Estimated assessment after rejection of books does not by itself prove concealment; penalty under section 271(1)(c) was deleted.

Penalty under section 271(1)(c) was treated as not automatic where income was assessed on estimate after rejection of the books. Regular maintenance of accounts, though not accepted for assessment, and the absence of material showing concealment, inaccurate particulars, fraud, gross neglect, or wilful neglect were treated as sufficient to defeat the Explanation. The difference between returned and assessed income, by itself, was held insufficient to sustain penalty where the assessment was only estimated and the assessee could discharge the negative burden on the material before the authority. The penalty deletion was upheld in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was exigible where the assessed income was determined by estimate after rejection of the books and the Explanation to that provision was sought to be invoked.

Analysis: The books of account were maintained regularly, though not accepted for assessment and income was estimated after invoking section 145(1). The mere fact that an estimated assessment was made did not, by itself, establish concealment or furnishing of inaccurate particulars. The difference between returned and assessed income was not of such magnitude as to justify an inference of fraud, gross neglect, or wilful neglect. The burden under the Explanation was treated as a negative burden, capable of being discharged by showing that on the material before the assessing authority no such culpable conduct could be attributed to the assessee.

Conclusion: Penalty was not leviable, and the finding deleting the penalty was upheld in favour of the assessee.

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