Law:

Section:

Section 271(1)(c) read with section 256 of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1967-68 - Whether question as to whether there was any concealment of income and whether there was any fraud or gross or wilful neglect in filing of proper return of income on part of assessee is essentially a question of fact - Held, yes - Whether, therefore, where Tribunal on consideration of material on record, concluded that there was no fraud or grass or wilful neglect on part of assessee and accordingly, cancelled penalty, no question of law arose from Tribunal's order, and consequently, said order was to be affirmed - Held, yes FACTS The assessee, who was carrying on business in precious stones, filed a return showing its income as Rs. 32,940 for the assessment year 1967-68. The ITO, assessed the total income of the assessee for the year in question at Rs. 74,613 by including an estimated amount by way of gross profit and by disallowance of some of the expenses claimed by the assessee. The AAC reduced the total income of the assessee to Rs. 66,401. As the returned income was less than 80 per cent of the assessed income, penalty proceedings under 271(1)(c) were initiated against the assessee. The ITO referred the matter to the IAC, who levied a penalty of Rs. 13,000. The Tribunal cancelled the penalty holding that the addition in gross profit was made on account of a routine defect in the accounts of the assessee and that disallowance of expenses bona fide incurred by the assessee did not lead to the conclusion that the assessee deliberately concealed his income or committed gross or wilful neglect in furnishing the return of its income. The Tribunal also rejected the revenue's application under section 256(1) holding that the finding arrived at by it was only a finding of fact, as the question whether an assessee committed an act of concealment or committed fraud or gross or wilful neglect in making the return of its income was a question of fact. On application under section 256(2): HELD The words 'unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part'…

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