Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1964-65 - Whether where assessee surrendered cash deposit stating that it was unable to prove genuineness of cash credit entries, penalty could not be levied on such cash deposits unless there was material on record to show that surrendered item was his income - Held, yes FACTS While proceeding with the assessment, the ITO noticed cash deposits of Rs. 12,000 appearing in the name of 'T' in the books of the assessee. The assessee was asked to prove the genuineness of these cash credit entries. The assessee stated that he was not in a position to prove the genuineness of these entries and made a statement "surrendering squared up aforesaid account of Rs. 12,000 in the name of 'T' ". The assessee was then assessed to an income of Rs. 65,046 as against the returned income of Rs. 46,446. The income assessed included the amount of Rs. 12,000. The IAC levied penalty under section 271(1)(c). The Tribunal maintained the penalty. On reference : HELD The assessee furnished no explanation for the cash credit entries of Rs. 12,000. He surrendered this amount for the purpose of tax. But he made no statement that this amount was his income. There was no material whatever which could lead to the conclusion that the amount of Rs. 12,000 represented the income of the assessee. The Tribunal assumed that the amount of Rs. 12,000 represented the income of the assessee and proceeded on that basis. The only circumstances that the amount of Rs. 12,000 was surrendered by the assessee an inference had been drawn that the amount represented the income of the assessee. This conclusion was not inevitable. There might be hundred reasons for the assessee to surrender this amount irrespective of the fact whether it was his income or not and it was incumbent, in view of the observations of the Supreme Court in CIT v. Anwar Ali case [1970] 76 ITR 696 , for the ITO to find on evidence that the amount of Rs. 12,000 represented the income of the assessee. Therefore, the requirements of sections 271(1)(c ) had not been satisfied so as to bring he case of the assessee within the same. Thus the…

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