D.D. VYAS, J.M.: ORDER This is appeal pertaining to asst. yr. 1975-76. assessee, registered firm, manufactures and sells boxes and cartons. previous year for asst. yr. 1975-76 ended on 31st March, 1975. For year under consideration, assessee filed return of income on 11th Aug., 1975, declaring income of Rs. 49,510. During course of assessment proceedings, ITO noticed following cash credits aggregating to Rs. 95,000 in account of Shri Sukhbir Singh : Date of receipt of Amount Date of return of loan Rs. loan 2nd May, 1974 25,000 7th July, 1975 6th May, 1974 25,000 8th July, 1975 5th July, 1974 15,000 10th May, 1975 11th March, 1975 15,000 9th June, 1975 22nd March, 1975 15,000 21st April, 1975 2. ITO required assessee to explain nature and source of these credits. He also recorded statement of Sukhbir Singh. assessee produced evidence in support of genuineness of loans. ITO in detail discussed evidence produced by assessee. ITO, after considering entire evidence in detail, held that theory of loan advanced by Sukhbir Singh was cooked up story and in reality Sukhbir Singh never advanced any loan. He also gave clear finding that theory of payment of interest to creditor was also not genuine. Consequently, ITO added sum of Rs. 95,000 to income of assessee as from undisclosed sources. Consequently, he completed his assessment on total amount of Rs. 1,00,617. He also initiated penalty proceedings under s. 271(1)(c) of IT Act, 1961 ('the Act'). 3 . In penalty proceedings, inter alia, it was submitted that loans in dispute were genuine. In view of evidence on record, it was contended that there were preponderance of probabilities that really money was borrowed from Sukhbir Singh. It was also submitted that even after insertion of Explanation under s. 271(1)(c), it was for Department to prove that sum of Rs. 95,000 was income of assessee in year of account and assessee failed to disclose same. ITO considered explanation of assessee in detail. Inter alia, learned ITO held as under : "That assessee was given sufficient opportunity to adduce evidence in support of genuineness of these amounts. assessee had failed to produce person, i.e., Ch. Sukhbir Singh, in whose name amounts were introduced. Ch. Sukhbir Singh was summoned and examined on oath and he flatly denied having given any loan to assessee. He also denied that signatures on reverse of alleged pronotes were his. Even visual check of signatures appended on reverse of pronotes in token of payment of loan amounts with signatures of Ch. Sukhbir Singh on statements recorded shows that there is no resemblance between signatures at reverse of pronotes and his actual signatures. Even on cross-examination by counsel of assessee, Ch. Sukhbir Singh denied having ever advanced any loan to assessee. assessee produced one Chatter Singh, alleged to have been broker for this transaction. On his examination, he stated that he had put Shri Amrit Prakash, partner, in contact with Shri Sukhbir Singh, yet neither were loan amounts passed in his presence nor repaid in his presence nor were any documents signed in his presence nor did he know how much loan was required by assessee. Further, Ch. Sukhbir Singh, in confessional statement before ITO assessing him, had stated that he was doing hawala business and many persons were given accommodation by him. Shri Sukhbir Singh, in fact, was man of very meagre means and was not in position to advance such huge amount as loan. This is proved by fact that number of Court decrees were passed against him but same could not be executed as he has no real asset. counsel for assessee stated that interest on some occasions were paid by cheque. On going through bank pass book of Shri Sukhbir Singh, these amounts paid by cheques were credited in his bank account but that is these amounts paid by cheques were credited in his bank account but that is clearly case of charges paid for name-lending. Keeping totality of evidence in view, it is established beyond shadow of doubt that credits shown were not genuine and assessee has failed to discharge onus. Apart from this, conduct of assessee before and during course of assessment proceedings has been of tenaciously holding on to made-up story and to persistently perpetuate falsity of whole transaction. assessee is, therefore, clearly in default and penalty is exigible in his case. assessee had gone in appeal to CIT(A) and appeal on this point was dismissed." 4 . learned ITO after considering all contentions was of view that penalty was leviable under s. 271(1)(c). Thus, he held that assessee concealed income of Rs. 95,000 plus interest of Rs. 5,617. Thus, he imposed penalty of Rs. 1,00,617 under s. 271(1)(c). 