Law:

Section:

SECTION 104 OF THE INCOME-TAX ACT, 1961 - ADDITIONAL INCOME-TAX ON UNDISTRIBUTED PROFITS - ITO ADDED BACK CERTAIN AMOUNT IN ASSESSEE-COMPANY'S INCOME AS INCOME FROM UNDISCLOSED SOURCES AND TREATED SAME AS COMMERCIAL INCOME OF ASSESSEE FOR DETERMINING ASSESSEE'S DISTRIBUTABLE INCOME FOR PURPOSES OF SECTION 104 - PENALTY IMPOSED UPON ASSESSEE FOR CONCEALMENT OF INCOME WAS, HOWEVER, QUASHED BY AAC - WHETHER ONUS WAS ON DEPARTMENT TO PROVE THAT ADDED AMOUNT WAS COMMERCIAL INCOME OF ASSESSEE FOR PURPOSES OF DECLARATION OF DIVIDEND UNDER SECTION 104 AND TRIBUNAL WAS JUSTIFIED IN HOLDING THAT ADDED AMOUNT COULD NOT BE TREATED AS COMMERCIAL INCOME OF ASSESSEE FOR PURPOSES OF SECTION 104 - HELD, ON FACTS, YES Facts For the assessment year 1963-64, the ITO assessed the assessee, a private limited company, at an income of Rs. 75,200, which included a sum of Rs. 40,000 which was added back as income from undisclosed sources. The ITO then computed the distributable surplus at Rs. 37,600. As the assessee had failed to declare any dividend, the ITO served a notice upon the assessee to show cause why additional super tax should not be levied and after rejecting the explanation of the assessee, treated the said addition of Rs. 40,000 as commercial profit and passed an order under section 104 against the assessee. The penalty proceedings for concealment of income were quashed by the AAC. On appeal, the Tribunal held that the proceedings under section 104 were of penal nature and the onus was on the department to prove that the sum of Rs. 40,000 was undisclosed commercial profit of the assessee. It further held in the penalty proceedings-that were taken against the assessee, that the sum of Rs. 40,000 was not treated as the assessee's income, because the ITO was unable to discharge the onus of proving this sum as the assessee's income and, as such, the sum of Rs. 40,000 could not be treated as the commercial income of the assessee for the purpose of section 104(1)(c). Hence, it cancelled the order made by the ITO under section 104. On reference : Held It has been held by the Calcutta High Court in the case of CIT v. Universal Fertiliser Co. (P.) Ltd. [1978] 114 ITR 47 that the…

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