Section 271(1)(c)

What a section 271(1)(c) notice is

Penalty — Concealment (older years). Penalty proposed for concealing income or furnishing inaccurate particulars. It is a critical-severity notice in the penalty family under the Income Tax Act 1961.

If you ignore it: Penalty levied.

Time to reply: this notice type carries no standard period. The date is printed on the notice itself and you must read it off the document. Check whether the notice specifies WHICH limb is alleged — concealment or inaccurate particulars. A notice that does not strike out the inapplicable limb is a well-known ground of challenge. Flag this for the CA every time.

Under the Income Tax Act 2025: there is no direct successor. Inoperative from AY 2017-18, replaced by s.270A. Superseded before the 2025 Act, so there is no direct successor. Under s.536(2) of the 2025 Act, a proceeding for any tax year beginning before 1 April 2026 stays under the Income Tax Act 1961 from the notice through to the appeal — so a notice arriving today for an earlier year is a 1961 Act matter, whatever today's date is.

Section 271(1)(c) — the law in short

What the courts have decided on section 271(1)(c), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• PCIT v LG Electronics India Pvt Ltd Supreme CourtHelps department
  Is 20% of the disputed demand a fixed price for a stay, or can the officer take less?
  Less is possible. The CBDT Office Memoranda of 29 February 2016 and 31 July 2017 do not fetter the quasi-judicial discretion of the officer or the Commissioner, who may on the facts grant stay on a deposit of under 20%.
• CIT v SSA's Emerald Meadows Supreme CourtHelps taxpayer
  The penalty notice does not say whether I concealed income or filed inaccurate particulars. Does that matter?
  It does. A penalty notice that does not specify which limb is alleged is reported as defective — you cannot answer a charge that has not been made.
• CIT v Jai Laxmi Rice Mills Supreme CourtHelps taxpayer
  The assessment in which the s.271E satisfaction was recorded has been set aside. Can the penalty stand?
  No. The Supreme Court held that once the original assessment order was set aside, the satisfaction recorded in it for initiating penalty under s.271E did not survive, and a penalty imposed on the basis of that order could not be sustained.
• MAK Data P Ltd v CIT Supreme CourtHelps department
  You surrendered the amount to buy peace and avoid litigation. Does that stop the penalty?
  No. The statute does not recognise 'to avoid litigation' or 'to buy peace' as an explanation at all. A surrender made only after the department confronts you with documents is not voluntary, and the penalty stood.
• Price Waterhouse Coopers Pvt Ltd v CIT Supreme CourtHelps taxpayer
  You forgot to add back something your own audit report flagged. Is that concealment?
  No. It is a bona fide and inadvertent human error — a computation mistake, not concealment or inaccurate particulars. The audit report disclosed the item, so nothing was hidden, and the penalty was deleted.
• CIT v Reliance Petroproducts Pvt Ltd Supreme CourtHelps taxpayer
  The officer disallowed your claim. Does a disallowance automatically bring penalty with it?
  No. Section 271(1)(c) needs either concealment or particulars that are factually false. Where everything was disclosed truthfully and only the legal claim was untenable, there is nothing inaccurate — and no penalty.
• CIT v Atul Mohan Bindal Supreme CourtCuts both waysNo later treatment found
  Is penalty under s.271(1)(c) criminal, quasi-criminal or civil?
  Civil — a strict liability, so mens rea need not be established. But the conditions of the section must still be satisfied, and the matter was sent back to be reconsidered on that footing.
• Union of India v Rajasthan Spinning & Weaving Mills Supreme CourtCuts both ways
  After Dharmendra Textile, does penalty follow automatically from every default?
  No. Whether the penalty provision applies at all depends on the conditions expressly stated in it. Once it does apply, the authority loses discretion over the amount — but not before.
• Union of India v Dharmendra Textile Processors Supreme CourtHelps department
  Does the department have to prove you meant to conceal?
  No. Penalty under s.271(1)(c) is a civil liability enacted to remedy loss of revenue, and wilful concealment is not an essential ingredient. Prosecution under s.276C, which does need a mental element, stands on a different footing.
• CIT v Gold Coin Health Food P Ltd Supreme CourtHelps department
  My return declared a loss and even after the addition the assessed figure is still a loss. Can concealment penalty under section 271(1)(c) be levied when no tax is payable?
