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The judgment involves the interpretation of penalty provisions u/s 271 of the Income-tax Act, 1961, related to concealment of income and correctness of the returned income. Issue 1: Correctness of Returned Income The assessee, a registered partnership firm, had returned an income of Rs. 1,31,460 for the assessment year 1972-73. However, additional income was discovered through unrecorded transactions, specifically cash credit entries, which the assessee failed to prove as genuine. The Appellate Assistant Commissioner reduced the addition from Rs. 1,22,500 to Rs. 77,500. The Inspecting Assistant Commissioner imposed a penalty of Rs. 80,000 under u/s 271(1)(c) of the Act for concealment of income. The Tribunal concluded that the returned income did not fall short of 80% of the correct income, thus the penalty provision was not attracted. The court analyzed the Explanation to clause (c) of sub-section (1) of section 271, emphasizing the requirement for the assessee to prove lack of fraud or negligence to avoid the presumption of concealment. The Tribunal's findings indicated the assessee's failure to discharge this burden, leading to the presumption under the Explanation. Issue 2: Deletion of Penalty The Tribunal's decision to delete the penalty imposed by the Inspecting Assistant Commissioner was challenged in the reference. The court observed that the reduction of the addition to Rs. 77,500 by the Commissioner was relevant. Considering the facts and the application of the Explanation to clause (c) of sub-section (1) of section 271, the court found the penalty justified. Consequently, both questions raised in the reference were answered in the negative, in favor of the Revenue and against the assessee. The judgment disposed of the reference accordingly, with no order as to costs.
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