Law: Income Tax Act, 1961

Section: 271(1)(c),256

(a) Income-tax----Penalty---Concealment of income---Search operations showing undisclosed loans ---Assessee agreeing for addition to income on condition that penalty was not levied---Tribunal finding that income was computed on basis of estimate---Tribunal justified in cancelling penalty---Indian Income Tax Act, 1961, S.271(1)(c). (b) Income-tax--- ----Reference---Penalty---Concealment of income---Finding regarding concealment is a finding of fact---Quantum of proof to arrive at such a finding cannot be considered by High Court---Indian Income Tax Act, 1961, Ss.256 & 271(1)(c). When once the Tribunal comes to the conclusion that the failure to return the correct income did not arise from any fraud or gross or wilful negligence on the part of the assessee, the quantum of proof necessary to come to that conclusion cannot be considered by the High Court on a reference. The assessee was an individual doing money-lending business. One A had given him a general power of attorney. There was a search in the premises of the assessee on July 27, 1970. Various premises standing in the name of the assessee as well as .A were seized. On August 3, 1970. the assessee filed a return admitting an income of Rs.10,000. The Income-tax Officer examined some of the debtors. The Income-tax Officer considering all these seized materials and other evidence came to the conclusion that the assessee was charging exorbitant interest on the moneys advanced by him. He also found that most of the bonds were executed by the debtors for double the amount of the loan actually advanced. He arrived at a peak credit of the loan at Rs.1,27,385 and estimated the interest income at 50 per cent. of the peak credit at Rs.63,693. The assessment was, thus, made on a total income of Rs.63,693 under section 144 of the Income Tax Act, 1961 as a best assessment since the assessee did not comply with various notices issued by the Income-tax Officer. Penalty was imposed but it was cancelled by the Tribunal because it found that: (a) the assessee was not served with the assessment order; (b) the assessment order did not separately estimate the interest income earned by the assessee and interest income earned…

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