Court allows concealment penalty under section 271(1)(c) for deemed income

The High Court held that penalty under section 271(1)(c) for concealment of income under section 68 of the Income-tax Act can be imposed even on deemed income. The Court disagreed with the Tribunal's interpretation that income under section 68 is not considered "income" as defined by the Act. The burden of proof for concealment penalty lies with the revenue, and penalty can be levied for both actual and deemed income. The Court recommended the Appellate Tribunal to reconsider the penalty amount based on the sustained income.

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Issues involved: Interpretation of penalty u/s 271(1)(c) for concealment of income u/s 68 and 2(24) of the Income-tax Act, 1961.

Summary:
The case involved an assessee firm deriving income from business in china clay and iron mines for the assessment year 1965-66. The Income-tax Officer added a sum claimed as cash credits by the assessee under section 68 of the Income-tax Act to the assessee's income. Penalty proceedings u/s 271(1)(c) were initiated, and the Inspecting Assistant Commissioner imposed a penalty of Rs. 25,000 considering the entire cash amount. The Appellate Tribunal, in the penalty appeal, held that the burden was on the revenue to prove that the added amount was the actual income of the assessee for concealment penalty. The Tribunal emphasized that penalty can only be levied for the concealment of actual income, not for deemed income u/s 68. The Tribunal annulled the penalty imposition due to lack of evidence showing the added amount was the assessee's income.

The High Court discussed the definitions of "income" u/s 2(24) and the provisions of section 68 of the Act. It highlighted that section 68 allows income-tax to be charged on unexplained sums found credited in the books of the assessee. The Court emphasized that when the explanation is unsatisfactory, the amounts are merged into the total income of the assessee, and there is no distinction between income u/s 68 and other income. The Court disagreed with the Tribunal's view that income u/s 68 is not "income" as defined by the Act, stating that deemed income is also subject to penalty provisions. The Court held that the Tribunal was wrong in requiring the revenue to prove the added amount was the actual income of the assessee for concealment assessment.

The Court recommended the Appellate Tribunal to consider the sustained amount while imposing the penalty. The judgment was delivered by R. N. Mishra J., with agreement from N. K. Das J.

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