Penalty under section 271(1)(c): statutory presumption applied where assessee failed to rebut unexplained cash credits.

Under the amended scheme of section 271(1)(c), where returned income falls below 80% of assessed income, the statutory Explanation raises presumptions that the assessed income is the assessee's income and that the shortfall resulted from fraud or gross or wilful neglect. The Tribunal's approach, which required the Department to independently prove concealment and treated rejection of the assessee's explanation as insufficient, was inconsistent with that burden-shifting framework. As no evidence was produced to support the genuineness of the disputed cash credits, the presumption remained unrebutted and the penalty was held sustainable.

---

---

Issues: Whether, on the facts and circumstances, penalty under section 271(1)(c) of the Income-tax Act, 1961 was rightly cancelled by the Tribunal despite the statutory Explanation and the consequent presumptions.

Analysis: The assessment year involved attracted the amended scheme of section 271(1)(c), under which, where the returned income is less than 80% of the assessed income, the Explanation operates and raises presumptions that the assessed income is the assessee's income and that the shortfall occurred by reason of fraud or gross or wilful neglect. The Tribunal proceeded on the footing that the Department had to prove concealment and that mere rejection of the assessee's explanation was insufficient. That approach ignored the statutory presumptions and the burden cast on the assessee to rebut them. The assessee produced no evidence to support the genuineness of the disputed cash credits.

Conclusion: The cancellation of penalty was erroneous. The presumption under section 271(1)(c) was not rebutted, and the penalty was sustainable; the answer was in favour of the Revenue.

---