Law:

Section:

Section 271(1)(c), read with sections 68 and 2(24) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1965-66 - Whether when after rejecting explanation of assessee as unsatisfactory, ITO added a sum found credited in books of account to assessee's income, there was no distinction between income arising on account of section 68 and income earned otherwise - Held, yes - Whether, therefore, when additions under section 68 had been made as deemed income of assessee, revenue could not be required to prove that amount added was in fact income of assessee so as to warrant levy of penalty for concealment of income - Held, yes FACTS For the relevant year, the assessee firm filed its return declaring certain income. The ITO determined income at enhanced amount. This amount of total income included a sum of Rs. 69,900 which the assessee claimed were cash credits, but the ITO added it as the assessee's income under section 68. Penalty proceeding was initiated under section 271(1)(c). The IAC imposed penalty taking into consideration the entire cash of Rs. 69,900. By then the assessee's first appeal against the quantum assessment was pending disposal before the AAC. Subsequently, the assessee challenged the levy of penalty before the Tribunal and claimed that the AAC had deleted a sum of Rs. 50,000 out of the cash credits. The Tribunal took into account the Explanation to section 271 (1)(c) which was admittedly applicable even if the ultimate addition out of the cash credits was confined to Rs. 19,900 and came to hold that the assessee had discharged the initial negative onus cast by the Explanation to section 271(1)(c) and, therefore, the burden shifted to the revenue to prove that the amounts added were in fact the income of the assessee. There was nothing on record to show that the amounts added were in fact the income of the assessee and the revenue relied entirely upon section 68, according to which unexplained cash credits would be deemed to be the income of the assessee. It was further held that penalty can be levied only for concealment of actual income and not for the concealment of an amount which was deemed to be the income under…

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