  Yes. A three-judge bench of the Supreme Court held that Explanation 4 to section 271(1)(c) is clarificatory and not substantive, so penalty was leviable even between 1 April 1976 and 1 April 2003 where the addition of concealed income merely reduced a returned loss and the assessed figure remained negative. Income in section 2(24) includes losses, as Harprasad had held, so the returned loss is no answer. The contrary view of a two-judge bench in Virtual Soft Systems Ltd v CIT was held not to be correct. The two assessees before the Court were spared, the Solicitor General having said the Department would not demand penalty from them.
• Sudarshan Silks & Sarees v CIT Supreme CourtHelps taxpayer
  The Tribunal cancelled my penalty on the facts. Can the High Court set that aside as perverse when no such question was ever referred to it?
  No. The Supreme Court set aside the Karnataka High Court's order and restored the orders of the Commissioner (Appeals) and the Tribunal cancelling penalty under section 271(1)(c). The Tribunal is the final court of fact. Its finding on facts can be examined by the High Court in reference jurisdiction only if a question is referred saying that the finding is perverse, in the sense that no reasonable person could have reached it. The question actually referred was only whether the Tribunal was right in upholding the cancellation of penalty. Perversity having been neither raised nor referred, the High Court was precluded from discussing it.
• Dilip N. Shroff v JCIT Supreme CourtHelps taxpayerPartly overruled — read this first
  Is a valuation you put on an asset 'inaccurate particulars' if the officer disagrees with it?
  No. 'Inaccurate' connotes a deliberate act or omission and 'particulars' means the details disclosed in the return. Furnishing an assessment or valuation is not by itself inaccurate particulars. But read the editor's note — this case was later overruled in part.
• T. Ashok Pai v CIT Supreme CourtHelps taxpayerPartly overruled — read this first
  My bank's tax department prepared my return and got it wrong. I corrected it by revised returns which were accepted. Can concealment penalty still be levied on me?
  Not on these facts. The Supreme Court set aside the Karnataka High Court's judgment and allowed the assessee's appeal. The Tribunal had found the assessee bona fide, the fault lying with the professional group at his bank that handled his tax affairs, and had held that penalty could not be sustained where the revised return was accepted and no penalty was levied by reference to the original return. The reference to the High Court was general and raised no question of perversity, and the existence of mens rea is essentially a question of fact for the Tribunal. The Court also held that concealment of income and furnishing inaccurate particulars carry different connotations.
• K.C. Builders v ACIT Supreme CourtHelps taxpayer
  The Tribunal cancelled my concealment penalty. Can the 276C prosecution still continue?
  No. Penalty under s.271(1)(c) and prosecution under s.276C rest on the same fact — concealment. Once the Tribunal, as the final fact-finding authority, holds there was no concealment and cancels the penalty, the substratum of the complaint disappears and quashing follows automatically.
• K.P. Madhusudhanan v CIT Supreme CourtHelps department
  Must the officer say in the notice that he is invoking Explanation 1?
  No. The Explanation is part of s.271 itself, so a notice under the section puts you on notice of the whole of it. No separate intimation that the Explanation is being applied is required.
• Prem Dass v ITO Supreme CourtHelps taxpayer
  The Tribunal cancelled my concealment penalty, but the prosecution under section 276C is still running. Does the penalty finding help me in the criminal court?
  Yes. The Supreme Court set aside the conviction and acquitted the appellant. Section 276C needs a wilful attempt to evade, which is a positive act that must be proved, and section 277 needs mens rea - that the person knew or believed the verification to be false, or did not believe it true. Neither can be made out from the presumption in section 132(4A) about seized books. The Court also held that the Tribunal's finding that this was a difference of opinion on estimates, not concealment, and the reduction of the penalty, could not be lost sight of, given the legislative intent in section 279(1A).
• CIT v Onkar Saran and Sons Supreme CourtHelps taxpayer
  I concealed income in my original return, and repeated the same figures in the return I filed after a section 148 notice. Which year's penalty law applies - the old one or the one in force when the later return went in?
  The law in force when the original return was filed. The Supreme Court dismissed the Revenue's appeals and held that where multiple returns are filed for a year, the law applicable to penalty proceedings is that in force on the date of the original return, if any. It is settled since Brij Mohan that penalty is governed by the law on the date of the offending return; the question was which return is the offending one. Since a penalty on reassessment can be quantified by reference to the income originally returned, the same return must also fix the date of the concealment.
