Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1959-60 - Assessment order for relevant year was reopened by ITO on finding that assessee had purchased a motor vehicle and made payment thereof between 26-8-1958 to 7-10-1958 - Explanation of assessee was that he had made this payment partly out of cash balance and partly from depreciation amount which was allowed on his trucks - ITO rejected explanation of assessee and held that purchase amount of vehicle was income of assessee from undisclosed sources - Thereafter, assessee was subjected to penalty under section 271(1)(c) - Whether as neither IAC nor Tribunal found that assessee's explanation was false and as there was no other material from which an inference of concealment of income could be drawn, no penalty could be imposed on assessee - Held, yes FACTS For the assessment year 1959-60, the total income of the assessee was fixed at Rs. 10,953. During the course of assessment for the next year, namely 1960-61, it was noticed that the assessee had purchased a motor vehicle and made payment of Rs. 31,250 for the purchase of the vehicle between 26-8-1958 and 7-10-1958. The assessment for the year 1959-60, was, therefore, reopened under section 147. The assessee's explanation with regard to these payments was that on 26-8-1958, he had a cash balance of Rs. 14,168, and out of this cash balance he made part of the said payment. This explanation was rejected by the ITO who found that in the cash book there were no entries of the withdrawal of Rs. 10,000. In regard to the source of payment of the balance of the purchase price, the assessee said that he was allowed depreciation amount on his trucks for the assessment years 1957-58 to 1959-60, and that his amount was utilized by him for making the payments. This explanation was also rejected by the ITO who described the explanation as "obviously phoney and without any substance". After rejecting the explanation of the assessee, the ITO held that Rs. 31,250 was the income of the assessee from undisclosed sources in the assessment year 1959-60. Thereafter, penalty proceedings were also initiated against the assessee…

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