Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of Income - Assessment year 1963-64 - Whether before imposing penalty under section 271(1)(c), it is necessary to find out whether assessee has been able to prove that concealment of income was not due to any fraud or gross or wilful neglect on its part - Held, yes - Tribunal cancelled penalty imposed under section 271(1)(c) holding that Explanation to section 271(1)(c) did not apply to assessment year in appeal and that department had failed to prove that amount in question constituted assessee's taxable income - On reference, High Court held that for imposition of penalty, law applicable would be law operating on date of filing return and thus remanded matter to Tribunal to decide matter accordingly - Tribunal took up matter after long delay and held that IAC was justified in drawing presumption in accordance with Explanation to section 271(1)(c) that amounts in question represented concealed income of assessee - Assessee had not appeared in hearing before IAC and no opportunity of hearing was given to assessee by Tribunal to show that there was any gross or wilful neglect on part of assessee in not returning correct income - Whether on facts, matter was to be remanded to Tribunal to dispose of it afresh after giving an opportunity of hearing to assessee - Held, yes FACTS While completing the assessment for the assessment year in question, the ITO noticed certain cash credits in the names of different parties. On scrutiny, the ITO did not accept these cash credits as genuine and assessed certain amount being the overall peak credit of the entire transactions as the assessee's income from undisclosed sources. Simultaneously, he disallowed the interest claimed to have been paid to the creditors. These additions were upheld in appeal before the AAC. For such concealment of income, proceedings under section 271(1)(c) were initiated. But, in spite of the service of notice, the assessee did not attend the hearing of the penalty proceedings. The IAC held that theExplanation to section 271(1)(c) as introduced with effect from 1-4-1964, applied as the return was filed after the said date. As the…

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