• Chuharmal v CIT Supreme CourtHelps department
  Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
  You do. Title normally follows possession, and the principle in s.110 of the Evidence Act can be applied by taxing authorities even though the Act does not strictly govern them. Unexplained articles found in the assessee's possession were treated as his income under s.69A and the concealment penalty was confirmed.
• CIT v Mussadilal Ram Bharose Supreme CourtHelps taxpayerSuperseded by amendment
  My income was estimated at a higher profit rate after my books were rejected, so my return fell well short of the assessment. Does that by itself mean penalty for concealment?
  No. The Supreme Court held that the Explanation to section 271(1) raises a presumption, not a conclusion. Once the returned income falls below the stipulated proportion of the assessed income, the onus shifts to the assessee to show that the failure did not arise from fraud or gross or wilful neglect - but that onus is rebuttable. Where the fact-finding body, on relevant and cogent material, is satisfied that the assessee was not guilty and the Revenue leads no further evidence, no penalty follows. Whether the onus is discharged is a question of fact, and its answer raises no question of law.
• CIT v Orissa Corporation (P) Ltd Supreme CourtHelps taxpayer
  I gave the lenders' names, addresses and PAN and filed their confirmations, but I cannot produce them and the summonses came back unserved. Can the loans still be added under section 68?
  Not on these facts. The Supreme Court declined to disturb the Tribunal's finding that the assessee had discharged its burden. The assessee had given the names and addresses of the creditors, the Revenue knew they were income-tax assessees and had their index numbers on its own files, and beyond issuing summonses under section 131 at the assessee's request the Revenue did nothing - it never examined the creditors' sources to see whether they were creditworthy, and made no effort to pursue them. In those circumstances the assessee could do no more, and the Tribunal's conclusion was neither unreasonable, perverse nor without evidence.
• Anantharam Veerasinghaiah & Co v CIT Supreme CourtCuts both ways
  Additions were made to my book profits in earlier years. Can I use that money to explain a cash credit or an unexplained payment in a later year?
  You can put the argument, and the Supreme Court says it is a real argument, but it does not win by itself. The Court held that when an intangible addition is made to book profits in an assessment, the amount added is the undisclosed income of the assessee, is as much a part of his real income as the profits shown in his books, has the same concrete existence, and could be available to him just as the book profits could. Secret profits of an earlier year may therefore constitute a fund, concealed but real, from which he may later draw to meet expenditure or to introduce amounts into his books. The Court then put the limit on it in the same paragraph: it is quite another thing to say that any part of that fund must necessarily be regarded as the source of a later unexplained expenditure or cash credit, and the mere availability of such a fund cannot in all cases imply that no further secret profits were earned in the later year. All the facts and circumstances have to be looked at.
• Brij Mohan v CIT Supreme CourtHelps department
  The penalty provision was made harsher after my assessment year but before I filed the return. Which version applies to my concealment penalty?
  The one in force when you filed. The Supreme Court held that a penalty is imposed for the commission of a wrongful act, so it is the law operating on the date the wrongful act is committed that determines the penalty. Where the penalty is for concealment of particulars of income, the concealment occurs when the return is filed, and the law ruling on that date applies. It is wholly immaterial that the concealed income falls to be assessed for an earlier year. The substituted clause brought in by the Finance Act, 1968 therefore governed a return filed in April 1968.
• CIT v Khoday Eswarsa & Sons Supreme CourtHelps taxpayerNo later treatment found
  Additions were made to my income and confirmed on appeal. The penalty order simply relies on the reasons in the assessment. Is that enough to sustain a concealment penalty?
  No. The Supreme Court held that penalty proceedings are penal in character, so the Department must establish that the disputed receipt is the assessee's income, and must have before it, apart from the falsity of the assessee's explanation, cogent material or evidence from which it can be inferred that he consciously concealed particulars or deliberately furnished inaccurate ones. The original assessment order may be good evidence in the penalty proceedings, but penalty cannot be levied solely on the reasons given in it. Where the Tribunal cancels a penalty on findings of fact, no question of law arises and no reference can be directed.
• CIT v Anwar Ali Supreme CourtHelps taxpayerSuperseded by amendment
  My explanation for a cash deposit was rejected in the assessment and an addition was made — does that by itself mean penalty for concealment follows?
