Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment years 1964-65 and 1965-66 - Whether in view of provisions of section 271(1)(c), some amount of culpable negligence or wilful omission on part of assessee must be necessary before penalty can be levied - Held, yes - Whether, therefore, where additions where made on account of unproved cash deposit, mere fact that explanation given by assessee was not proved to satisfaction of department or was not correct could not by itself be sufficient to invoke penalty under provisions of section 271(1)(c) - Held, yes FACTS The assessee-firm filed its return declaring income of Rs. 27,293 for the assessment year 1964-65 and Rs. 54,595 for the assessment year 1965-66. In connection with the return for the assessment year 1964-65, the ITO made additions of Rs. 10,985 and Rs. 10,585 in the trading accounts of the head office and the Bombay branch of the firm respectively. These additions were made with the tacit consent and agreement of the assessee. The ITO also made a similar agreed addition of Rs. 40,000 out of unexplained cash credits of Rs. 96,630 for the assessment year 1964-65, while for the assessment year 1965-66 an agreed addition of Rs. 16,823 was made to the income declared from the Bombay branch and a further sum of Rs. 15,000 as credits was added in the names of certain persons. Thus, the total income for the year was determined at Rs. 91,970 by order of the Commissioner. The Assessing Officer initiated penalty proceedings under section 271(1)(c) and levied penalty. Before the Tribunal, the assessee contended that it was a case of an agreed addition resulting from unproved deposits and no culpable or wilful negligence on the part of the assessee was involved and, therefore, the penalties were not exigible. The Tribunal having accepted assessee's contention that it being a case of unproved cash deposit deleted the penalty. On reference : HELD From a perusal of section 271(1) it is manifest that before this section can apply the authority concerned must be satisfied that the assessee has concealed the particulars of his income or deliberately furnished inaccurate…

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