Law:

Section:

Explanation to section 271(1)(c) [as it stood in assessment year 1967-68] of the Income-tax Act, 1961 - Penalty - For concealment of income - In relevant assessment year ITO included in assessee's income certain amount under head 'Income from other sources' which represented cash credits appearing in names of some persons - Though assessee had produced confirmatory letter and sworn statements from creditors to show genuineness of these cash credits evidence adduced by assessee was disbelieved - Later on penalty proceedings under section 271(1)(c) were initiated and assessee stated before IAC that evidence provided in assessment proceedings might be considered in penalty proceedings also - IAC without applying his mind held that as evidence of assessee had been found unsatisfactory in assessment proceedings, penalty under section 271(1)(c) was leviable - Whether in view of fact that IAC did not deal with evidence on record, it was to be held that revenue failed to make out a case for levy of penalty and, thus, no penalty could be imposed under section 271(1)(c) or even by invoking Explanation thereto - Held, yes Facts In the relevant assessment year, i.e., 1967-68, the ITO included, in the assessee's income, a certain amount under the head 'Income from other sources'. This sum represented cash credits appearing in the names of some persons. Before completion of the assessment, the ITO issued show-cause notice under section 274(2) to the assessee to show cause why penalty should not be levied for concealing the income or furnishing inaccurate particulars of such income. On appeal, the AAC accepted the genuineness of some of the cash credits and upheld the assessment to the extent of the balance amount relating to three cash credits. In support of the plea that these cash credits were genuine, the assessee produced a confirmatory letter from one creditor and sworn statements from the two other creditors. The ITO disbelieved the explanation of the assessee and the AAC upheld the view of the ITO. No appeal was filed by the assessee against the order of the AAC. The ITO referred the matter regarding the levy of penalty to the IAC and before levying penalty the IAC…

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