Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1981-82 - A search was conducted at business and residential premises of partner of assessee-firm under section 132 and certain loose papers were found, in which, transactions relating to sales were found entered which were not recorded in books of account - Assessee filed a revised return in which entries made in loose papers were treated as sale on which profit was calculated - Assessee had not offered any explanation as to why sales recorded in loose papers were not entered in books of account and income relating thereto had not been disclosed in return - Whether it could be said that assessee deliberately concealed income from assessment and would, therefore, be liable for penalty - Held, yes FACTS The assessee-firm was engaged in the business of purchase and sale of cloth. A search was conducted at the business and residential premises of the partner of the assessee-firm under section 132 and certain loose papers were found, in which, transactions relating to the sales were found entered which were not recorded in the books of account. The assessee filed a revised return in which entries made in the loose papers were treated as sale on which profit was calculated. The Assessing Officer made an addition on account of unrecorded income as well as income from undisclosed sources and also levied penalty under section 271(1)(c). On appeal, the Commissioner (Appeals) confirmed the addition; however, he deleted the penalty partly. On second appeal, the Tribunal deleted the entire penalty observing that the assessee had filed voluntary return disclosing profit on sales found on the loose papers. On reference : HELD The order of the Tribunal deleting the penalty was based on irrelevant considerations and on wrong facts. Findings of the Tribunal were perverse and without any basis. In the instant case, income shown in the revised return was not voluntary. The assessee was caught and during the course of search loose papers were found in which entries relating to the sales were found not recorded in the books of account. The assessee treated the entries made in the…

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