Estimated trading additions and unexplained cash credits did not establish concealment, so penalty under income-tax law was cancelled.

Penalty under section 271(1)(c) was held unsustainable where the trading addition rested on estimation, since an estimated figure can involve an honest difference of opinion and does not, by itself, prove concealment. The cash credit was assessed as income for lack of proof of genuineness, but that finding did not establish concealment of income for the relevant year. An earlier observation on a capital account deposit was treated only as part of telescopic benefit and not as a finding of concealment. On that basis, the penalty was cancelled.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable where the trading addition was based on estimate and the cash credit addition was made for want of proof of genuineness.

Analysis: The addition in the trading account was founded on estimate, and an honest difference of opinion could arise on such material; it was not, by itself, proof of concealed income. The cash credit was treated as income because its genuineness was not established, but that circumstance did not establish concealment of income for the relevant year. The earlier observation regarding the capital account deposit was made only for granting telescopic benefit and did not amount to a finding of concealment.

Conclusion: Penalty was not justified and was cancelled.

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