Law: Income Tax Act, 1961

Section: 271(1)(c)

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1977-78 - Whether, where ultimate finding that assessee has concealed particulars of his income is an inference to be drawn from admitted discrepancy in value of closing stock, explanation offered by assessee and consideration of true meaning of "concealment" essence of which is secrecy and deception, is a mixed question of law and fact, and where there is a mixed question of law and fact, inference from facts found is a question of law - Held, yes FACTS Subsequent to search the respondent-assessee filed his return declaring income of Rs. 85,200. On examination of books of account of the assessee, it was revealed that the value of the closing stock was Rs. 1217 lakhs while the assessee had declared closing stock at Rs. 10.36 lakhs. The assessee furnished explanation of said discrepancy but it was rejected by the Assessing Officer and he made addition to income which was affirmed by the Commissioner (Appeals) and the Tribunal. The Assessing Officer also levied penalty under section 271(1)(c) treating the addition as concealed income. However on appeal, the Commissioner (Appeals) and then the Tribunal reversed the said order of the Assessing Officer. On petition : HELD Concealment of particulars of income is an inference which flows from certain evidence such as the statements annexed to the income-tax return filed by the respondent and their scrutiny with reference to the account books. The discrepancy is admitted but is explained by the respondent. On a superficial view "concealment of particulars of income" appears to be a question of fact. The inference that the respondent concealed his income attracts the consequence of penalty the levy of which depends on the construction of the proviso to Explanation 1 to sub-section (1) of section 271 on which the respondent had placed reliance. The circumstances which give rise to a question of law are varied and cannot be encapsulated in a single proposition. A finding of fact based on surmises or in violation of fundamental rules of justice or a finding of fact arrived at by misconstruction of a document or a finding…

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