Law:

Section:

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 1949-50 - Assessee-firm had obtained on overdraft from bank on statement of stocks - During assessment assessee explained that all stocks did not belong to it and that stock might also have been over-valued by one of its partner - ITO did not accept assessee's explanation in respect off two items of stock and levied penalty under section 28(1)(c) of 1922 Act - Whether since basis of penalty proceedings was statement or declaration of stock made by assessee to bank and it was only on strength of such statement or declaration finding of suppression of stock was made, it could not be said that there was deliberate concealment of income or contumacious conduct on part of assessee by way of furnishing of inaccurate particulars and, therefore,, penalty proceedings could not have been resorted to by department - Held, yes FACTS The ITO noticed that for obtaining an overdraft from the bank, the assessee firm had hypothecated certain stocks to the bank. The assessee explained before the ITO that not all the stocks belonged to it and also that the stock might also have been over-valued by one of its partner. The ITO did not accept the assessee's explanation in regard to two items of stock, valued at Rs. 47,940, and made the necessary addition. The ITO thereupon levied penalty under section 28(1)(c) of the 1922 Act. The Tribunal held that there was no conclusive evidence that these two items in fact existed at all except in the declaration given by the assessee-firm to the bank that it was possible that the declaration of the assessee to the bank might have been made with a view to obtain more overdraft facilities and, therefore, on that count, penalty proceedings could not be resorted to. The penalty was accordingly remitted in full. On reference: HELD It was only in respect of part of the excess stock that no explanation could be offered by the assessee-firm and since the assessee-firm was not able to identify only those two items of stock worth Rs. 47,940, this figure was agreed to be added to the…

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