Law:

Section:

Section 271(1)(c) of the income-tax act, 1961-Penalty-For concealment of income-ITO added as income from undisclosed sources-Amount shown as credit in assessee's books representing sale proceeds of goods-Tribunal confirmed addition, holding, however, that impugned sum should be taxed as business income-IAC levied penalty for concealment of income which was sustained by tribunal-Whether imposition of penalty could be questioned on plea that basis of penalty had ceased to exist with tribunal's finding as to head of concealed income-Held, on facts, no Facts For the assessment year 1966-67, the assessee filed a return on 16-2-1968, showing an income of Rs. 15,944. The ITO completed the assessment on 31-12-1970 on a total income of. Rs. 68,525, including income from undisclosed sources of Rs. 38,464 which was credited in the assessee's books of account as sale proceeds of goods. On appeal, the AAC reduced the addition to Rs. 31,464. While confirming the addition, the Tribunal held that the said amount represented the assessee's income from the sale of timber and, therefore, it should be charged to tax under the head "Profits and gains of business or profession" and not under the head "Income from other sources". After the disposal of the appeal by the AAC, the IAC levied under section 274(2), a penalty of Rs. 10,000 for the said concealment of income under section 271(1)(c), observing that the ITO had examined the accounts thoroughly and could discover the suppression of opening stock and of the purchases made during the year which enabled him to detect concealment in the real sense. On appeal before the Tribunal, the assessee argued (i ) that the penalty was levied on the basis that he had concealed his income assessable under the head "Income from other sources" whereas the Tribunal held in the quantum appeal that the undisclosed income was assessable under the head "Profits and gains of business or profession"; and (ii) that, on such finding by the Tribunal, the basis of the penalty order ceased to exist and the penalty order became unsustainable. The Tribunal, however, sustained the penalty order, holding (i) that it was of no importance whether the impugned…

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