Law:

Section:

Section 271 (1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1965-66 - Whether in case of difference between assessed income and returned income as stipulated in Explana-tion penalty is automatic - Held, no - Whether Explanation to section 271 (1)(c) will come into operation only when department has proved that assessed amount represented income of assessee - Held, yes - Whether fact that certain income is assessed as assessee's income is conclusive evidence that amount assessed is Income of assessee for purposes of penalty - Held, no FACTS In the course of examination of the accounts of the assessee for the assessment year 1965-66, the ITO found that the assessee had shown in its cash book on 28-10-1964, receipt of a sum of Rs. 27,000 while the corresponding withdrawals from the bank account were on two different dates. The assessee explained that an aunt of one of the partners of the firm J, who came to perform the sradha ceremony of her husband, gave old currency notes of Rs. 27,000 for being exchanged with new notes. The money deposited in the accounts on 28-10-1964 was stated to represent the cash received from her. She was given back the money by cheques which were encashed from the bank on 29-10-1964 and 5-11-1964. No evidence to support the explanation given in respect of the amount of Rs. 27,000 was produced by the assessee. The ITO found that all the cheques drawn on 29-10-1964 and 5-11-1964 were in favour of 'self. The ITO, therefore, held that these amounts represented the assessee's income from undisclosed sources and, accordingly, the assessment was completed after adding this amount to the income of the assessee. Proceeding was also initiated for levy of penalty under section 271(1)(c) for concealment of income, and penalty was imposed on the assessee. The Tribunal confirmed the addition to the assessee's income but deleted the penalty holding that the mere fact that the assessee was not able to explain the source of the particular amount to the satisfaction of the ITO was not sufficient to justify the levy of penalty unless the department proved that a receipt of income nature was concealed. On the facts…

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