  No. The Supreme Court held that penalty proceedings are penal in character and separate from the assessment, so the department must prove that the disputed amount was in fact the assessee's income and that he consciously concealed it or deliberately furnished inaccurate particulars. A finding in the assessment that the explanation is false is good evidence but not conclusive. Where there was nothing beyond the falsity of the explanation, the penalty of Rs 66,000 on an unexplained deposit of Rs 87,000 could not stand and the Revenue's appeal was dismissed.
• Hindustan Steel Ltd v State of Orissa Supreme CourtCuts both waysPartly overruled — read this first
  Must penalty be imposed just because the law permits it?
  No. Penalty is discretionary and is not to be imposed merely because it is lawful to do so — and not at all for a technical or venial breach, or where the default flowed from a bona fide belief.
• ITO v M.K. Mohammed Kunhi Supreme CourtHelps taxpayer
  My appeal is pending before the Tribunal and recovery of the demand is going on. Can the Tribunal stay recovery when no section gives it that power?
  Yes. The Supreme Court held that the Tribunal has the power to stay recovery as incidental or ancillary to its appellate jurisdiction. No provision confers it expressly, and the statutory stay in section 220(6) is available only while an appeal is pending before the first appellate authority, not the Tribunal. But an express grant of statutory power carries by necessary implication the authority to use all reasonable means to make the grant effective, and the wide powers in section 254(1) carry with them everything incidental and necessary to make their exercise fully effective - including, in proper cases, orders preventing a successful appeal from being rendered nugatory.
• CIT v S.V. Angidi Chettiar Supreme CourtHelps department
  Our firm was dissolved before the penalty order was passed, and as a registered firm it pays no tax of its own. Can a concealment penalty still be levied on it?
  Yes. A Constitution Bench of the Supreme Court held that penalty could be imposed on the firm after its dissolution. The provision continuing assessment proceedings against a discontinued firm applies to registered firms as much as unregistered ones, and assessment there means more than computation - it takes in the procedure for declaring and imposing liability and the machinery for enforcing it. Liability to pay tax is not a condition precedent to penalty, as clause (b) shows, since penalty may be imposed for failing to comply with a notice even where there is no assessable income. Jurisdiction depends on the officer's satisfaction before the assessment proceedings conclude.
• PCIT v Colo Colour Private Limited High CourtHelps taxpayer
  The officer accepted my purchases but estimated a profit element on them because the sales tax department listed my suppliers as hawala dealers. Can he then levy concealment penalty on that estimate?
  No. The Bombay High Court dismissed the Revenue's appeal, holding that no substantial question of law arose. The Assessing Officer had himself recorded that the purchases were not in doubt, because without the material the corresponding sales could not have been made, and had merely estimated 12.5 per cent of the purchase price as the benefit, with one per cent for commission. Penalty under section 271(1)(c) cannot be founded on an addition made on estimate or guesswork. Having accepted the assessee's material for assessment as not amounting to concealment, the Department could not relabel the same material as concealment under the garb of penalty proceedings.
• PCIT v Praveen Sawhney High CourtHelps taxpayerNo later treatment found
  The Department says my search assessment is in time because it made a reference to a foreign tax authority and gets a year excluded under s.153B. The reference was for years the treaty did not cover. Does the exclusion still apply?
  No. Clause (ix) of the Explanation to s.153B excludes the time taken on a reference for exchange of information only where the reference is made in terms of the agreement under s.90 or s.90A. A request made outside what the treaty permitted is not such a reference, gives no exclusion, and the assessments were time-barred. Twenty-nine Revenue appeals were dismissed.
• Nirlon Ltd v Deputy Commissioner of Income Tax High CourtHelps taxpayerNo later treatment found
  They sanctioned prosecution and filed the complaint while my appeal was still pending before the Tribunal. Is the launch itself bad?
  The Bombay High Court held that it was, and quashed the complaint. The CBDT's own guidelines require a case under s.276C(1) to be processed for prosecution where the s.271(1)(c) penalty exceeding Rs 50,000 has been imposed AND confirmed by the Tribunal, and launching prosecution before that confirmation is contrary to instructions that bind the officers of the Revenue.
• Jindal Stainless Ltd v DCIT High CourtHelps taxpayer
  My appeal is pending. Can the department take my whole refund against the disputed demand, or only twenty per cent of it?
