Penalty under income-tax law cannot rest on a mere difference between estimated and assessed income without proof of concealment.

Penalty proceedings under section 28(1)(c) of the Income-tax Act, 1922 are penal in character, so the revenue must prove concealment or deliberate furnishing of inaccurate particulars. A mere difference between the assessee's returned estimate and the income later assessed does not, by itself, justify an inference of dishonesty or falsehood. Because the penalty order treated that disparity as evidence of concealment, it contained an error of law on the face of the record. As the extent to which that error affected the decision could not be determined, the penalty order was quashed.

---

---

Issues: Whether penalty under section 28(1)(c) of the Income-tax Act, 1922 read with section 18A(9) could be sustained merely because the assessee's returned counter-estimate was lower than the income ultimately assessed, and whether such disparity alone could justify an inference of concealment or deliberate furnishing of inaccurate particulars.

Analysis: Proceedings under section 28(1)(c) are penal in character, so the burden lay on the revenue to establish the ingredients of concealment or deliberate inaccuracy. A mere difference between the estimate furnished by the assessee and the income later assessed does not, by itself, permit a legal inference of dishonesty. The penalty order rested, in part, on that disparity as an indication that the estimate was false, which was an error of law apparent on the face of the record. Since it could not be ascertained how far that error influenced the decision to impose penalty, the order could not stand.

Conclusion: The penalty order was unsustainable and was quashed, in favour of the assessee.

---