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Issues involved: Assessment of undisclosed income, penalty u/s 271(1)(c) of the Income Tax Act, applicability of Explanation to s. 271(1)(c) in penalty proceedings.
Assessment of undisclosed income: The assessee had investments in his name, wife's, and son's names totaling Rs. 1,05,850, which the ITO found unexplained. The ITO added Rs. 60,889 to the assessee's income as the source of these investments was not satisfactorily explained. Penalty u/s 271(1)(c): Penalty proceedings were initiated for concealing income of Rs. 60,889. The IAC levied a penalty of Rs. 20,000, considering the shortfall in explaining the sources of investments made by the assessee. Applicability of Explanation to s. 271(1)(c): The Tribunal canceled the penalty, stating that the Department failed to establish that the explanation offered by the assessee was false or unacceptable. The Tribunal decided the case based on the Supreme Court's ruling in CIT v. Anwar Ali [1970] 76 ITR 696, without invoking the Explanation to s. 271(1)(c). The Department argued that the Tribunal should have applied the Explanation to s. 271(1)(c) as the initial presumption of concealing income was against the assessee. However, the Tribunal decided the case based on the evidence presented and did not invoke the Explanation. The High Court disagreed with the Department, stating that the Tribunal is an independent arbitral tribunal and is not obligated to consider points not raised by the parties. The Tribunal's decision to not invoke the Explanation was justified as the matter was not raised during the proceedings. In conclusion, the High Court upheld the Tribunal's decision to cancel the penalty, ruling in favor of the assessee and awarding costs.
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