Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1969-70 - Assessing Officer levied penalty under section 271(1)(c) holding that deduction claimed by assessee on account of interest paid on loans was not justified - Tribunal recorded finding of fact that there was no concealment of income - Whether on said finding, Tribunal was justified in cancelling penalty - Held, yes FACTS The ITO held that though the assessee was deriving income from business, the assessee had not utilised the loans from various parties for business purposes but the loans were utilised for construction of the property and, hence, the claim for deduction of interest made by the assessee was not justified. The ITO also levied penalty under section 271(1)(c). The AAC cancelled the penalty. The Tribunal affirmed the order of the AAC. On reference : HELD The only contention raised before the Tribunal on behalf of the revenue was that the expenditure claimed by the assessee on account of payment of interest on loans was not justified and as the assessee was not entitled to claim that deduction, the assessee must be held to have concealed his income. The Tribunal, however, held, after appreciating the material on record, that it was not a case of concealment of income. In view of this finding by the Tribunal, it must be held that the Tribunal was justified in canceling the penalty. Note : The case was decided in favour of the assessee. B.P. Rajgarhia and S.K. Sharan for the Applicant. Narayan Prasad Agrawal and Mrs. Nilu Agrawal for the Respondent. JUDGMENT G.G. Sohani, CJ.-By this reference under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, 'B' Bench, Patna, has referred the following question of law to this court for its opinion: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty for the assessment year 1969-70 imposed under section 271(1)(c) read with the Explanation thereto of the Income-tax Act, 1961?" The material facts giving rise to this reference, briefly, are as follows: The assessee was…

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