Ariyt Pasayat ( 1 ) PURSUANT to direction given by this Court under Section 256 (2) of Income Tax Act, 1961 (in short, the act ), following question has been referred for opinion of this Court by Income Tax Appellate Tribunal, Delhi Bench a , New Delhi (in short- the Tribunal ): "whether, on the facts and in the circumstances of the case, die Tribunal was correct in law in cancelling the penalty of Rs. 50. 000. 00 imposed by the Inspecting Assistant Commissioner under Section 271 (1 ) (c) of the Income Tax Act, 1961?" ( 2 ) FACTUAL position, as borne out by the Statement of Case, is essentially as follows: Assessee, who was assessed in the status of an individual filed return showing income of Rs. 5. 000. 00 for assessment year 1966-67. A sum of Rs. 48,500. 00 was recovered in cash from his house during a search by the Customs Authorities. On being asked about the nature and source of the aforesaid sum, he explained it as follows: (i) Loan from Shri Babu Ram on 6. 3. 1966 Rs. 15,000. 00 (ii) Loan from M/s. Jain Bullion Company, Meerut against ornaments pledged by the assessee on 10. 3. 1966 Rs. 10,000. 00 (iii) Sale proceeds of silver coins sold to Madan Lal Vinod Kumar Jain, Delhi On 8. 3. 1966 Rs. 23,374. 00 Income Tax Officer, during assessment proceedings, did not accept the evidence produced by assessee in respect of loans as mentioned at Serial Nos. 1 and 2 above and also in relation to the claim regarding sale of silver coins. He added the entire sum of Rs. 48,500. 00 as income from undisclosed sources. Appeal was preferred by assessee before Appellate Assistant Commissioner (in short, "aac"), against assessment and the said Authority confirmed the addition. On a further appeal, the Tribunal directed deletion of Rs. 23,374. 00 on the ground that evidence, both documentary and oral, produced by assessee in respect of sale of silver coins for Rs. 23. 374. 00 was satisfactory. It, however, did not accept the explanation in respect of alleged loans and found that they were not genuine. In the meantime, proceedings under Section 271 (1) (c) of the Act was initiated for concealment of income. Considering the quantum involved, matter was referred to the Inspecting Assistant Commissioner of Income Tax (in short, IAC ). 374. 00 was satisfactory. It, however, did not accept the explanation in respect of alleged loans and found that they were not genuine. In the meantime, proceedings under Section 271 (1) (c) of the Act was initiated for concealment of income. Considering the quantum involved, matter was referred to the Inspecting Assistant Commissioner of Income Tax (in short, IAC ). A show-cause notice was issued by IAC and reply was submitted by assessee. Assessee s primary stand was that merely because there were some inconsistencies between the statements made before the Customs Authorities and Income Tax Officer, the same was not sufficient to disbelieve the explanation offered as regards the genuineness of loans. IAC did not accept the stand and felt that assessee had made conflicting statements and inconsistencies were not explained. The explanation offered was found to be not acceptable and penalty of Rs. 50,000. 00 was imposed. Matter was carried in appeal before the Tribunal by assessee. It was pointed out that the Tribunal, in the quantum of appeal, had already deleted addition of Rs. 23,374. 00 and maintained remaining additions on the ground that it was not satisfied about the genuineness of loans. It was further pleaded that loan was advanced by Shri Babu Ram on the basis of pronote and M/s. Jain Bullion Company on the basis of ornaments pledged. It was further stated that Shri Babu Ram was produced before Income Tax Officer and his statement was recorded, where he stated about source from which the loan was given. Mere disbelief of the evidence was not sufficient for attracting penal consequence. Tribunal was of the view that mere rejection of the explanation or disbelief of the Tribunal in the quantum appeal was not sufficient to prove concealment. There has to be some positive material or positive circumstance to suggest that assessee had concealed his income. It was held that on consideration of facts and circumstances of the case, no concealment had been proved and therefore, penalty was directed to be deleted. Revenue moved for reference under Section 256 (1) of the Act, which was rejected. But pursuant to direction given by this Court under Section 256 (2) of the Act, question, as set out above, has been made. ( 3 ) WE have heard learned Counsel for Revenue. There is no appearance on behalf of assessee in spite of notice. Revenue moved for