Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment years 1964-65 to 1966-67 - Whether in order to enable penalty proceedings to survive, assessment proceedings should be alive and where assessment had been set aside in part and matter had been remitted to AAC for de novo consideration, Tribunal should not examine question of levy of penalty on merits and cancel it - Held, yes FACTS For the relevant assessment years, the assessee claimed loss in the spun pipe plant and excess remuneration paid to the financial adviser. The ITO rejected these claims and it was also found that the assessee had introduced bogus hundi credits and by debiting the hundi credits, there was a resulting diminution of the profits of the business carried on by the assessee and the ITO included the hundi amounts with interest and completed the assessment. Penalty proceedings were initiated under section 271(1)(c ). On appeal by the assessee against the assessment orders, the disallowance of the loss in the spun pipe plant claimed by the assessee and the excess remuneration paid were set aside and the proceedings were remitted to the AAC for fresh consideration in so far as the unexplained hundi credits and interest disallowed were concerned. The assessment proceedings so remitted awaited finalisation. The IAC levied penalty under section 271(1)(c). On appeal, considering the additions on account of the hundi credits, the Tribunal concluded that the assessee had produced the discharged hundi khokas before the authorities in proof of the genuineness of the loans and, in the absence of materials to establish that the claim made by the assessee was bogus, concealment of income was not made out and the levy of penalty for all the assessment years in question could not be sustained. In that view, the penalty levied was deleted. On reference : HELD There was no dispute that the orders of assessment passed against the assessee for the assessment years under consideration had been set aside by the Tribunal and the matter had been remitted to the AAC for de novo consideration of the genuineness of the hundi loans. Under those circumstances, when the…

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