Law:

Section:

Section 271(1)(c ) of the Income-tax act, 1961-Penalty-For concealment of income-ITO included unproved cash credits in assessee-firm's income on the basis of disclosure petitions made by partners-In penalty proceedingassessee contended that admission in disclosure petition was made because of non-co-operative attitude of creditors and requested IAC to summon creditors for proving genuineness of loans-IAC rejected assessee's request and imposed penalty treating cash credits as concealed income-Tribunal set aside penalty order on the ground that IAC bound to summon creditors-Whether Tribunal justified-Held, on facts, yes Facts The books of the assessee-firm for the assessment year 1963-64 contained certain cash credits. The two partners of the firm had separately made disclosure petitions admitting that the bulk of those cash credits was introduced by them out of their own undisclosed income. The ITO included the impugned cash credits in the assessee's income on the basis of the disclosure petitions. In the penalty proceedings under section 271(1)(c), the assessee contended (i) that the disclosure petition had been made under compulsion as the creditors were not co-operating for their own reasons; (ii) that the said disclosure did not amount to admission on the part of the firm as the firm was an entity distinct from the partners; and (iii )that the credits were genuine loans from the parties. It also requested the IAC to summon the creditors under section 131 for appearing along with their books of account to enable the assessee to prove the genuineness of the loans. The IAC took the view that the admission made by the partners that the impugned credits were their own undisclosed income was an admission of the assessee and, that therefore, it was futile to summon the creditor. He, accordingly, imposed penalty under section 271(1)(c). On appeal, the Tribunal observed that although there was a clear admission by the partners in the disclosure petition that the impugned credits were their concealed income and it was to be presumed that they acted on behalf of the firm, yet, in penalty proceedings, the assessee-firm had a right to show that the admission in the…

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