Penalty under section 271(1)(c) upheld as assessee discharged burden under the Explanation through factual evidence.

Penalty under section 271(1)(c) was cancelled because the Tribunal, on evidence from the search and witness affidavits, found it could not be said with certainty that the gold biscuits and primary gold were recovered from or acquired by the assessee. That factual finding was not successfully challenged by the Revenue. On that basis, the assessee was held to have discharged the burden under the Explanation to section 271(1)(c) by showing that the failure to disclose complete income did not arise from fraud or wilful neglect. The cancellation of penalty was upheld in favour of the assessee.

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Issues: Whether the Appellate Tribunal was justified in cancelling the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, in the light of the Explanation to that provision.

Analysis: The Tribunal had found, on the basis of the evidence relating to the search and the affidavits of witnesses, that it could not be said with certainty that the gold biscuits and primary gold were recovered from the assessee's or acquired by him. That finding of fact was not successfully challenged by the Revenue. On that footing, the assessee was held to have discharged the burden under the Explanation to section 271(1)(c), showing that the failure to disclose complete income did not arise from fraud or wilful neglect on his part.

Conclusion: The cancellation of penalty was upheld and the question was answered in the affirmative, in favour of the assessee and against the Revenue.

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