reference under Section 256 (1) of the Act, which was rejected. But pursuant to direction given by this Court under Section 256 (2) of the Act, question, as set out above, has been made. ( 3 ) WE have heard learned Counsel for Revenue. There is no appearance on behalf of assessee in spite of notice. Primary stand of learned Counsel for Revenue is that the effect of Explanation added to Section 271 (l) (c) of the Act has been lost sight of by the Tribunal. After addition of the Explanation, the position of law which emerged from the decision of the Apex Court in Commissioner of Income Tax v. Anwar Ali, (1970) 76 ITR 696, was no longer applicable. It is pointed out that returned income was Rs. 5,000. 00. Even after deletion of the addition made by Income Tax Officer to the extent of Rs. 23,374. 00, the Explanation was clearly applicable as the assessed income was far above the permissible limit. ( 4 ) AT this juncture, it is necessary to refer to the legislative history so far as Section 271 (1) (c) is concerned. There are three stages of amendment of Section 27 (1) (c ). The periods are, (a) prior to April, 1964; (b) April 1,196 4/03/193/1976; and (c) after 1/04/1976, which have relevance to present dispute. Originally, the word "deliberately" existed which was omitted by the Finance Act, 1964, with effect from 1/04/1964. An Explanation was inserted at the end of Sub-section (1) of Section 271, by the said Finance Act (Section 40 of the Finance Act, 1964 ). In between, by the Finance Act, 1968, the base for levy of penalty became the amount of concealment as against the quantum of tax ought to be avoided under the then existing provisions. Subsequently, further amendments were brought by the Taxation Laws (Amendment) Act, 1975 (Section 61 of the said amending Act ). Four Explanations were substituted for the Explanation introduced by the Finance Act, 1964. The effect of the said amendment, so far as we are concerned, is that where, in respect of facts material to the computation of the total income of assessee, he furnishes no explanation or he cannot substantiate the explanation offered by him or the explanation offered by him is found to be false, the relevant income shall be deemed to be his concealed income. Another change was the base for levy of penalty for concealment. The base which was made, viz. , the concealed income, was again changed to tax sought to be evaded. We are not very much concerned with the other changes. ( 5 ) THE question of onus is of primary and added importance in legal acrimony. In Anwar Ali s case (supra), the Apex Court laid down that before a person could be visited with a penalty for concealment, etc. Revenue must prove that the amount in question was the income of assessee and that he had concealed it with a motive. It was further held that the penalty could not be imposed merely because any explanation given by assessee in regard to items in question was not believed to be true. ( 6 ) SECTION 271 (l) (c) is attracted where, in the course of any proceedings under the Act, the Assessing Officer or the first Appellate Authority is satisfied that, (a) any person has concealed the particulars of his income; or (b) has furnished inaccurate particulars of such income. The expression "has concealed" and "has furnished inaccurate particulars" have not been defined either in the section or elsewhere in the Act. However, notwithstanding differences in the two circumstances, they lead to the same effect viz. , keeping off a certain portion of the income. The former is direct while the latter maybe indirect inits execution. The word conceal is derived from the Latin word concealer which implies to hide . In Webster s New International Dictionary, the word has been equated to hide or withdraw from observation to cover or keep from sight; to prevent discovery of, to withhold knowledge of. Meaning of word concealment as fraud in Shorter Oxford English Dictionary is: "in law, the intentional suppression of truth or fact known, to the injury or prejudice of another". There may be cases where the facts may attract both the offences, and in some cases there may be overlapping of the two offences. ( 7 ) IF, in the facts and circumstances of a particular case and on the materials before it, the Tribunal reaches a conclusion that concealment was not proved, it is a question of fact and no question of law arises from such order. ( 7 ) IF, in the facts and circumstances of a particular case and on the materials before it, the Tribunal reaches a conclusion that concealment was not proved, it is a question of fact and no question of law arises from such