Law: Income Tax Act, 1922

Section: 22(2)

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 1960-61 - In course of examination of accounts of assessee for relevant assessment year credit in name of 'C' was found - Assessee explained that credit in name of 'C', though had been repaid, amount was still available with assessee for personal use - ITO rejected assessee's explanation and treated said amount as undisclosed income and also levied penalty under section 28(1)(c) of 1922 Act - Whether when there was no positive evidence to show that 'C' had been paid and amount was not available with assessee, amount of credit could not be treated as undisclosed income and, therefore, imposition of penalty was not justified - Held, yes FACTS The assessee filed return of income for the relevant assessment year. In the course of examination of accounts, certain credit in name of 'C' was found. The assessee explained that credit in name of 'C' had been repaid on 5-7-1958 but that amount was still available with the assessee on 1-4-1959 for personal use. The ITO rejected the explanation and treated said amount as undisclosed income of the assessee. He also levied penalty under section 28(1)(c) of 1922 Act. The AAC and the Tribunal reduced the penalty. On reference : HELD The submission of the revenue that the amount which belonged to 'C' could be said to be only in the exclusive knowledge of the assessee, could not be agreed with. If the department wanted to verify whether the amount had been paid to 'C' they could have examined and if he was not alive, either his son or his records could have been called for and verified. The Tribunal in the order had pointed out that even in 'C' account, the amount of the assessee had not been shown. What the Tribunal intended to convey by that sentence was that the assessee had not shown 'C' as a creditor in his account books. Further, account of 'C' had been looked into by the ITO, it should be in evidence to show that either he had received the money on 5-7-1958, or did not receive at all. If there was an entry to the effect that on 5-7-1958, he had received…

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