Law: Income Tax Act, 1922

Section: 28(1)(c),66(1)

Section 271(1)(c) of the Income-tax Act, 1961 (Corresponding to section 28(1)(c) of Indian Income-tax Act, 1922) - Penalty - For concealment of income - Assessment year 1952-53 - Whether though findings arrived at in assessment proceedings constitute relevant and admissible materials in penalty proceedings, yet they do not operate as res judicata as considerations relevant in penalty proceedings are different from those in assessment proceedings. - Held, yes - Whether merely disbelieving assessee's explanation about sources of certain amounts entered in his books that they did not belong to him and taxing amounts in hands of assessee will not per se justify an imposition of penalty as department must do something more and establish that amounts constituted assessee's taxable income and he was guilty of defaults specified in section 28 of 1922 Act - Held, yes FACTS For the assessment year 1952-53, the assessee enjoyed over-draft facilities by furnishing as security three deposits in the names of 'L', 'G' and 'P'. The ITO, and, on appeal, the AAC came to the conclusion that the said three deposits represented assesse's undisclosed income and therefore, taxed the same in his hands. The Tribunal dismissed the appeal with the observation that the department had succeeded beyond reasonable doubt in establishing that the assessee itself brought in the security moneys in the shape of those fixed deposits in the names of various persons who were totally at its influence or were obliged. The addition was, thus, upheld. Following this, the ITO levied penalty under section 28(1)(c) of 1922 Act. On second appeal, the Tribunal cancelled the penalty, holding that no mens reahad been established by the department to warrant levy of penalty; that the reason for the additions being made in regard to these deposits in the quantum assessment could at best amount to the assessee's explanation being not satisfactory; that there was no material in it to support its conclusion that the fixed deposits represented the secret moneys of the assessee-firm and that no link had been established between the assessee's moneys and the deposits in question. On reference: HELD As regards…

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