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Issues involved: Assessment of undisclosed income, levy of penalty u/s 271(1)(c) of the I.T. Act, 1961, admission of concealment of income by the assessee.
Assessment of undisclosed income: The case involved an assessment year of 1968-69 where the assessee, a registered firm engaged in various businesses, had cash credits in its accounts. The Income Tax Officer (ITO) assessed Rs. 10,590 as income from undisclosed sources due to the inability of the assessee to prove the genuineness of the cash credits. The assessee did not appeal this assessment, leading to penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961. The Income-tax Appellate Tribunal later allowed the appeal, stating that the assessee did not admit to concealing income, and surrendering the amount for taxation did not imply admission of concealment. Levy of penalty u/s 271(1)(c): The question referred to the court was whether the Tribunal erred in law by holding that the penalty levied on the assessee under section 271(1)(c) for the assessment year 1968-69 was not sustainable. The Revenue contended that the assessee admitted concealment of income, shifting the burden to the assessee to prove otherwise. However, the court found that the assessee did not admit to concealing income but only acknowledged cash credits in its accounts without being able to provide evidence of their genuineness, citing inability to call the parties involved due to heavy indebtedness. Admission of concealment of income: The court rejected the Revenue's argument that the assessee admitted concealment of income, emphasizing that the assessee's acknowledgment of cash credits without proof of genuineness did not amount to admission of concealment. A previous case cited by the Revenue was deemed inapplicable as it involved different circumstances where the assessee agreed to an addition as concealed business income, unlike the present case where the addition was made from undisclosed sources. The court ruled in favor of the assessee, stating that the Tribunal's decision was correct, and the penalty was not sustainable. Conclusion: The court answered the referred question in the negative, in favor of the assessee, and directed the Commissioner to pay the costs.
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