Penalty for unexplained cash credit fails where genuineness is not proved but concealment is not established.

Penalty under section 271(1)(c) was held not leviable where the assessee sought an to examine the creditor in penalty proceedings but no such opportunity was granted. The assessment finding, as affirmed in quantum proceedings, was only that the cash credit was not proved genuine. On that basis, the explanation could at most be treated as unsatisfactory and the evidence as insufficient; that alone did not establish concealment of income or justify penalty. The penalty was therefore cancelled.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable where the assessee's request to produce the creditor in penalty proceedings was not allowed and the cash credit was held only to be not proved genuine.

Analysis: The assessee had made a written request in the penalty proceedings to examine the creditor so as to substantiate the genuineness of the cash credit, but no opportunity was granted. The assessment finding affirmed in quantum proceedings was only that the credit was not proved genuine. On these facts, the explanation could at most be treated as unsatisfactory and the evidence as insufficient, but that by itself did not establish concealment of income.

Conclusion: The penalty was not leviable and was cancelled.

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