Law:

Section:

Explanation to section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Whether where IAC before levying penalty under section 271(1)(c) referred to reasons assigned by ITO for rejecting evidence given by assessee in assessment proceedings, recorded reasons afresh and sustained penalty under section 271(1)(c) read with Explanation thereto, Tribunal was right in cancelling penalty without discussing evidence on record or without giving any reason for accepting evidence of assessee - Held, no Facts During the reassessment proceedings under section 147(a ) for the assess-ment year 1970-71, the ITO called upon the assessee to state why the bank deposits in the accounts of his wife and children should not be treated as his income from undisclosed sources. The assessee submitted that the aforesaid amounts represented gifts received by his wife and children from close relatives on various religious and other occasions. The ITO rejected the assessee's explanation and included the same in the income of the assessee. The returned income was less than 80 per cent of the assessed income. On first hearing in proceeding under section 271(1)(c), the assessee could not appear before the IAC and the hearing was postponed on the assessee's request. However, on second hearing the IAC disposed of the matter ex parte and held that the statements of the wife and children of the assessee recorded during the assessment proceedings by the ITO did not merit acceptance. The penalty under section 271(1)(c) was, therefore, imposed. On appeal, the Tribunal, however, held that the explanation given by the assessee was corroborated by the statements of his wife and children and that the department had not brought on record any positive evidence to contradict the testimony of the assessee, his wife and children. The Tribunal then observed that once the assessee discharged the initial burden of rebutting the said presumption under Explanation to section 271(1)(c), the burden shifted on to the department to prove by cogent evidence that the disputed amount represented the assessee's income of the relevant year. The penalty so imposed was, therefore, cancelled. On…

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