Law:

Section:

SECTION 271(1)(c) OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - WHETHER AFTER INSERTION OF EXPLANATION WITH EFFECT FROM 1-4-1964 MERELY GIVING OF AN EXPLANATION REGARDING SUM ADDED TO ASSESSEE'S INCOME WILL NOT DISCHARGE ONUS ON ASSESSEE BUT EXPLANATION GIVEN HAS TO BE PLAUSIBLE OR PROBABLE ONE TO DISCHARGE ONUS PLACED ON ASSESSEE - HELD, YES - WHETHER WHERE TRIBUNAL FINDS THAT ASSESSEE'S EXPLANATION REGARDING SUM ADDED IS PLAUSIBLE ONE, PENALTY UNDER THE EXPLANATION CANNOT BE IMPOSED - HELD, YES - WHETHER FINDING IN ASSESSMENT PROCEEDING IN REGARD TO ASSESSEE'S EXPLANATION ABOUT AN ADDITION IS NOT CONCLUSIVE BUT IS ENTITLED TO WEIGHT - HELD, YES Facts For the assessment year 1968-69, the assessee, a partnership firm, had deposited a sum of Rs. 1,10,000 in the partners' names in equal proportion. The assessee explained that Rs. 1 lakh was the sale price obtained for the partners' agricultural properties and produced copies of the registered deeds in support of its claim. The sum of Rs. 10,000 was claimed to be sale proceeds of agricultural produce of the lands which had been sold. The aforesaid sums had been received by the assessee by two corresponding bank drafts. The ITO rejected the assessee's explanation regarding the sum of Rs. 10,000 and assessed the same as the assessee's income. On appeal, the Tribunal upheld the addition. Since the returned income was less than 80 per cent of the assessed figure, penalty proceeding under the Explanation to section 271(1)(c) were initiated and the IAC observed that the assessee did not prove that the partners had sold agricultural produce of Rs. 10,000. As such he imposed penalty. On appeal, the Tribunal followed the decision in CIT v. Anwar Ali [1970] 76 ITR 696 (SC) and held (i) that merely because the ITO was not satisfied with the explanation, it did not mean that the assessee had concealed any income while filing the return, and (ii) that no penalty was imposable since the explanation given was quite plausible. On reference, the revenue contended, Inter alia, that the explanation of the assessee having been rejected in the assessment proceeding, it was not open to the Tribunal to accept the…

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