Law: Income Tax Act, 1961

Section: 143,271

Income-tax----Penalty---Concealment of income---Deemed concealment under explanation---Notice 'for imposition of penalty---Specific reference to Explanation dealing with deemed concealment not necessary---Indian Income Tax Act, 1961, S.'271(1)(c), Expln. 1, cl. (B)---[CIT v. P.M. Shah (1993) 203 ITR 792-(Bom.) and CIT v. Dharamchand L. Shah (199'3) 204 ITR 462 (Bom.) overruled]. Though the assessee, a firm, had taken certain bank drafts for payments to suppliers of rice in Andhra Pradesh, it had made the entries in it's a counts not on the dates on which they were obtained but a few days later. The explanation of the assessee was that sufficient cash balance was not available on those dates, it had obtained hand loans from friends, and, as it had expected to repay such loans within a short time, no entries were made in its books of account in respect thereof: The assessee also stated that since it was unable to furnish evidence for such loans it offered the amount of Rs.93;000 as additional income. Penalty proceedings were initiated by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer found the assessee's explanation unacceptable, noted that, it had offered the amount of Rs.93,000 as additional income, and applying, Explana­tion 1(B) to section 2 71 imposed a penalty on the assessee. The Appellate Tribunal cancelled the penalty, inter alia, four the reason that in the notice initiating penalty proceedings the assessee was not intimated about the proposed action under Explanation 1(B) to section .271(l)(c); but the High Court, on a reference, held that the imposition of penalty was valid. On appeal to the Supreme Court: Held, affirming the decision of the High Court, that the penalty was validly levied. The Explanation to section 271(1)(c) is a part of section 271. When the Assessing Officer or the Appellate Assistant Commissioner issues a notice under section 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By virtue of the notice under section 271 the assessee is put to notice that, if he does not prove, in the circumstances stated…

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