Penalty under section 271(1)(c): statutory presumption applies once income exceeds the threshold, and benefit of doubt is insufficient.

Where the Explanation to section 271(1)(c) of the Income-tax Act applied because the assessed income exceeded the returned income by the statutory margin, the assessee had the burden to rebut the presumption of fraud or gross and wilful neglect with relevant evidence or sufficient circumstances. The article states that this burden could not be discharged by a mere benefit-of-doubt approach. On that basis, the Tribunal was not legally justified in cancelling the penalty.

---

---

Issues: Whether the Tribunal was justified in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961, after the Explanation thereto applied to the case.

Analysis: The assessment year was 1965-66, and the assessed income exceeded the returned income by more than the statutory threshold, attracting the Explanation to section 271(1)(c). Once the Explanation applied, the burden lay on the assessee to establish that the failure to return the correct income was not due to fraud or gross and wilful neglect. That burden could be discharged only by relevant evidence or by pointing to circumstances sufficient to rebut the presumption. In such a case, penalty could not be deleted merely by giving the assessee the benefit of doubt.

Conclusion: The Tribunal was not legally justified in cancelling the penalty.

Ratio Decidendi: Where the Explanation to section 271(1)(c) applies, the assessee must rebut the statutory presumption by proving absence of fraud or gross and wilful neglect; penalty cannot be set aside on a mere benefit-of-doubt approach.

---