Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - assessment year 1963-64 - Whether where assessee did not maintain her accounts and that she had subjected her self to assessments made on best method, it could not establish that she was guilty of wilful neglect in filing return so as to attract section 271(1)(c) - Held, yes - Whether further fact that assessee had been negligent in manner of running business would also not be enough to show that assessee had spent more than what was actually shown to have been spent and, in absence of any material to show that assessee had secreted part of her income which had been discovered or was discoverable, she could not be said to be guilty of gross neglect - Held, yes FACTS The assessee had filed her return on the basis of certain estimate called cash statements. The department did not accept the return and completed the assessment under section 144. The income finally assessed was in excess of the income returned by the assessee to the margin of eighty percent. Therefore, penalty proceedings under section 271(1)(c) were initiated and penalty was levied. However, the Tribunal, held that the assessee had indicated the basis of estimate, even though imperfect, on which she arrived at her returned income for the year and there was nothing on record to show that this basis was coloured by suppressio veri. In view of this and in the absence of a statutory compulsion to maintain regular books of account, no penalty would be exigible even in terms of theExplanation to section 271(1)(c). On reference: HELD It is well established by now-too well established to require any citation of authority-that the fact that the assessing authorities in assessing a person were satisfied that the return filed by the assessee did not disclose his correct income and proceeded to make a best estimate and that the income was assessed on that basis would not enable the court to hold that the assessee had conealed the particulars of his income or had furnished inaccurate particulars thereof in order to attract section 271(1)(c ). But by virtue of the Explanation and the deeming provision therein, it has to be…

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