  Ordinarily only twenty per cent. Where an appeal against the demand is pending before the Commissioner (Appeals), the Board's Office Memorandum of 29 February 2016 as amended on 31 July 2017 permits adjustment of not more than twenty per cent of the disputed demand. Anything above that can be retained only if the case falls within the narrow exception in para 4B(a), and the department has to show that it does.
• PCIT v Jai Maa Jagdamba Flour Private Limited High CourtHelps taxpayer
  After a search on or after 1 July 2012, can the officer levy penalty under s.271(1)(c) instead of s.271AAB?
  No, not for the specified previous year. The Jharkhand High Court held that s.271AAB opens with a non obstante clause and excludes s.271(1)(c) where the undisclosed income relates to the specified previous year. Where the search was on 3 September 2014 the penalty, if any, had to be levied under s.271AAB, and because the assessee had admitted nothing in a s.132(4) statement and paid no tax on admitted income, the case fell under clause (c) of s.271AAB(1). The penalty actually levied under s.271(1)(c) could not stand. The Court also held it immaterial that no incriminating document had been found, because the statute keys the choice of section to the date of the search.
• PCIT v Sri Venkatesh Granites Pvt Ltd High CourtHelps taxpayerNo later treatment found
  The s.271AAB penalty order never says which limb of the definition of undisclosed income is satisfied. Can the penalty survive?
  No. The Tribunal held that the Assessing Officer's penalty order had nowhere specified whether the alleged undisclosed income satisfied the statutory parameters in the Explanation to s.271AAB, and cancelled the penalty for that reason alone. The Telangana High Court agreed and concurred that the penalty, whether at 30 per cent or at the 10 per cent the CIT (Appeals) had substituted, could not be sustained, and held that no question of law arose.
• Anil Kumar Malhotra v Union of India High CourtHelps departmentNo later treatment found
  My stay application was rejected on the 20% ground while my appeal is pending. Can I go straight to the High Court under Article 226 saying the assessment breached natural justice?
  This Court said no. Having already filed the statutory appeal, the assessee cannot simultaneously attack the assessment order in writ under the guise of challenging the rejection of his stay application; that is resort to two forums at once. The remedy against the rejection is the review route in clause 4(C) of the Office Memorandum dated 29.02.2016 read with a revision under s.264, and the writ petitions were dismissed with liberty to take that route.
• Mohd. Farhan A. Shaikh v ACIT (Full Bench) High CourtHelps taxpayer
  Bombay had two conflicting lines on defective penalty notices. Which one won?
  The assessee's. A Full Bench held that the grounds must be conveyed through the statutory notice, that an omnibus notice suffers from the vice of vagueness, and that non-striking of the irrelevant portion renders the penalty order bad in law.
• Vodafone India Services Pvt Ltd v Union of India (Gujarat) High CourtHelps taxpayerNo later treatment found
  The AO rejected my stay application in a few lines and told me to pay 20%. Can that order stand?
  No. An order under s.220(6) that brushes aside the assessee's submissions and mechanically directs payment of 20% is not a speaking order and will be quashed. The Gujarat High Court also held that a penalty demand is not 'tax', so the CBDT's 20% benchmark and the parameters that govern a tax demand do not simply carry across to a penalty appeal.
• Smt Tharakumari v ITO High CourtHelps department
  The officer refused me cross-examination of the person whose statement he used. Does that alone get the addition deleted?
  Not by itself, and this case shows why. The assessee's counsel argued in the Madras High Court that she had been denied the opportunity to cross-examine Shri Deepak Patwari, on whose sworn statement before the Investigation Wing the addition rested. The Court did not reject the principle. It dismissed the appeal because she had not co-operated in the assessment, had not appeared before the CIT(A) on any of five hearing dates, and had put no evidence on record to show that the statement was wrong or to explain how she came to identify and sell the scrip. The concurrent findings that the transaction was sham and taxable under s.68 were therefore not perverse.
• Sundaram Finance Ltd v ACIT High CourtHelps departmentNo later treatment found
  The notice did not specify the default, but you clearly understood it. Does the defect still help you?
  In Madras, no. The assessee had understood the purport and import of the notice, and claiming depreciation on machinery that did not exist was inaccurate particulars. The penalty was upheld.
• PCIT v Ritu Singal High CourtHelps departmentHigh Courts differ
  I told the search party the money was my unaccounted income. Is that enough to escape s.271AAA penalty?
