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Validity of cancellation of penalty under section 28(1)(c) imposed on the assessee for undisclosed income source of Rs. 29,500 used for purchasing a house in 1951. Analysis: The High Court of Andhra Pradesh deliberated on the validity of cancelling the penalty imposed under section 28(1)(c) of the Indian Income-tax Act, 1922, on the assessee. The case revolved around the assessee, engaged in contract business, purchasing a house in 1951 for Rs. 29,500 in his minor son's name. The Income-tax Officer added this amount as income from undisclosed sources due to inconsistent explanations provided by the assessee. The Appellate Tribunal upheld this addition but later cancelled the penalty, prompting the reference to the High Court. The department argued that there was further material indicating the assessee's explanation was false, emphasizing a deficiency in cash as of April 1, 1951. However, the Tribunal clarified that except for the falsity of the explanations given by the assessee, there was no other evidence to prove the Rs. 29,500 was concealed income. The department contended that the multiple false explanations by the assessee warranted penalty, but the assessee relied on legal precedents emphasizing the department's onus to prove revenue nature. The High Court highlighted that penalty proceedings are penal, requiring positive evidence to establish concealed income. The court emphasized that mere false explanations, without additional evidence, do not justify penalty imposition. It was noted that the case differed from precedent due to multiple false explanations, but this did not alter the legal position. The court stressed the need for the department to prove, with positive evidence, that the disputed amount constituted income concealed by the assessee. The court referenced legal decisions to support its stance that repeated false explanations do not alone justify penalties without additional positive evidence. The court distinguished a relevant case where unreliable books and a pattern of concealing income justified penalty imposition. Ultimately, considering all facts and circumstances, the court concluded that there was no justification for imposing a penalty under section 28(1)(c) of the Act. In conclusion, the High Court ruled in favor of the assessee, holding that there was no basis for imposing the penalty. The court also criticized the Tribunal's unwarranted observation regarding the presentation of facts. The question was answered in the affirmative, favoring the assessee, with no order as to costs and a fixed advocate's fee.
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