Law:

Section:

Explanation to section 271(1)(c) of the income-tax act, 1961 [inserted with effect from 1-4-1964]-Penalty-For concealment of income-Addition made by ITO to assessee's returned income on account of unaccounted stocks and unexplained cash credits, were in principle upheld by tribunal in quantum appeals-Penalty levied by IAC under explanation to section 271(1)(c) for concealment of income, cancelled by tribunal on grounds that qua addition made on account of unaccounted stocks, being made on estimate basis, assessee was entitled to benefit of doubt and that qua addition of cash credits, assessee was not proved guilty of producing false evidence or of producing no evidence-Whether tribunal legally justified in cancelling penalty-Held, on facts, no Facts For the assessment year 1965-66, the assessee-company returned an income of Rs. 1,74,613. The ITO made an addition of Rs. 1,50,000 on account of unaccounted firewood after rejecting the assessee's explanation. The ITO also made an addition of Rs. 91,500 on account of certain cash credits not satisfactorily explained by the assessee. On second appeal, the Tribunal eventually upheld the addition on account of firewood at Rs. 50,000. As regards the cash credits, the Tribunal accepted the assessee's explanation in respect of credits totalling Rs. 50,000, but rejected it in respect of certain credits totalling Rs. 10,000. The assessee did not contest the additions in respect of the remaining credits totalling Rs. 31,500. Thus, the Tribunal upheld addition of cash credits amounting to Rs. 41,500 in all. In the consequential penalty proceedings initiated for concealment of income, the IAC, after considering the assessee's explanation, held that the assessee was guilty of concealment of its income and imposed a penalty on it, invoking the provisions of the Explanationto section 271(1)(c). On appeal, the Tribunal held that with regard to the addition of Rs. 50,000 made on account of unaccounted firewood, penalty could not be levied, because this addition had been made on the basis of estimate and in making an estimate an element of guesswork was involved, which would entitle the assessee to benefit of doubt. As regards the…

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