Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1966-67 - Penalty under section 271(1)(c) was levied on assessee as its assessable income was more than 20 per cent of returned income - Tribunal cancelled said penalty on ground that department did not produce any evidence to show that assessee had concealed income - Whether with effect from 1-4-1964, when Explanation to section 271(1)(c) was added, onus rested on assessee prove that failure to return correct income did not arise from any fraud or wilful neglect on its part - Held, yes - Whether since assessee failed to discharge said onus, penalty was rightly imposed - Held, yes FACTS For the assessment year in question, the assessee company filed a return showing Rs. 19,407 as the income. The IAC determined the income of the assessee at Rs. 1,60,420. On appeal before the AAC as well as before the Tribunal, the assessed income was reduced to some extent. As the assessable income was more than twenty-five per cent of the returned income of the assessee, a penalty of Rs. 27,700 was imposed by the IAC. The Tribunal allowed the assessee's appeal and set aside the order imposing penalty on ground that although the income assessed was well above 20 per cent of the income returned, the onus laid on the department to prove by cogent materials that the additions so made were concealed amounts of the assessee and they were in the nature of income but department had failed to prove same. On reference: HELD It has been held in CIT v. Behera [1976] 103 ITR 479 (Orissa), that with effect from 1-4-1964, when the Explanation to section 271(1)(c) was added, the onus vests on the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or wilful neglect of the assessee, where the total income returned is less than 80 per cent of the total income assessed. In the case of CIT v. Parmanand Advani [1979] 119 ITR 464 (Pat.), the same High Court also held the same view. Since assessee failed to discharge said onus, the cancellation of the penalty by the Tribunal was not legal and proper. Note: The decision is in favour of the revenue.…

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