Law:

Section:

Section 271(1)(c), read with explanation thereto [as it stood prior to 1-4-1976], of the income-tax act, 1961-Penalty-For concealment of income-Assessment year 1965-66- Assesses gave some explanation in respect of certain cash credits but eventually surrendered these-Ito treated those credits as income from undisclosed sources and iac imposed penalty without establishing that the said credits constituted concealed income of assessee-Whether tribunal right in setting aside penalty-Held, on facts, yes Facts During the assessment proceedings for the assessment year 1965-66, the assessee stated (i) that though the cash credits appearing in the names of certain parties were genuine loans, the parties concerned were not in a position to come forward and depose before the ITO regarding those credits : and (ii) that the assessee could not give further evidence in support of the genuineness of these credits but was agreeable to be assessed in respect of them. The ITO thereupon added the peak credit of those three accounts to the income of the assessee as his income from undisclosed sources. Subsequently, the IAC imposed penalty under section 271(1)(c), read with Explanationthereto, upon the assessee, holding that surrender had been made after inquiry by the ITOregarding the genuineness of the credits and that the so-called loans were not genuine but represented secret income of the assessee. On appeal, the Tribunal held that though the initial onus was upon the assessee to show that there was no fraud or gross or wilful neglect on his part, after the aforesaid explanation given by the assessee, it was for the department to bring some cogent material on record to show that the amount of peak credit constituted concealed income of the assessee. It observed that the assessee might surrender a particular amount for various reasons, but mere surrender was not enough to justify the imposition of penalty. In the result, it held that the charge of concealment had not been established and, consequently, set aside the penalty. On reference : Held It is well settled that tinder the provisions of section 271(1 )(c), read with the Explanation thereto, as soon as it is found that…

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