order. Similarly, whether the burden in a given case has been discharged on a set of facts or not is a question of fact. Where a finding of fact arrived at by the Tribunal is based on no material or is perverse or is based on irrelevant, extraneous or inadmissible considerations or is arrived at by the application of wrong principles of law, a question of law arises. Where the Tribunal fails to arrive at its own conclusion of fact after due and proper consideration of the entire materials for arid against assessee and cancels the penalty, a question of law arises. Similar is the case where conclusions of the Tribunal suffer from infirmity on account of relevant materials and evidence being ignored. ( 8 ) A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent substituted Explanations makes it clear that the Statute visualized assessment proceedings and penalty proceedings to be wholly distinct and inde- pendent of each other. In essence, the Explanation (after 1964) is a rule of evidence. Presumptions which are rebunable in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on assessee. The rational behind this view is that the basic facts are within the special knowledge of assessee. Section 106 of the Indian Evidence Act, 1872 (in short, the evidence Act ), gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the Assessing Officer as to whether he can invoke the Explanation or not. Explanation 1, which primarily concerns the case at hand, automatically comes into operation when, in respect of any facts material to the computation of the total income of any person, there is failure to be after an Explanation or the Explanation is offered which is found to be false by the Assessing Officer or the first Appellate Authority, or an Explanation is offered which is not substantiated. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which the particulars have been concealed. In such a case, the amount added or disallowed in computing the total income is deemed to represent the income in respect of which the particulars have been concealed. As per the proviso to explanation 1, the onus to establish that the explanation offered was bonafide and all facts relating to the same and material on the computation of his income have been disclosed by him will be on the person charged with concealment. Mere failure to substantiate the explanation is not enough to warrant penalty. Revenue has to establish that the explanation offered was not substantiated. The proviso to explanation 1 is concerned only with cases coming under Clause (B) of the Explanation where assessee offered an explanation which he was not able to substantiate. The Explanation of assessee for purposes of avoidance or penalty must be an acceptable Explanation; it should not be a fantastic or fanciful one. As indicated above, consequence follows as a matter of law. The burden is on assessee. If he fails to discharge that burden, the presumption that he had concealed income or furnished inaccurate particulars thereof is available to be drawn. . ( 9 ) THE principal logical import of the explanation is to shift the burden of proof from Revenue on to assessee. Rebuttal must be on materials relevant and cogent. If is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body, bearing the aforesaid principles in mind, come to a conclusion that assessee has discharged the onus, it becomes a conclusion of fact, and no question of law arises. As observed earlier, the initial burden is on assessee. Once the initial burden is discharged, assessee would be out of mischief unless further evidence is adduced. It is plain on principle that it is not the law that the moment any fantastic or unacceptable explanation is offered, the burden placed would be discharged and the presumption rebutted. As pointed out by the Apex Court in the case of Commissioner of Income Tax v. Mussadilal Ram Bharose, (1987) 155 ITR 14, the burden placed upon assessee is not discharged by any fantastic explanation. It must be an explanation acceptable to the fact-finding body. As pointed out by the Apex Court in the case of Commissioner of Income Tax v. Mussadilal Ram Bharose, (1987) 155 ITR 14, the burden placed upon assessee is not discharged by any fantastic explanation. It must be an explanation acceptable to the fact-finding body. These aspects were highlighted by one of us (Arijit Pasayat, Chief Justice), in the case of Commissioner of Income Tax v. A. Sreenivasa Pai, (2000) 242 ITR 29 and Commissioner of Income Tax v. Kishorekumar Shamji, (2000) 244 ITR 702. ( 10 ) THE Apex Court had considered the effect of change of law by Finance Act, 