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Issues involved:
1. Interpretation of penalty provisions u/s 271(1)(c) of the Income-tax Act, 1961 in a case where assessment was made u/s 297(2)(a) based on the Indian Income-tax Act, 1922. 2. Allocation of onus to prove cash credits as concealed income in penalty proceedings. Judgment Details: Issue 1: The Tribunal set aside the penalty order based on the assessment made under the Indian Income-tax Act, 1922, u/s 297(2)(a) of the Income-tax Act, 1961. The High Court, following the judgment in Jain Brothers v. Union of India [1970] 77 ITR 107, answered question No. 1 in the negative, favoring the revenue. Issue 2: In the penalty proceedings, the Inspecting Assistant Commissioner imposed a penalty for deliberate income concealment. The Tribunal held that the department had the onus to prove that the cash credits were concealed income. The Tribunal found that the alleged admission by the assessee regarding Rs. 70,388 being undisclosed income was made as an alternative argument due to difficulty in providing evidence. The High Court noted conflicting views in cases like Durga Timber Works v. CIT [1971] 79 ITR 63 (Delhi) and Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67 (Punj) regarding the department's duty when an admission is made by the assessee. However, the High Court emphasized that the department's duty was fulfilled as the assessee agreed to treat Rs. 70,388 as undisclosed income. The matter was remanded to the Tribunal to determine if the penalty could be retained only for this amount. The judgment was delivered by S. C. DEB, with agreement from DIPAK KUMAR SEN.
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