Law:

Section:

Section 271(1)(c), of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1974-75 - Addition to income was made on basis of estimate and consequently, returned income became less than 80 per cent of assessed income - Penalty was imposed on basis of said addition - Tribunal without considering Explanation to section 271(1)(c) cancelled penalty - Whether presumption raised by Explanation being rebuttable presumption, Tribunal should have considered evidence and find out whether assessee had discharged presumption - Held, yes - Whether, therefore, order of Tribunal had to be set aside for fresh disposal - Held, yes FACTS The assessee company filed a return showing Rs. 12,826 as its income. The ITO raised the income to Rs. 27,500 which was reduced in appeal to Rs. 22,000. As the returned income fell short of the assessed income by more than 20 per cent, a penalty notice under section 274 read with section 271(1)(c) was issued. The ITO held that the petitioner wilfully concealed the particulars of his income and, therefore, levied a penalty under 271(1)(c). The first appellate authority and the Tribunal allowed the appeal of the assessee, cancelling the penalty. On reference : HELD Since the income returned was less than eighty per cent. of the income assessed, the AAC and so also the Tribunal illegally omitted to consider the Explanation to section 271(1)(c). It may be true that the addition was made on the basis of an estimate but that did not mean that penalty could not be levied if the assessee failed to prove that the difference between the income returned and the income assessed was not due to any fraud or wilful negligence on its part. The onus to discharge the presumption was on the assessee and it was for it to prove that the difference did not arise from any fraud or wilful neglect on its part. Had the Tribunal considered the Explanation in its true perspective and then recorded a finding, the same could be a finding of fact. This had, however, not been done. Undoubtedly, the presumptions raised by the Explanation being rebuttable presumptions, the Tribunal should have considered the evidence and find out whether the assessee…

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