Penalty for cash capital introduction cancelled where surrounding facts rebutted deliberate concealment under income-tax law.

Penalty under section 271(1)(c) was found unsustainable where the surrounding facts supported the assessee's explanation for cash capital introduced in the books. The material did not establish fraud, gross neglect or wilful neglect, and the assessee's prior earnings and living arrangement with his brother made saving from income plausible. Although the Explanation to section 271(1)(c) can shift the burden in an appropriate case, those circumstances were held sufficient to rebut any inference of deliberate concealment. The cancellation of other penalties for the same assessment year was also treated as supporting the assessee's bona fides, and the penalty was cancelled.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable on the assessee for the cash capital introduced in his books, and whether the Explanation to section 271(1)(c) was attracted so as to place the burden on the assessee to disprove fraud or gross or wilful neglect.

Analysis: The assessee had shown prior earnings at Calcutta and was living with his brother, making it probable that he could have saved money from his income. The material on record did not establish that the concealed income had resulted from fraud, gross neglect or wilful neglect. The cancellation of other penalties for the same assessment year was also treated as relevant to the assessee's bona fides. Although the Explanation to section 271(1)(c) shifts the burden in an appropriate case, the surrounding facts and circumstances furnished sufficient material to rebut an inference of deliberate concealment.

Conclusion: The penalty under section 271(1)(c) was not sustainable and was cancelled in favour of the assessee.

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