Law:

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Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of Income Where during course of search no books of account were seized from assessee and no notice under section 148 or 139(2) was issued to assessee, as there was no evidence on record to prove that there was concealment, levy of penalty on assessee was not justified. [A.Y. 1984-85]. The assessee was dealing in iron and steel articles and had effected sales to the sister concern amounting to Rs. 2,91,625. There was a search action initiated at the residential and business premises of the assessee on 27-6-1985, wherein admittedly no books were seized from the assessee. However, at the business premises of the sister concern of the assessee certain books were found wherein it was noticed that the assessee had made sales of iron and steel amounting to Rs. 2,91,625 to the sister concern. As the assessee could not furnish complete authority of funds, the assessee filed return of income on 30-12-1985, by offering to tax the said amount of Rs. 2,91,625. The Assessing Officer passed the assessment order accepting the return filed by the assessee and levied penalty under section 271(1)(c), by invokingExplanation 3 thereto. The Commissioner (Appeals) deleted the penalty. The Tribunal upheld order of the Commissioner (Appeals). Held that during the course of search no books of account were seized from the assessee and no notice under section 148 or 139(2) was issued to the assessee. The departmental representative had admitted before the Tribunal that Explanation 3 to section 271(1)(c) was not applicable to the facts of the instant case. In these circumstances, rejection of reference application filed by the revenue on the ground that there was no evidence on record to prove that there was concealment of income, could not be faulted. A.S. Jaiswal for the Applicant. C. J. Thakkar for the Respondent. JUDGMENT( Oral judgment ) J.P. Devadhar, J.-This application filed by the Revenue under section 256(2) of the Income-tax Act, 1961, was admitted on April 15, 1998, on the following questions of law. "1.Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was…

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