Law:

Section:

Section 271(2)(c) of the Income-tax Act, 1961 [Corresponding to section 28(1)(c) of Indian Income-tax Act, 1922] - Penalty - For concealment of income - Assessment year 1955-56 - In respect of a credit entry found in assessee's books and having remained unexplained and unproved, ITO treated as undisclosed income and levied penalty under section 28(1)(c) - Whether explanation if it was shown to be deliberately false, might no doubt induce inference that when assessee originally furnished particulars of his income, he deliberately furnished false particulars, but it was for ITO expressly so to decide - Held, yes - Whether where assessee maintained accounts in an unintelligible fashion and his accounts contained records of credits which did not show that they had been drawn from other transactions contained in accounts themselves, ITO was perfectly justified in inferring that these sums should have come in from a totally different source - Held, yes - Whether it was not even unreasonable to infer that entire series of transactions had been kept in this fashion only with a view to conceal real source of these sums of money, and if so much could be inferred, it could not be said that section 28(1)(c) was not attracted - Held, yes FACTS In respect of certain credit entries in the books of account, the assessee's explanation that this sum represented the sale proceeds of sugar ITO held that if the credits really represented sale of sugar, there was need for the entries to be made in the suspense account or subsequently cancelling these credit entries by debit entries. He accordingly treated the entire amount as undisclosed income. On appeal, the AAC slightly reduced the addition. The ITO thereupon levied penalty under section 28(1)(c) which was upheld, on appeal by the AAC. On second appeal, the Tribunal also confirmed the levy of penalty for there was a deliberate manipulation of the accounts. On reference : HELD The proceedings under section 28(1)(c ) are undoubtedly of a penal nature, and what may be regarded as the guilt of the assessee had to be brought home to him. It would not suffice merely to say that the explanation of the assessee was not acceptable. The…

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