Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1964-65 - Whether order of assessment is not conclusive of fact that amount assessed was in fact income of assessee - Held, yes - Certain cash credits were found in books of account of assessee - Assessee's explanation that said amount had been borrowed from his father was rejected by ITO on ground that father could not have saved such a large amount - Whether unless department had something more than mere estimate of father's ability to save amount in question, guilt of concealment could not be said to have been established - Held, yes - Whether, therefore, in such circumstances, no penalty could be levied on assessee - Held, yes FACTS The ITO noticed the cash credit of Rs. 22,980 in the name of the father of the assessee. The assessee was asked to explain and establish the genuineness of the cash credit. After a detailed investigation the ITO came to the conclusion that the assessee's father, did not have the capacity to pay the large amount of Rs. 22,980 and, accordingly, treated said amount as the assessee's own income from undisclosed sources. On appeal, the AAC came to the conclusion that the father of the assessee could have saved a sum of Rs. 5,000 and, therefore, reduced the addition of income by that figure. The Tribunal affirmed the finding of the AAC. On the basis of the addition in the assessment, penalty under section 271(1)(c) was levied upon the assessee. The Tribunal held that it was incumbent on the Department to establish that the income sought to be enhanced constituted income of the assessee and it was such income as was of the revenue nature. In the absence of such evidence the assessee could not be held guilty of failure to return the correct income as required by the Explanation to section 271(1)(c). The penalty imposed was, therefore, deleted. On reference : HELD In a case like this when the assessee had borrowed the money from his relative or his father, all that the assessee could do was to produce the person, who gave such money, in evidence. The father had been examined but his evidence did not carry the conviction with the…

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