  No, not by itself. The Delhi High Court held that all three conditions in s.271AAA(2) must be fulfilled before the escape route opens. The assessee had said the amounts advanced were her unaccounted income for the year, but did not specify how she had derived that income or what head it fell under - rent, capital gain, professional income, business income out of money lending, or the source of the money. Unless such facts are given with some specificity the requirement of substantiating the manner is not met. The appellate authorities had misdirected themselves and the penalty was restored.
• PCIT v Sandeep Chandak High CourtHelps departmentNo later treatment found
  The s.271AAB penalty notice came on the printed s.274 read with s.271 form. Does that by itself kill the penalty?
  Not on these facts. The Allahabad High Court looked past the caption to the body of the notice, which told the assessee that proceedings under s.271AAB were being taken and that his reply would be considered before any order was made under s.271AAB. Because the officer had never initiated any s.271(1)(c) proceeding in the s.143(3) assessment, and because the assessee's own reply showed he had understood the notice as a s.271AAB notice, the Court held the initiation was in accordance with law and restored the penalties the Tribunal had cancelled.
• PCIT v Mukeshbhai Ramanlal Prajapati High CourtHelps taxpayerHigh Courts differ
  The officer never asked me how I earned the surrendered income. Can he still levy s.271AAA penalty because I did not substantiate the manner?
  No. The Gujarat High Court held that the requirement in s.271AAA(2)(ii) to substantiate the manner in which the undisclosed income was derived is consequential to, or a corollary of, the base requirement in clause (i) to specify that manner in the s.132(4) statement. The duty to substantiate begins only when the officer recording the statement elicits a response on the point. Where the Revenue failed to question the assessee at all about how the income was derived, it cannot jump to the later requirement, and when the base requirement itself fails the question of denying the immunity does not arise. The Tax Appeal was dismissed and the deletion of the penalty stood.
• PCIT v Neeraj Jindal High CourtHelps taxpayer
  After a search I filed higher income in my section 153A return and the officer accepted it. Can he levy concealment penalty just because the figure went up?
  No, not by itself. The Delhi High Court held that once the assessing officer accepts a return filed under section 153A, that return takes the place of the original return under section 139 for all purposes, including penalty, and penalty under section 271(1)(c) can only be on income assessed over and above the income returned under section 153A. A mere increase over the original return, without incriminating evidence, does not show concealment. Explanation 5 could not be invoked either, because no assets relating to assessment years 2005-06 and 2006-07 were found; the cash was found in the year of search. The Revenue's four appeals were dismissed.
• CIT v Manjunatha Cotton and Ginning Factory High CourtHelps taxpayer
  Your penalty notice keeps both limbs and strikes off neither. Does that make it bad?
  Yes. Concealment and inaccurate particulars are different charges. A printed form that retains every ground shows non-application of mind, denies you the chance to answer the actual charge, and makes the proceedings bad in law.
• Rajendra Kumar Dwivedi v CIT, Kanpur High CourtHelps department
  I sold my agricultural land in small plots over several years, leaving roads and drains. The Assessing Officer has taxed part as business income and part as capital gains and invoked s.45(2). Can he split it like that?
  Yes, on facts like these. The Allahabad High Court upheld a finding that land held in an urban area as a capital asset, carved into 43 plots of 60 to 1,815 sq. mtrs. and sold over seven years with roads and drainage provided, had been converted into stock-in-trade, so that s.45(2) applied and the profits on sale were business income. Both substantial questions were decided in favour of the Revenue and the appeals were dismissed.
• CIT v Mohair Investment & Trading Co High CourtHelps departmentSuperseded by amendment
  The CIT(A) order came two years ago but the appeal is still in the Tribunal. Is the penalty already time-barred?
  No. The proviso to s.275(1)(a) does not take away the six months the officer gets from the end of the month in which the Tribunal's order is received. Where successive appeals are filed, the clock in the main limb runs from the final appellate order; the proviso's one-year period from the end of the financial year of receipt of the CIT(A)'s order is an exception for cases that stop at the CIT(A).
• CIT v Oasis Hospitalities (P) Ltd High CourtCuts both ways
  What exactly do I have to file to discharge my onus on share application money under section 68, and what happens once I have filed it?
