Penalty for unexplained cash balance failed where concealment was not shown to arise in the relevant assessment year.

Penalty under section 271(1)(c) was held unsustainable for assessment year 1970-71 because the impugned cash balance inflation related to the opening balance shown on 1 April 1970. The addition of unexplained cash difference as income did not, by itself, establish concealment in that assessment year, and there was no finding that any concealment occurred during the relevant accounting period. A mere inability to explain the cash credit was insufficient to justify penalty, so the penalty was cancelled.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained for the assessment year 1970-71 when the impugned cash balance inflation related to the opening balance shown on 1 April 1970.

Analysis: The addition of the unexplained cash difference as income did not by itself establish that the assessee had concealed income during the assessment year 1970-71. The opening cash balance was recorded on 1 April 1970, and there was no finding that the concealment, if any, occurred in the accounting period relevant to assessment year 1970-71. A mere inability to explain the cash credit was insufficient to fasten penalty for that year.

Conclusion: The penalty under section 271(1)(c) was not sustainable for assessment year 1970-71 and was cancelled.

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