1964 in the case of Commissioner of Income Tax v. Ramesh Biscuit Factory, (1994) 205 ITR 344. With reference to the case of Mussadilal Ram Bharose (supra), the Apex Court had approved the interpretation placed upon the explanation by a Full Bench of Punjab and Haryana High Court in Vishwakarma Industries v. Commissioner of Income Tax, (1982) 135 ITR 652 . The same issue was also dealt with by the Apex Court in the case of Commissioner of Income Tax v. K. R. Sadayappan, (1990) 185 ITR 49. At page 54 of the said case, it was observed as follows: "it is true that the presumption that arose was a rebuttable presumption that there was concealment of income and if there was cogent material to rebut the evidence that was acceptable, then the presumption would not stand. In the instant case, the falsity of the explanation given by the assessee has been accepted by the Tribunal. The Tribunal stated that in the instant case, no doubt the Income Tax Officer was justified in saying that not only the explanation was riot convincing but falsebecause there was no cash available to the assessee for payment of the extra money paid. Therefore, no explanation was put forward as to where from the extra money came. If that was the position and the further presumption was that the assessee was guilty of fraud, then the subsequent presumption followed that the assessee has concealed the income and that can be rebutted only by cogent and reliable evidence. No such attempt in this case was made. In that view of the matter, in our opinion, it cannot be said that, in this case, the Tribunal was justified in rejecting the claim and penalty maybe imposed. No such attempt in this case was made. In that view of the matter, in our opinion, it cannot be said that, in this case, the Tribunal was justified in rejecting the claim and penalty maybe imposed. The presumption raised as aforesaid, that is to say, that the assessee was guilty of fraud or wilful neglect as a result of which the assessee has concealed the income, would be there. This presumption could have been rebutted by cogent, reliable and relevant materials. There was none, at least neither the Tribunal nor the High Court has indicated any. If that is the position, the High Court, in our opinion, was in error in not correctly applying the principles laid down by this Court in CJT v. Mussadilal Ram Bharose, (1987) 165 ITR 14 (SC), and the principles of law applicable in a situation of this type to the facts of this case and therefore, the decision is not sustainable. It is thus clear that the question referred to the High Court in this case is no longer res integra. The decisions of this Court aforesaid clearly point out the change that has been brought about by the introduction of the said Explanation. " ( 11 ) ULTIMATELY, it was observed that the principle initiated in Anwarali s case (supra), that mere rejection of the case is not sufficient for levying penalty and Revenue must go further and establish that there has been concealment of particulars of income or a deliberate failure to furnish accurate particulars is no longer necessary. The cases, to which, the said Explanation is attracted, have to be decided in the light of the law enunciated in Mussadilal s case (supra), Saddayappan s case (supra ). Undisputedly, in the case at hand, the Tribunal has proceeded to place the onus on Revenue to prove by some positive material or positive circumstance to suggest that assessee had concealed his income. That was not necessary to be done by Revenue in view of the Explanation to Section 271 (l) (c ). What Revenue was required to do was to consider the Explanation, if any, offered by assessee and decide upon its acceptability. The burden was on assessee to prove that there was no concealment. That is the main import of the Explanation added to Section 271 (1) (c) of the Act with effect from 1. 4. 1964. What Revenue was required to do was to consider the Explanation, if any, offered by assessee and decide upon its acceptability. The burden was on assessee to prove that there was no concealment. That is the main import of the Explanation added to Section 271 (1) (c) of the Act with effect from 1. 4. 1964. ( 12 ) TRIBUNAL was not justified in its conclusion in cancelling the penalty. However, quantum of penalty has to be fixed by taking into account the unexplained incomes to the extent of Rs. 25. 000. 00. This exercise shall be taken up by the Tribunal while dealing with matter under Section 260 of the Act. Our answer to the question referred is in negative, in favour of Revenue and against assessee. ( 13 ) THIS reference is disposed of.