  It depends on what you can produce. The Delhi High Court set out the initial onus as three ingredients — identity of the shareholder, genuineness of the transaction and creditworthiness of the shareholder — and held that for a corporate subscriber, PAN, acknowledgement of the return, the bank statement for the relevant period and confirmations discharge it. Once they are filed the onus shifts to the Assessing Officer, who must have cogent material and cannot act on suspicion. But where the assessee produces only names and the persons produced are shown to have no capacity, the onus is not discharged. Three appeals went for the assessees and one against.
• CIT v Nalwa Sons Investments Ltd High CourtHelps taxpayerSuperseded by amendment
  My company was finally assessed on book profit under section 115JB. Can the officer still levy concealment penalty on a disallowance he made in the normal computation?
  No. The Delhi High Court held that where the assessment is finally made on book profit under section 115JB because that figure is higher, a disallowance in the normal computation produces no additional tax and so there is no amount of tax sought to be evaded within Explanation 4 to section 271(1)(c). The Court accepted that the assessee had made a false claim of depreciation on machinery it could not show it had used, and it disagreed with the reasons the Commissioner (Appeals) and the Tribunal had given. It still upheld the deletion of penalty, because the concealment had no role to play once tax was charged on book profit.
• CIT v Zoom Communication Pvt Ltd High CourtHelps department
  I forgot to add back income tax and a written-off asset in my computation, but everything was there in the accounts. Reliance Petroproducts protects me from penalty, doesn't it?
  No, not on these facts. The Delhi High Court restored penalty under section 271(1)(c) on a company that had debited income tax paid and equipment written off to its profit and loss account and failed to add them back. Reliance Petroproducts protects a claim that is merely unsustainable in law where the facts are disclosed and the explanation is bona fide. Here the claims had no legal basis at all - section 40(a)(ii) barred one outright and section 32(1)(iii) had no application to the other - and the only explanation offered was oversight, with nothing said about whose oversight or how it survived audit.
• CIT v Aero Traders (P) Ltd High CourtHelps taxpayer
  My books were rejected and the Assessing Officer estimated my profit. Can he then levy concealment penalty under section 271(1)(c) on that estimated addition?
  No, on these facts. The Delhi High Court dismissed the Revenue's appeal against deletion of a Rs.36.41 lakh penalty. The Commissioner (Appeals) and the Tribunal had held that where the addition rests on an estimated rate of profit applied to turnover, and the Assessing Officer could point to no specific item of addition supported by conclusive evidence, there is no concealment or furnishing of inaccurate particulars. The High Court held that was purely a finding of fact, no perversity had been shown, and no substantial question of law arose. It was also relevant that the assessee's books were with the police, not withheld by it.
• Madhushree Gupta v Union of India High CourtCuts both ways
  The Assessing Officer just wrote "initiate penalty proceedings under section 271(1)(c)" at the foot of the assessment order. Section 271(1B) now says that is enough. Can I still challenge it?
  The provision survives, but the Delhi High Court read it consistently with Article 14 rather than at face value. Section 271(1B), inserted by the Finance Act 2008 with retrospective effect from 1 April 1989, deems a direction to initiate penalty proceedings in an assessment order to be satisfaction for section 271(1)(c). The petitioners said this legislatively presumes away a jurisdictional fact the Assessing Officer must find for himself. The Court did not strike the provision down; it said it had applied the settled principles by reading the amended provision so as to be in consonance with the safeguards contained in Article 14. The Revenue accepted that it does not reopen assessments that have already become final.
• CIT v Mahendra C. Shah High CourtHelps taxpayer
  I declared the seized assets in my section 132(4) statement but nobody asked me how I earned the money, and I paid the tax only with a revised return. Do I lose the Explanation 5 immunity?
  No. The Gujarat High Court held that the assessee had complied with the second exception to Explanation 5 and cancelled the penalty. Where the authorised officer does not ask how the undisclosed income was derived, the assessee cannot be denied immunity because the statement does not say so; the officer is bound to explain Explanation 5 in full and cannot stop short so that the Revenue may take advantage of the lapse. As for payment, the provision fixes no time for paying the tax and interest, and it is enough that payment is shown before the assessment is completed. Disclosure in the return itself is not what the exception turns on.
• CIT v Kaushalya High CourtCuts both waysPartly overruled — read this first
  Is a defective s.274 notice always fatal?
  On this view, no. Section 274 prescribes no particular form, and a mistake in language or a failure to strike out the inapplicable limb does not by itself invalidate the notice — you must show you were actually prejudiced.
