Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1959-60 - Certain items of cash deficit and cash deposit were found in assessee's accounts - IAC rejected assessee's explanation and holding that said items represented concealed income, imposed penalty under section 271(1)(c) - Tribunal set aside said penalty on ground that in previous assessment years intangible additions had been made and a part of that amount remained available to assessee thereafter - Income returned by assessee was gross under-estimate when compared with actual income as finally determined by Tribunal - Books of assessee were also found to be unreliable - Whether entirety of circumstances must be taken into consideration to arrive at conclusion and not mere existence of cash deposits in current year or intangible additions in previous years - Held, yes - Whether taking entirety of circumstances into consideration, only legitimate inference which could be drawn was that cash credits and cash deposits represented concealed income - Held, yes - Whether, therefore, Tribunal was not justified in holding that no penalty was leviable - Held, yes FACTS Certain items of cash deficit and cash deposit were found in the assessee's accounts. The IAC rejected the assessee's explanation and held that these items of cash deficit and cash deposits represented concealed income. Accordingly, he imposed a penalty under section 271(1)(c). On appeal, the Tribunal held that in the previous assessment years intangible additions had been made and a part of that amount remained available to the assessee thereafter. The Tribunal, accordingly, allowed the appeal and set aside the order of the IAC. On reference : HELD Income returned by assessee was gross under-estimate when compared with actual income as finally determined by Tribunal, namely. The books of the assessee were also found to be unreliable. Taking entirety of circumstances into consideration, only legitimate inference which could be drawn was that cash credits and cash deficits represented concealed income. The explanation that the cash deficits appearing in the accounts might represent intangible…

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