5 . Being aggrieved with order of ITO, assessee took up matter in appeal. Inter alia, it was submitted that interest payments were made by cross cheques and that above interest payment stood recorded in bank account of Shri Sukhbir Singh. It was also contended that books of account were accepted by Department except for above cash credits for which addition was made. learned counsel also submitted that it was not established by Department that assessee knowingly concealed particulars of its income. In same connection it was argued that in present case, Department failed to discharge initial onus which lay on it. According to learned counsel, assessee failed to prove genuineness of loans as such additions were made under s. 68 of Act. 6 . learned CIT(A) was not satisfied with contention of appellant. According to him, in present case, returned income was less than 80 percent of assessed income and as such s. 271(1)(c) is attracted. According to learned CIT(A), in present case, assessee failed to discharge initial onus resting upon it. learned CIT(A) was of view that assessee made bogus entries in books of account and introduced bogus cash credits. learned CIT(A), consequently, held that sum of Rs. 95,000 was never advanced by Shri Sukhbir Singh. learned CIT(A), consequently, sustained order of ITO. 7. Before Tribunal, on behalf of appellant, it was contended that learned CIT(A) was not justified in sustaining order of penalty. other contention of learned counsel for appellant was that ITO imposed penalty under s. 271(1)(c) on basis of Explanation 1(A) added to s. 271(1)(c) of Act, w.e.f. 1st April, 1976. According to learned counsel, said Explanation is only applicable from asst. yr. 1976-77 and not from assessment year under consideration. So, very basis on which penalty was imposed by ITO, was illegal. Thus, it was contended that order of imposing penalty under s. 271(1)(c) by ITO was legally not correct. other contention of learned counsel for appellant was that in present case, in penalty proceedings, it was not established by Department that sum of Rs. 1,00,617 was income of assessee in year of account and assessee consciously concealed particulars of its income. Other submission of learned counsel for assessee was that in spite of Explanation to s. 271(1)(c), it was for Department to establish that disputed amount was income of assessee in year of account and assessee concealed same. In present case, no such material was brought on record. In this connection it was contended that decision in case of Addl. CIT vs. Karnail Singh V. Kaleran (1974) 94 ITR 505 (P&H) goes to show that it is for Department to prove ingredients of s. 271(1)(c). learned counsel also contended that in present case on basis of material on record, initial burden which lay upon assessee was discharged. As such, it was contended that there was no fraud or gross or wilful neglect on behalf of assessee for not returning assessed income. According to learned counsel, there was preponderance of probabilities in favour of holding that there was no concealment of income. 8. On behalf of Revenue, it was contended that in present case assessee never took stand before learned CIT(A), that ITO was legally not correct in invoking Expln. 1(A) to s. 271(1)(c), which came into force from asst. yr. 1976-77. Even if it may be accepted that any illegality was committed by ITO in invoking Expln. 1(A) to s. 271, it was only clerical mistake on his part because in substance, he applied provisions of s. 271(1)(c). learned Departmental Representative contended that before learned CIT(A) no such arguments were advanced by appellant. Moreover, learned CIT(A) after hearing appellant and considering evidence on record clearly held that present case was hit by Explanation to s. 271(1)(c), which came into force w.e.f. 1st April, 1964. learned CIT(A), after hearing assessee, held that in present case assessee failed to prove that there was no fraud or gross or wilful neglect on part of assessee for not returning assessed income. learned Departmental Representative also submitted that appellate authority was always competent to do what ITO failed to do. If ITO wrongly mentioned Expln. 1(A) to s. 271, it was not fatal in present case. other contention of Revenue was that in present case, Tribunal while deciding quantum matter clearly held that loans in question were bogus. It was also found as fact that Shri Sukhbir Singh never advanced loan to assessee. learned Departmental representative further contended that present case is not case where assessee failed to prove its case. As matter of fact, this case is based not merely upon falsity of explanation given by assessee but Tribunal, after appreciating all facts, gave clear finding of fact that loans were bogus and Shri Sukhbir Singh never advanced loan. It was also pointed out that it was for assessee to show that there was no fraud or gross or wilful neglect on its part in not returning its assessed income. assessee failed to discharge this burden. Thus, learned CIT(A) was perfectly correct in holding that penalty was leviable in present case under s. 271(1)(c). learned Departmental Representative also contended that decision in case of Karnail Singh V. Kaleran (supra) is not correct law. 9. We have considered rival, submissions. At first we may point out that ITO levied penalty under s. 271(1)(c). From assessment order, it is also clear that he initiated penalty proceedings under s. 271(1)(c). It means that ITO initiated penalty proceedings under s. 271(1)(c) for concealment of income and furnishing of inaccurate particulars of his income. While applying Explanation to s. 271(1)(c), be wrongly stated that Expln. 