Concealment penalty requires proof of deliberate suppression, and the governing law is that in force when the return was filed.

Penalty for concealment is determined by the law in force when the offending return was filed, so the concealment alleged for the 1961-62 assessment year had to be tested under section 28(1)(c) of the Indian Income-tax Act, 1922, not the later wording of section 271(1)(c) of the 1961 Act. The High Court also held that penalty requires proof of conscious and deliberate concealment or deliberate furnishing of inaccurate particulars; mere omission, inability to substantiate an item, or reliance on suspicious surrounding facts is not enough. On the facts, the Department failed to prove intentional concealment, the Tribunal was justified in placing the burden on the Department, and the penalty was not sustainable.

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Issues: (i) Whether penalty for concealment relating to assessment year 1961-62 was governed by the law in force on the date of the original return or by the law in force when penalty proceedings were initiated. (ii) Whether the assessee had consciously concealed income or deliberately furnished inaccurate particulars so as to attract penalty. (iii) Whether the Tribunal was justified in casting the burden of proof on the Department and in holding that concealment was not proved.

Issue (i): Whether penalty for concealment relating to assessment year 1961-62 was governed by the law in force on the date of the original return or by the law in force when penalty proceedings were initiated.

Analysis: The material act charged as concealment was the filing of the original return without the three items of income. That act occurred on 17 July 1961, when section 28(1)(c) of the Indian Income-tax Act, 1922 was in force. Penalty liability must be tested by the law operating on the date of the wrongful act. Section 297(2)(g) of the Income-tax Act, 1961 enables initiation and imposition of penalty under the 1961 Act for earlier years completed after 1 April 1962, but it does not alter the principle that the default and the nature of the offence are determined with reference to the law then in force. The omission of the word "deliberately" by the Finance Act, 1964 did not make the later date of satisfaction of the Income-tax Officer the governing date for determining the offence in this case.

Conclusion: Penalty was to be tested with reference to section 28(1)(c) of the Indian Income-tax Act, 1922, and not by the later state of section 271(1)(c) of the Income-tax Act, 1961.

Issue (ii): Whether the assessee had consciously concealed income or deliberately furnished inaccurate particulars so as to attract penalty.

Analysis: The Tribunal examined the three items added in the revised return, namely parithoshikam, commission on two chitties, and commission in parallel chitties, and found that the surrounding facts did not establish conscious concealment. The reasoning accepted that the omission in the original return was not shown to be intentional, that the assessee's accounts were not regular in the chitty business, and that the material relied upon by the Department rested on surmise rather than proof of deliberate falsification. In penalty matters, the decisive element is conscious and deliberate concealment, and mere inability to substantiate an item or agreement to include it in income does not by itself establish concealment.

Conclusion: The assessee was not shown to have intentionally concealed income or deliberately furnished inaccurate particulars.

Issue (iii): Whether the Tribunal was justified in casting the burden of proof on the Department and in holding that concealment was not proved.

Analysis: Once penalty proceedings were founded on concealment, the Department had to establish the statutory ingredients of the default. The Tribunal treated the Department's material as insufficient to prove intentional concealment or deliberate furnishing of inaccurate particulars. That approach accorded with the requirement that penalty cannot rest on conjecture and must be supported by proof of the requisite culpable conduct.

Conclusion: The Tribunal was justified in holding that concealment was not proved and in resolving the matter against the Department.

Final Conclusion: The reference was answered in favour of the assessee on all material questions, and the penalty could not be sustained on the facts found.

Ratio Decidendi: Penalty for concealment must be determined by the law in force when the concealed or inaccurate return was filed, and it can be imposed only on proof of conscious and deliberate concealment of income or deliberate furnishing of inaccurate particulars.

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