Law:

Section:

Section 271(1)(c), read with section 147, of the Income-tax Act, 1961 – Penalty for concealment of income – Assessment year 1960-61 – Additions on account of income from undisclosed sources was made to assessee's total income on basis of finding that certain purchases were made in cash and not on credit as shown in his account books – Penalty under section 271(1)(c) was also levied - Explanation offered by assessee before AAC that he had borrowed money from certain persons for financing above purchases, was rejected – Tribunal confirmed addition holding that assessee had not established that he had borrowed monies from certain person for making purchases in question – Whether acceptance or non-acceptance of evidence of those persons was matter entirely within discretion of Tribunal and AAC – Held, Yes – Whether Tribunal's finding as mentioned aforesaid was primarily on question of fact and Tribunal could not be said to have committed any error in so finding - Held, yes – Whether, therefore, additions made to income of assessee and also penalty levied under section 271(1)(c) was justified – Held, yes FACTS The assessee had made certain purchases from two partners and they had been recorded in the books as credit purchases. The ITO found that assessee had made cash payment in respect of such purchases and, therefore, reopened the assessment under section 147(b). After issuing a notice under section 148 the ITO directed the assessee to explain the sources for cash payment to the bank and to offer explanation. In spite of repeated opportunities given to him the assessee did not produce any evidence for the purchases. The ITO came to the conclusion that the assessee himself paid for those purchases from his income from undisclosed sources. Consequently, he added that amount as income of the assessee from undisclosed sources in the relevant year and he also levied penalty under section 271(1)(c). The assessee filed an appeal before the AAC and for the first time contended before the AAC that he had borrowed from four persons in for financing the purchase referred to above. The AAC on an appreciation of the evidence, came to the conclusion that the new case put…

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