1(A) to s. 271(1)(c) was attracted. As matter of fact, from order of ITO imposing penalty, it was clear that his approach was correct but he mentioned wrong Expln. 1(A) to s. 271(1)(c). Simply because section was wrongly mentioned, order of penalty passed by ITO under s. 271(1)(c) cannot be said to be illegal. Penalty was imposed under s. 271(1)(c). ITO, while imposing penalty, clearly held that apart from conduct of assessee before and during course of assessment proceedings, it was clear that assessee has been tenaciously holding on to made-up story and was persistently perpetuating falsity of whole transaction. He also held that explanation given by assessee was totally false. Before learned CIT(A) assessee never took stand that ITO wrongly applied Expln. 1(A) to s. 271(1)(c). Even from grounds of appeal filed before CIT(A), it was not proved that assessee took stand that Expln. 1(A) to s. 271(1)(c) was applied. Even before learned CIT(A), it was never argued that penalty order passed by ITO under s. 271(1)(c) was legally not sustainable in law. We may also point out that Explanation to s. 271(1)(c) only provides rules of evidence. If there was any irregularity in stating wrong Explanation it was only irregularity and will not go to root of matter. It is also settled law by now that if ITO failed to apply his mind to provision or came to wrong determination for or against assessee in computation of tax, appellate authority can correct error. Reference may be made to ratio of decision of CIT vs. McMillan & Co. (1958) 33 ITR 182 (SC). 10. If all aforesaid facts are taken into consideration, it would be clear that basis on which penalty was imposed under s. 271(1)(c) was not illegal. Against order of ITO, assessee filed appeal before learned CIT(A). Before CIT(A), assessee was given adequate opportunity of being heard. learned CIT(A) after appreciating all facts and contentions of appellant came to conclusion that ITO was correctly justified in imposing penalty under s. 271(1)(c). learned CIT(A) also held that assessee failed to discharge initial onus which lay on it in view of s. 271(1)(c), which came into force from 1964. In decision of Saeed Ahmad vs. IAC (1971) 79 ITR 28 (All), it was held that Explanation provides nothing more than rule of evidence relating to raising of rebuttable presumption. In certain circumstances, it was not rule which created or negatived any substantive right. substantive right. 11. decision in case of Lakser Lal Ji (sic) relied on by learned counsel for assessee, is not applicable on facts of present case. In that case initiation of penalties under s. 271(1)(c) was on particular ground, namely, concealment of income, but penalty was imposed for furnishing inaccurate particulars of income. On those facts, Hon'ble High Court held that basis for imposition of penalty was bad in law. 12. Looking to aforesaid facts, we are of definite view that in present case, basis for imposing penalty under s. 271(1)(c) was not bad in law. 13. Other contention of learned counsel for appellant was that in present case assessee produced sufficient evidence during course of assessment proceedings and if all that evidence is taken into consideration, it would be clear that there were preponderance of probabilities for holding that there was no fraud or gross or wilful neglect on part of assessee. According to learned counsel, it was for Department to prove that addition in question was really income of assessee in year of account. According to learned counsel, deeming provision in present case should not be extended beyond its legitimate field. According to learned counsel, in view of decision in case of Karnail Singh vs. Kaleran, it was for Department to show that disputed addition was income of assessee in year of account and claim of assessee was bogus. As matter of fact, it was case of not proving cash credits. Simply because assessee failed to prove genuineness of cash credits, penalty cannot be levied in present case. learned counsel for assessee relies on ratio of decisions in cases of CIT vs. Vadilal Lallubhai 1972 CTR (SC) 321 : (1972) 86 ITR 2 (SC), CIT vs. Asbestos & Allied Packing Co. (1983) 35 CTR (Cal) 251 : (1983) 144 ITR 109 (Cal), CIT