Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 [Corresponding to section 28(1)(c) of the Indian Income-tax Act, 1922] - Penalty - For concealment of income - Assessment year 1958-59 - Assessee had pledged goods to bank in excess of goods as per its stock account - Assessee's explanation abount declaring goods at higher figure was not accepted and, accordingly, additions were made to its income and penalty was levied on it under section 28(1)(c) of 1922 Act - Whether mere non acceptance of assessee's explanation could not amount to proving that he had concealed particulars of his income - Held, yes - Whether in absence of positive evidence to establish guilt of assessee, it could not be made liable to pay penalty - Held, yes FACTS The assessee firm, carrying on business in grain commission agency, speculation and business on its own account, filed return showing an income of Rs. 30,095. The ITO in the course of assessment proceedings found that the assessee had obtained overdrafts from the bank on the security of grains. On a comparison of the statement to the bank furnished by the assessee and the stock accounts, the ITO found that the assessee had pledged goods to the banks which were in excess of the goods as per its stock account. The ITO determined the value of the excessive stocks at Rs. 25,406 rejecting the explanation that the discrepancy was due to the wrong naming of the gains by the bank authorities and that it was the general practice to declare 5 per cent excess grain. The AAC reduced the amount of penalty. On second appeal, the Tribunal came to the conclusion that merely because the explanation given by the assessee had not been accepted by the taxing authorities it could not be held that the assessee had concealed the particulars of his income so as to make him liable to penalty under section 28(1)(c) of the 1922 Act. On reference, the revenue contended that the certificate issued by the bank was sufficient positive evidence to prove that the assessee had concealed the particulars of his income so as to make him liable to penalty under section 28(1)(c) of the 1922 Act. HELD The certificate only went to show that the assessee had pledged goods with…

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