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Issues:
1. Whether the Tribunal was right in canceling the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1968-69? Analysis: The judgment pertains to a case where the Income-tax Appellate Tribunal, Gauhati Bench, referred a question of law regarding the cancellation of a penalty under section 271(1)(c) of the Income-tax Act, 1961. The assessee, a firm engaged in the business of biris and other articles, initially filed a return showing an income of Rs. 38,200 for the assessment year 1968-69. Subsequently, it filed a revised return with an enhanced income of Rs. 46,992, along with explanations for the discrepancies in the account books. The Income-tax Officer made several additions to the income, leading to a total income of Rs. 77,590 and initiated penalty proceedings due to alleged concealment of income. The Inspecting Assistant Commissioner imposed a penalty of Rs. 50,000 under section 271(1)(c) of the Act, citing substantial concealment of income. The assessee appealed to the Tribunal, which overturned the penalty order. The Tribunal considered the additions made by the Income-tax Officer and assessed whether the penalty was sustainable under the Explanation to section 271(1)(c) of the Act, which places the burden on the assessee to prove the absence of fraud or negligence in reporting income. Regarding specific additions made by the Income-tax Officer, the Tribunal found that the omission of Rs. 10,000 in the biri account was a clerical error, not deliberate concealment. Similarly, the enhancement of income by Rs. 14,000 in the biri account was considered a case of under-valuation of closing stock, not concealment of sales. The Tribunal concluded that the penalty was not justified as the assessee had not acted with gross negligence or willful intent to conceal income. Ultimately, the Tribunal held that the Explanation to section 271(1)(c) was not applicable in this case, shifting the burden to the department to prove deliberate concealment or furnishing of inaccurate particulars of income, which it failed to do. Consequently, the Tribunal's decision to cancel the penalty was upheld by the High Court, ruling in favor of the assessee for the assessment year 1968-69. The judgment highlights the importance of proving fraudulent intent or gross negligence in imposing penalties under tax laws and underscores the burden on the department to establish deliberate concealment of income. In this case, the Tribunal's meticulous examination of the facts led to the cancellation of the penalty, emphasizing the need for concrete evidence to support allegations of tax evasion or concealment.
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