vs. Sardar Bhagat Singh (1983) 35 CTR (Pat) 1 : (1983) 142 ITR 836 (Pat), Addl. CIT vs. Prasadi Sao Rajendra Prasad (1984) 145 ITR 504 (Pat), CIT vs. Chotanagpur Glass Works (1984) 39 CTR (Pat) 97 : (1984) 145 ITR 225 (Pat), Bapulal Ramchandra vs. CIT (1982) 137 ITR 23 (MP) and CIT vs. Nipani Tobacco Stores (1984) 40 CTR (Pat) 1 : (1984) 145 ITR 128 (Pat). On behalf of Revenue, it was contended that decision relied on by learned counsel for appellant are not applicable on facts of present case. present case is really covered by ratio of decision in case of D.M. Manasvi vs. CIT 1972 CTR (SC) 437 : (1972) 86 ITR 557 (SC). learned Departmental Representative contended that in that case Tribunal has clearly given finding that loans were bogus and creditor never advanced loans. Against that finding, assessee filed application under s. 256(1) of Act which was rejected. Even application under s. 252(2) of Act was rejected by Hon'ble High Court. learned Departmental Representative contended that on facts of present case, it is proved that cash credits were bogus. In penalty proceedings, assessee did not produce fresh material. Tribunal, while deciding quantum matter, after considering all evidence produced by assessee and after appreciating all facts and evidence, Tribunal clearly gave finding that creditor never advanced loan. It was held that disputed loans do not find place in books of account of creditor. Moreover, in view of Explanation to s. 271(1)(c), sum of Rs. 1,00,617 was deemed income of assessee in year of account. Since assessee failed to discharge initial onus which lay upon it, case of assessee is fully covered under deeming provision. learned Departmental Representative further contended that whether cash credits were genuine or not, were in personal knowledge of assessee. Tribunal has already held that such loans were bogus. learned Departmental Representative further contended that decision in case of Karnail Singh vs. Kaleran (supra) was overruled by Full Bench of same High Court. 14. Before discussing contentions of parties in detail, we will like to point out that Tribunal, while deciding quantum matter in para 6 of order, clearly held that creditor never advanced loans in question. It was also found by Tribunal that entries regarding loans of Rs. 95,000 did not find place in books of account of Shri Sukhbir Singh & Sons. It was also found that books of account of Shri Sukhbir Singh & Sons did not even indicate receipts of interest. Tribunal, after appreciating statement of Shri Sukhbir Singh and other material, clearly held that loans were never advanced by creditors and interest was never received by them. Tribunal, after appreciating facts, also held that pronotes were never executed by creditors and receipt of interest was also not under signature of Shri Sukhbir Singh. Tribunal clearly held that ITO had brought on record enough evidence to show that Shri Sukhbir Singh did not advance loan of Rs. 95,000 as alleged. Tribunal after appreciating evidence on record, including statement of Shri Sukhbir Singh, clearly held that whole thing was not genuine. On face of this finding of Tribunal, it is difficult to say at this stage that it was case of not proving cash credit. As matter of fact present case is one in which, from evidence on record, it is proved that theory of advancing loan to assessee was bogus. ITO, while deciding penalty matter, also gave positive finding, supported with material on record, that whole theory of advancing loan was cooked up story. We have also reproduced relevant observations of ITO given in penalty order. We agree with observations made by ITO while passing penalty order. 15. It is common ground that in present case, returned income was less than 80 per cent of finally assessed income. So, Explanation to s. 271(1)(c) is clearly attracted. Once said Explanation is applicable, it straightaway raises three legal presumptions, viz., (i) that amount of assessed income is correct income and it is in fact income of assessee himself ; (ii) that failure of assessee to return correct assessed income was due to fraud ; or (iii) that failure of assessee to return correct assessed income was due to gross or wilful neglect on his part. 16. said presumptions raised by Explanation are not conclusive presumptions and they are rebuttable. As rule under civil law, initial burden of discharging onus of rebuttal is on assessee. However, once it does so, it would be out of mischief of Explanation until and unless Department is able to establish afresh that assessee in fact had concealed particulars of income or furnished inadequate particulars thereof. basic rule of evidence is that if person, on whom onus to prove lies, is unable to discharge same, his case would fail. burden of discharging onus would again be like one in ordinary civil proceedings, i.e., it can be so discharged by preponderance of probabilities. It would be permissible to discharged by preponderance of probabilities. It would be permissible to assessee under penalty proceedings to show and prove that on existing material itself, presumption raised by Explanation would stand rebutted. There is no dispute to proposition that penalty proceedings are separate and distinct from assessment proceedings. 