Law:

Section:

Section 271(1)(c), read with Explanation 1 thereto, of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1972-73 - Addition made by ITO in assessee's income by valuing its closing stock at higher rate than that declared by assessee was confirmed by Tribunal - During penalty proceedings material was produced by assessee showing sale of stock in next year at lower rates - IAC rejected contention of assessee on basis of Tribunal's decision in quantum appeal - Whether material produced by assessee daring penalty proceedings was to be considered independently of assessment proceedings, presumption of assessee having concealed income stood rebutted in instant case and no penalty was imposable - Held, yes FACTS For the assessment year 1972-73, the assessee returned his income at Rs. 15,000 by valuing its closing stock at Rs. 575 per metric ton. The ITO calculated the stock at Rs. 900 per metric ton and added the difference of Rs. 34,158 to the income of the assessee. On appeal, the Tribunal reduced tie addition to Rs. 20,034. Penalty proceedings were initiated and the matter went to the IAC. The assessee produced material before Mm to show that the closing stock was sold in the next year at rates ranging from Rs. 480 to Rs. 595 per metric ton. The IAC observed that the same argument had earlier been rejected by the Tribunal in quantum appeal, and imposed a penalty of Rs. 22,100. On appeal, the Tribunal cancelled the penalty by holding that the material produced in the penalty proceedings was to be considered independently of the assessment proceedings and the assessee had rebutted the presumption of concealment of income. On reference : HELD So far as the interpretation of the provision of section 271(1)(a ) and the Explanation is concerned, the matter is covered by the Full Bench decision in Vishwakarma Industries v. CIT [1982] 135 ITR 652 (Punj. & Har.) and a Division Bench in CIT v. Rajeshwar Singh [1986] 162 ITR 173 (Punj. & Har.). The IAC could apply the Explanation to the facts of the present case and even though the initial presumption would be on the assessee, he could rebutt said presumption. By producing documentary…

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