TMI Blog1978 (11) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) of the I.T. Act, 1961 ? " In order to appreciate the scope of the reference, it is necessary to refer to the material facts that gave rise to the aforesaid question : The assessee, M/s. Sohinder Singh and Brothers, Jullundur, is a registered firm carrying on business in the manufacture and sale of pipe fittings and resale of ready-made goods on wholesale basis. During the course of the examination of accounts for the assessment year 1964-65, relevant to the accounting period ending March 31, 1964, the ITO while examining the correctness of the closing stock shown by the assessee with reference to the overdraft obtained by pledging the stock with the bank, found that there was a huge discrepancy between the value of the closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal, which was dismissed. Hence this reference. Mr. Ved Vyas, learned counsel appearing on behalf of the assessee, argued that the assesee agreed to the addition of Rs. 23,054 in the total income only for the purposes of assessment in order to earn peace of mind and avoid litigation and that it cannot be considered as its concealed income. He further argued that in order to avoid litigation for the year under consideration it was thought advisable by the assessee to agree to the aforesaid addition in his total income, as in the preceding year a penalty of Rs. 12,000 was also imposed by the IAC and he got the necessary relief from the Tribunal. His further contention is that mere surrender of certain amount for assessment purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the assessee cannot be penalised. This penalty provision is quasi-criminal in nature and its purpose is that the assessees should file correct returns of income and should not conceal any income, and if any assessee deliberately conceals the income then he is to be penalised under the aforesaid provision. For initiating penalty proceedings under s. 271 (1)(c), the ITO after inquiry, has to give a clear finding that a definite amount had been concealed by the assessee. But, where there is no material before the ITO to give a definite finding and he did not probe into the matter on the basis of the offer made by the assessee, the assessee cannot be penalised and the offer of the assessee to add a certain amount in his total income for asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that he was not in a position to prove the genuineness of those entries and made a statement, " surrendering squared up account of Rs. 12,000 in the name of Messrs. Ramesh Trading Company." The assessee was then assessed on an income of Rs. 65,046, which included the amount of Rs. 12,000, as against the returned income of Rs. 46,446. Assessment was followed by penalty proceedings under s. 271(1)(c) of the Act and a penalty of Rs. 6,768 at 50 per cent. of the tax sought to be evaded was levied by the IAC. On appeal, the Tribunal maintained the order levying penalty but reduced the quantum to 1/3rd of the tax evaded. On a reference made to this court, their Lordships of the Division Bench held as under : " In the present case the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the ground that in the present case the assessee himself has agreed that the sum of Rs. 23,054 was his income, whereas in Gumani Ram Siri Ram's case [1972] 85 ITR 67 (Punj) there was no such admission. I am unable to agree with the distinction made by the IAC and the Tribunal. In Gumani Ram Siri Ram's case also, as observed earlier, the assessee had made an admission. There is no difference between the surrender of squared up account of Rs. 12,000 and to add the amount of Rs. 23,054 in the trading account. This erroneous conclusion has been arrived at by the IAC and the Tribunal on the basis of a note on the face of the return agreeing to an addition of Rs.23,054 which was duly signed by the assessee. But that writing, as I have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed amount to be his income and the admission of the assessee is proved by the department during penalty proceedings, the onus on the department is discharged. In that situation the assessee is put to proof and it is open to the assessee to prove in the penalty proceedings that the admission made by him during the course of assessment proceedings was wrongly or illegally made or was incorrect. He can lead evidence during penalty proceedings to show that he had not concealed any income or furnished inaccurate particulars thereof. If he fails to prove this, the income-tax department would be justified in levying penalty on him under section 271(1)(c). " I am in perfect agreement with these observations of their Lordships. But in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X
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