17. We may point out that in cases of concealment of income and tax evasion, modus of concealment is obviously within special knowledge of assessee. Consequently, in cases of blatant evasion, legislature was compelled to take off impossible burden of establishing facts which are obviously in special knowledge of assessee alone. onus was, therefore, rightly placed on shoulders of assessee to say, that despite amendment no change was brought about in law, would be rendering whole of provisions redundant and would be violating settled rule of construction that meaning must be given to every word in statute. intention of legislature in making amendments to s. 271(1)(c) and inserting Explanation thereof was to bring about change in existing law. Consequently, ratio of decision in case of CIT vs. Anwar Ali (1970) 76 ITR 696 (SC) is no longer attracted for construction of s. 271(1)(c) as amended. ratio of decision in case of Karnail Singh vs. Kaleran (supra) no longer holds good. In case of Vishwakarma Industries vs. CIT (1982) 29 CTR (P&H) 243 (FB) : (1982) 135 ITR 652 (P&H) (FB) Hon'ble Punjab and Haryana High Court (Full Bench) had clearly ruled that said decision was not correctly decided. Now, on facts of present case, it has to be decided whether assessee was able to discharge initial burden which lay upon it or not. It is common ground that in penalty proceedings, no fresh material was produced by assessee. So on basis of material on record, it has to be decided whether there were preponderance of probabilities in favour of holding that there was no fraud or gross or wilful neglect on part of assessee is not returning assessed income. assessee miserably failed to prove that there was no fraud or gross or wilful neglect in not returning assessed income. We have gone through copy of statement of creditor. He has clearly denied for having advanced loan in question. He also clearly stated that he never executed pronotes in question. He further stated that payment of interest was never received by him. He also denied his signatures on receipts of interest. It is significant to note that whether cash credits were genuine or not were in personal knowledge of assessee. cash credits do find place in books of account of assessee. In quantum matter it was finally held that creditor never advanced loans. That finding still holds good. Even from statement of Shri Sukhbir Singh, it is proved that he never advanced loan to assessee. Shri Sukhbir Singh was maintaining account books. Even in his books of account advancing of loan was not recorded. His books of account also did not show that he ever received any interest. statement of creditor was recorded twice. creditor consistently denied for having advanced loan in question. We have gone through entire statement of Shri Sukhbir Singh carefully. We have also gone through other material on record. If all said evidence is appreciated in light of preponderance of probabilities and hard facts of life, only one conclusion that can be drawn, is that whole theory of advancing loan was bogus. assessee made false entries in books of account. Even payment of interest was wrongly debited. assessee was not able to show, in penalty proceedings, that creditor was telling lie, on basis of material on record. In view of matter, assessee was not able to produce evidence or circumstances to show that loans in question were genuine. Even statement of broker was recorded. He clearly stated that in his presence loan was not advanced. So all connected persons clearly stated that theory of advancing of loan was not genuine. If claim was genuine, at least assessee could have filed his affidavit. On other hand, it is proved that whole theory is bogus. ITO and learned CIT(A) gave good reasons in support of their findings. 18. Thus, there is no material on record to prove that assessee was able to discharge onus which lay upon it. Under circumstances, case of assessee is hit under mischief of Explanation under s. 271(1)(c). In our opinion, Full Bench of Hon'ble Punjab and Haryana High Court has discussed this issue in detail. Even in case of CIT vs. S.P. Bhatt (1974) 97 ITR 440 (Guj), Hon'ble Gujarat High Court held that rebuttal presumption that assessed income is in fact income of assessee himself, is equally raised by Explanation. 