Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1990-91 - Whether only an assessee can explain entries in balance-sheet and in absence of any explanation, Assessing Officer is free to draw a reasonable inference as per Explanation 1 to section 271(1)(c) - Held, yes - Assessee-company, engaged in chitty business, showed a credit balance in balance-sheet in respect of Kuries terminated during 1977 to 1983 - From said account, assessee transferred certain amount to profit and loss account and offered same to tax - However, balance amount was still retained as credit balance in liability side of balance-sheet - In course of assessment, Assessing Officer raised specific query, but assessee kept silent - In those circumstances, Assessing Officer, having regard to nature of business, treated said amount as auction discount foregone by defaulter subscribers and made addition of same to assessee's income - Penalty was also levied on it under section 271(1)(c) - Tribunal upheld addition, but cancelled penalty on ground that Assessing Officer had failed to explain nature of concealed income - Whether on facts, Tribunal's order casting burden wrongly on department was against statutory provisions and, consequently, order of Tribunal cancelling penalty was to be set aside - Held, yes FACTS The assessee-company, engaged in chitty business, showed a credit balance in balance-sheet in respect of Kuries terminated during 1977 to 1983. From the said account, the assessee transferred certain amount to profit & loss account and offered the same to tax. However, the balance amount was still retained as credit balance in the liability side of the balance-sheet. In the course of assessment, the Assessing Officer asked for explanation, but the assessee described that the amount was business liability and offered no details. The Assessing Officer was of the opinion that the credit balance represented the auction discounts, which were foregone by defaulting subscribers and, therefore, there was no subsisting liability for payment of those amounts to the said subscribers. Accordingly, the Assessing Officer held that those amounts…

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