Law: Income Tax Act, 1922

Section: 23(3)

Income-tax-----Penalty-Assessment for 1961-62 completed after 1961-Act came into force-Credits included as income from undisclosed sources-Levy of penalty under 1961-Act Whether valid-Tribunal holding no penalty leviable for mere addition of unexplained cash credits-Whether High Court can interfere Indian Income-tax Act, 1922, S. 23(3)-Income-tax Act, 1961, Ss. 271(1)(c) & 297(2)(g). The assessment of the assesses for 1961-62 was completed on July 17, 1963, under section 23(3) of the Indian Income-tax Act, 1922, and certain credits were treated as income from undisclosed sources. Penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, were initiated and a penalty of Rs. 7,500 was levied by the Inspecting Assistant Commissioner. This was set aside by the Tribunal on the grounds : (a) as the assessment was completed under section 23(3) of the 1922-Act, no penalty under section 271(1)(c) of the 1961-Act can be levied and (b) addition of unexplained cash credits cannot, by itself, justify levy of penalty. On a reference by the Department ; Held, (i) as the assessment was completed on July 17, 1963, after the new Act had come into force, section 297(2)(g) was attracted for the initiation of proceedings for the imposition and levy of penalty under the new Act; (ii) the finding of the Tribunal that the bare fact that the assessee's explanation was not satisfactory or that it was false did not justify the imposition of penalty, was a question of fact which cannot be interfered with in a reference.  …