19. We may state here that in penalty proceedings, it was for assessee to show and prove that on existing material itself, presumption raised by Explanation stands rebutted. On facts stated above, assessee failed to discharge initial onus. On other hand from aforesaid discussion, it is clear that theory of advancing loan by creditor to assessee was concocted one. It is proved that creditor never advanced loan to assessee and assessee never made payment of interest. It is also proved that entries in books of account recording loan were bogus and false. So present case is not case of inference from mere aforesaid explanation given by assessee, but case wherein there are definite evidence and finding that device has been created by assessee for purpose of concealing his income. So present case comes within ratio of decision in case of D.M. Manasvi (supra). 20. Now we would discuss decisions relied on by learned counsel for appellant. first relevant decision is in case of Vadilal Lallubhai (supra). In that case, Supreme Court ruled that deeming provisions are only for definite purpose. They are limited to purpose for which they are created and should not be extended beyond their legitimate field. To this proposition there could be no dispute. Other decision relied on by learned counsel for assessee was Nipani Tobacco Stores' case (supra). In that case, Tribunal after appreciating facts, came to conclusion that initial burden which lay upon assessee in view of Explanation to s. 271(1)(c) was discharged. So, said decision was rendered on facts of case. other decision, relied on by learned counsel, was Asbestos & Allied Packing Co.'s case (supra). In that decision Tribunal holds that mere inability to explain hundi's loan cannot amount to fraud or wilful neglect, attracting penalty and that no penalty could be levied merely because assessee surrendered certain receipts for purposes of taxation. So, that decision was passed on facts of that case. decision in case of Sardar Bhagat Singh (supra), relied on by learned counsel for appellant, is also on different facts. In that case there was no finding of wilful concealment or gross or wilful neglect by assessee. So, this decision also does not help assessee. decision in case of S.P. Bhatt (supra) also does not help appellant. Even in that case it was held that legal fiction enacted in Explanation could be displayed only if there was no fraud or gross or wilful neglect on part of assessee. In that decision Hon'ble High Court held that Explanation to s. 271(1)(c) creates legal fiction if condition of its applicability is satisfied. condition is objective condition, namely, that total income returned by assessee should be less than 80 per cent of total income assessed subject to certain deduction, which is not material for our purpose. What condition contemplated was merely matter of arithmetical calculation. IT authority was required to take up total income returned by assessee and total income assessed by Revenue authorities and if former is less than 80 per cent of latter, condition for applicability of Explanation is satisfied. So, said decision also does not help assessee. decision in case of Bapulal Ramchandra (supra) also does not help appellant. Even this decision goes to show that if quantum of concealed income falls within Explanation to s. 271(1)(c) burden which was on Department to prove fact that there was conscious concealment on part of assessee, has now been placed on assessee by Explanation and assessee is required to prove that failure to return correct income did not arise from any fraud or gross or wilful neglect on his part. Other decisions, relied on by appellant, are also on different facts. Under these circumstances, it is not necessary to discuss them in detail. 21. Looking to aforesaid facts and entirety of circumstances and hard facts of life, we are of view that in present case, in view of Explanation to s. 271(1)(c), assessee miserably failed to prove that there was no fraud or gross or wilful neglect on part of assessee for not returning assessed income. So, in penalty proceedings assessee failed t o prove that on existing material itself presumption raised by Explanation stands rebutted. We are also of view that present case is not one where explanation of assessee was rejected or where assessee failed to prove genuineness of cash credits, but in present case there are definite evidence on record as discussed above to prove that assessee made false entries in books of account for purpose of concealing income. whole theory of advancing loan by creditor is bogus. In substance creditor never advanced loan to assessee and assessee has been perpetuating story which has no legs to stand. So present case is really covered by ratio of decision of case of D.M. Manasvi (supra). 22. For reasons discussed above, there is no substance in this appeal. 23. No other point was pressed before us. In result, appeal fails and same is dismissed. *** IMPERIAL BOX & CARTON MAKERS v. INCOME TAX OFFICER