Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1953-54 - Whether evidence gathered at stage of assessment proceedings are prima facie material in penalty proceedings and so long as assessee has not adduced any evidence to disprove or rebut said prima facie material at stage of penalty proceedings, that can be acted upon and a finding of concealment of income can be based thereon if materials are such as to warrant an inference of willful non-disclosure - Held, yes FACTS For the assessment year 1953-54, the assessee, in its return, disclosed total turnover in respect of sales of mixture of coffee and chicory and a gross profit in relation to coffee business. The ITO however, made addition by making enhanced estimate of the net profit in sales of chicory and coffee as also in biscuits business. He further levied penalty under section 28(1)(c) of the 1922 Act. On appeal, the AAC, not only directed fresh assessment after giving opportunity to the assessee to cross-examine the various purchasers, but also set aside the orders levying penalty on the ground that the evidence so far collected did not establish definitely any concealment. On remand, the ITO made addition not merely on the basis of rejection of the assessee's explanation but also on some evidence. On appeal, the AAC upheld the additions. On further appeal, the Tribunal reduced the amount of addition. On the above basis, the IAC levied penalty under section 271(1)(c ). On appeal, the Tribunal held that section 271(1)(c) could be invoked even in respect of concealment having taken place earlier to the coming into force of the Act. On merits, it held that materials were sufficient to disclose deliberate concealment of income on assessee's part. On reference : HELD The original assessment proceeding is a good item of evidence in the penalty proceedings as well, but the penalty cannot be levied solely on the basis of the finding given in the order of assessment. Therefore, the materials gathered at the stage of the assessment proceedings cannot altogether be overlooked in the penalty proceedings. As a matter of fact, the evidence gathered at the stage of…

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