such additions having given rise to presumption under the Explanation to section 271(1)(c) for the assessment year 1967-68. The Court said (page 757):

"It is undoubtedly true that in this case the income returned by the assessee was less than 80 per cent, of the total income as assessed by the Income-tax Officer. However, it must not be forgotten that it was by resorting to the provisions of section 69A that the Income? tax Officer and the Appellate Assistant Commissioner assessed the amounts of the demand drafts as income of the assessee of the particular previous year relevant to the assessment year under consideration ?.

Unless and until we come to the stage of it being established, that the receipt of Rs. 60,000 constituted income of the assesee and that too without resort to the deeming provisions of section 69-A, it cannot be said that there was any scope for invoking the penalty provision of section 271(1)(c). In any event, the burden of proof would be clearly discharged the moment it was pointed out on behalf of the assessee in the penalty proceedings that it was by virtue of the deeming provisions after the assessee's version was rejected that the amount was brought to tax under section 69-A of the Income-tax Act. "

Thus, the decision of this Court in Vinaychand Harilal's case (1979) 120 ITR 752 clearly covers the present case.

In our opinion, no distinction can also be found about the deeming provisions for treating unexplained cash credit investment or expenditure, etc., as income chargeable to tax by treating the same as income of the assessee of the previous year in their application to penalty proceedings, as sought to be drawn by learned counsel for the Revenue to distinguish the aforesaid decision of this Court, on the ground that the principle was laid down with reference to section 69 and not with reference to section 68.

In view of the discussion, our answer to question Nos. 1 and 2 is in the affirmative, that is to say, in favour of the assessee and against the Revenue.

Our answer to question No. 3 whether further enquiry about the nature of sums added on agreement represent concealed income of the assessee or not depends upon the facts and circumstances of the case. Depending upon what exactly the admission of the assessee had been, where the assessee admits unequivocally that it is the income of the assessee of the previous year, it may need no further enquiry unless such admission is explained by the assessee. However, if the agreement of the assessee is simplicity that he is not in a position to adduce satisfactory evidence in support of his case and agrees, for addition in view of the legal fiction created under various statutory provisions, it cannot be treated as an admission of such sum representing the income of the assessee particulars of which \v are concealed by the assessee on the basis of such agreement either. In view of our answer to question No. I and in the present case, it must be held that the Tribunal was right in not sustaining penalty on the basis of the alleged agreement to surrender the sum to be taxed.

To question No. 4 our answer is that until the insertion of the Explanation 1 with effect from April 1, 1976, the very fact that additions have been made under the provisions of section 68/69-A cannot lead to a presumption that such additions were income of the assessee for the purpose of penalty proceedings. The purpose of legal fiction created under sections 68, 69, and 69-A was only to bring such unexplained sum within the ambit of charging provision.

There is no order as to costs

M.B.A/1291/FC????????????????????????????????????????????????????????????????????????????????? Order accordingly