Law:

Section:

explanation to section 271(1)(c) [as it stood prior to 1-4-1976] of the income-tax act, 1961-penalty-for concealment of income-ito, on basis of departmental valuer's report, found difference between cost of construction of building as disclosed by assessee and that determined by valuer-ito added impugned difference as assessee's income under section 69 and imposed penalty under explanation to section 271(1)(c)-assessee did not disclose source of difference in investment as disclosed by him and as determined by departmental valuer but merely contended that as addition had been made on estimate basis penalty could not be imposed-whether explanation to section 271(1)(c) was attracted and penalty was imposable on assessee-held, on facts, yes Facts The assessee constructed a building during previous years relevant to the assessment years 1974-75 to 1976-77. The ITO rejected the cost of construction indicated by the assessee for the assessment year 1975-76 and after getting the same determined by the departmental valuer, brought the difference in the cost of construction to tax in the assessee's hands as income from undisclosed sources under section 69. The ITO, thereupon, initiated penalty proceedings in respect of the said unexplained investment. The assessee opposed it on the ground that the addition had been made on the basis of estimate only and the statements regarding the cost of construction by the assessee was not proved to be incorrect. The assessee, however, did not give the source of investment and the difference between the source of investment as disclosed by the assessee and the cost as estimated by the departmental valuer. The ITO imposed the penalty under the Explanationto section 271(1)(c). On appeal, the Commissioner (Appeals) confirmed the same. Following the decision in Rahmat Development & Engg. Corpn. v. CIT [1981] 130 ITR 602 (Cal.), the Tribunal held that the ITO was correct in imposing penalty under the Explanation to section 271(1)(c). On reference: Held The question whether the provisions of section 271(1)(c ) would be applicable in a case where the additions have been made to the returned income on the basis of an estimate, will depend on…

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