Law: Income Tax Act, 1961

Section: 271

Income-tax---Penalty---Concealment of income ---Assessee carrying on business prior to ' assessment year 1968-69 in status of individual ---Assessee claiming that ' individual business converted into partnership firm with effect-from l-4-1967 though partnership deed executed on 26-8-1967---I.A.C. holding that income from individual business for period from 1-4-1967 to 26-8-1967 not disclosed by assessee---Income for entire year disclosed by assessee---Income up to 26-8-1967 might have been assessed in hands of assessee in status of individual---That income of whole year was income of partnership not wholly ruled out---No inference of concealment of income could be drawn--­Levy of penalty not valid---Indian Income Tax Act, 1961, S. 271(1)(c). The assessee carried on business in the status of individual, in commission agency prior to the assessment year 1968-69. For the assessment year 1968-69, the assessee filed a return showing an income of Rs.33,233 which represented share of profits from a firm. The assessee claimed that the individual business was converted into a partnership firm comprising two partners, namely, the assessee and his son with effect from April 1, 1967, though the partnership deed was executed on August 26, 1967. The Inspecting Assistant Commissioner came to the conclusion that the partnership business had come into existence only with effect from August 26, 1967, and prior to that the assessee had carried on his individual business and that he failed to disclose income from his individual business for the period from April 1, 1967, to August 26, 1967. The Inspecting Assistant Commissioner therefore held that the assessee had concealed the income from his individual business for the aforesaid period and levied penalty for concealment of income under section 271(1)(c) of the Income Tax Act, 1961. On appeal, the Tribunal found that, according to the assessee though the partnership deed was executed on August 26, 1967, the partnership business commenced from April 1, 1967, itself and it, therefore, held that there could be two views in the matter and, therefore, it was not a fit case for imposition of penalty. On a reference: Held, affirming the…

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