Law:

Section:

Section 271(1)(c ) of the Income tax act. 1961 [as it stood prior to 1-4-1968]-Penalty-For concealment of Income-Assessee-HUF disclosed in its return to the extent of its interest in two firms but not amount receivable later on finalisation of accounts-during assessment assessee apprised ITO of income received by assessee from these two firms-Whether penalty could be imposed on the ground that there was variance in amount of income disclosed in return and income finally assessed-Held, on facts, no Facts The assessee-HUF derived income from various sources including share income from firms. During the assessment year 1964-65, the assessee filed a return disclosing the extent of its interest in two firms. Since the accounts had not been finalised by the two firms, the assessee could not show the extent of profits receivable by him from these firms. During the assessment, the ITO was apprised of the income received from the two firms, but the ITO came to know of the assessee's interest in another firm, which had resulted in an income of Rs. 2,130. A show cause notice under section 271(1)(c)was issued for imposing a penalty, and the TAC imposed a penalty of an amount calculated at 50 per cent of that tax which the assessee had avoided. The tax avoided was worked out by taking into account the assessed income of the assessee and deducting therefrom the income returned. On appeal, the Tribunal upheld the method of calculation but reduced the penalty from 50 per cent to 20 per cent. On reference: Held 1. It is settled that where the accounts of a firm in which an assessee is apartner have not been made up by the time the assessee files a return, he may in the return, not disclose the specific amount of profit from the firm, but disclose only the extent of his share in the firms. Section 155(1), anticipating this situation, took ample care of this by making provision for rectification of a partner's assessment, on the assessment of the firm, in which the assessee was a partner, being finalised. 2. Clause (iii) of section 271(1)(c) [as it stood prior to 1-4-1968] applied only to cases where the income as returned by the assessee had been accepted as the correct income.…

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