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Issues:
1. Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 for undisclosed income. 2. Applicability of the Explanation appended to section 271(1)(c) of the new Act regarding concealment of income. Analysis: The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, involving the imposition of a penalty on a Hindu undivided family for undisclosed income. The case involved an assessment order for the year 1951-52 under the old Act, where a total income of Rs. 1,38,284, including Rs. 1,00,000 from undisclosed sources, was assessed. The assessee failed to explain the nature and source of two sums of Rs. 50,000 each, leading to penalty proceedings under section 271(1)(c) of the new Act. The Tribunal set aside the penalty, prompting a reference on the legality of canceling the penalty. The two key questions raised were whether a penalty could be imposed under the new Act for an assessment made under the old Act and whether the Tribunal was justified in canceling the penalty. Regarding the first question, the Supreme Court precedent in Jain Brothers v. Union of India was cited, establishing that penalties under the new Act could be imposed for assessments under the old Act. The second question revolved around the surrender of Rs. 50,000 by the assessee, with conflicting statements initially disowning the credit but later surrendering it for assessment, subject to no penalty being imposed. The Tribunal found that the surrender was not voluntary but induced by discussions with the Income-tax Officer to avoid penalties. The Tribunal concluded that the charge of concealment was not proved, considering the circumstances of the surrender. The judgment also discussed the applicability of the Explanation to section 271(1)(c) of the new Act, which shifts the burden of proof to the assessee if income returned is less than assessed income. However, as this point was not raised before the Tribunal, it was deemed a new question and not considered in the judgment. Ultimately, the court ruled in favor of the assessee, stating that the Tribunal was justified in canceling the penalty based on the circumstances of the case. The court highlighted that the burden of proof regarding concealment was not met, given the nature of the surrender and discussions with tax authorities. The judgment emphasized the importance of voluntary admissions and the procedural complexities of applying the Explanation to concealment cases, which were not addressed in this instance.
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