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Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1955-56 - Whether on deletion in appeal of additions on which penalty was based penalty too has to be deleted since penalty cannot stand on its own independently of assessment - Held, yes FACTS In the assessment under section 147, additions were made to the assessee's income on account of deemed dividend income and penalty was imposed. The Tribunal held that since in the appeal against the assessment reopened under section 147, the addition on account of deemed dividend had been deleted, the very basis of penalty under section 271(1)(c) ceased to exist, and, therefore, the penalty was to be deleted. On reference: HELD As the additions which were made in the assessment under section 147had been deleted by the Tribunal, the basis for imposition of penalty ceased to exist. The penalty cannot stand on its own independently of the assessment. Therefore, the deletion of penalty was justified. JUDGMENT Sengupta, J. - At the instance of the Commissioner, West Bengal-VI, the following question of law has been referred to this Court under section 256(1) of the Income-tax Act, 1961 ('the Act'), for the assessment year 1955-56: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961?" 2. The facts leading to this reference are that the assessee is a registered firm and the reference relates to the assessment year 1955-56. The assessment in this case was originally made in March 1960, bringing to tax Rs. 12,26,206 on account of deemed…

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