• CIT v S. P. Viz Construction Co. (No. 1) High CourtHelps taxpayer
  A different Assessing Officer finished my assessment from where the last one left off, without offering me a rehearing. Does s.129 give me a right he was bound to offer?
  The right under the proviso to s.129 is a right to demand — the successor officer may continue the proceeding from the stage at which his predecessor left it, and where no demand for reopening or rehearing is made he is not obliged to wait. The practical consequence runs the other way too: because the extension of limitation is tied to that demand, an officer who was never asked for a rehearing cannot claim the time he spent waiting.
• Rukmani Wires Pvt Ltd v DCIT (ITAT Delhi) — where the buy-back price is BELOW the issue price there is no "distributed income", so s.115QA cannot apply and s.10(34A) cannot be used to deny the shareholder's capital loss ITATHelps taxpayer
  My client's shares were bought back at less than the price the company issued them at, so it made a loss. The Assessing Officer says buy-back income is exempt under section 10(34A), so the loss cannot be carried forward — and he has levied concealment penalty. Is the loss really lost?
  On a buy-back before 1 October 2024, which is the regime this order is about, the ITAT Delhi held that where the buy-back consideration is lower than the price at which the company issued the shares there is no "distributed income", so s.115QA "per se cannot be applied", and that s.10(34A) — which exempts income on a buy-back "as referred to in section 115QA" — "also consequentially would not have any application". The very basis on which the officer had denied the carry-forward of the long-term capital loss was therefore "legally incorrect". Because the denial of the loss was itself unsustainable, no penalty for furnishing inaccurate particulars could stand on it, and in any event the claim was at worst an incorrect claim on a question of interpretation with all the figures already on the record; the s.271(1)(c) penalty of Rs.57,98,464 was directed to be deleted.
• Haresh Ghanshyamdas Makhija v ITO ITATHelps taxpayer
  They already penalised me under 271A for keeping no books. Can they levy 271B on top?
  No. Once penalty has been levied under s.271A for non-maintenance of books, a further penalty under s.271B for failure to audit those books cannot stand — the department cannot assert a failure to audit books it has itself found not to exist. The same consolidated order deletes a separate concealment penalty under s.271(1)(c) on the footing that the officer accepted the return and assessed the identical income, so there was nothing concealed.
• Harshadbhai Dahyalal Vaidhya (HUF) v ITO — the relative exclusion is available to an HUF donee, tested against the relationships of its member ITATHelps taxpayerNo later treatment found
  A gift was made to my client's HUF by the karta's paternal uncle. The Explanation defines 'relative' only for an individual. Can the department tax it in the HUF's hands?
  The Ahmedabad Bench held not. The charging clause operates on an individual and on an HUF alike, so the proviso exempting a sum received from a relative must govern both; the definition in the Explanation is then applied to test the donor's relationship, and a gift to an HUF from the brother of a parent of its member falls within item (iv) of that definition. The appeal was allowed.
• Vinitkumar Raghavjibhai Bhalodia v ITO — a gift by an HUF to its member is a gift from 'relatives', and is in any event exempt under section 10(2) ITATHelps taxpayer
  My client received Rs 60 lakh from his own HUF. The Assessing Officer says an HUF is not a 'relative' in the Explanation, so it is taxable. What is the answer?
  There are two answers and the Rajkot Bench gave both. First, an HUF is not a body of individuals but 'a group of relatives' — every person who composes it falls within the Explanation's list — so a gift from the HUF to a member is a gift from relatives and is outside the charge. Second and independently, a sum received by a member out of the income of the family is exempt under section 10(2), which requires only that he is a member and that the sum came out of the income of the family.
• Statutory position — s.115G: no return need be furnished where the only income is investment income or long-term capital gains and tax has been deducted at source CBDT Circulars & InstructionsCuts both ways
  My NRI client's only Indian income for the year was interest on debentures of an Indian public company subscribed to in foreign exchange, and the company deducted tax at source. He did not file a return and has now had a notice. Was he obliged to file?
  If both conditions in section 115G are satisfied, no. It is not necessary for a non-resident Indian to furnish a return under section 139(1) if his total income assessable under the Act during the previous year consisted ONLY of investment income or long-term capital gains or both, AND the tax deductible at source under Chapter XVII-B has been deducted from that income.
• Virtual Soft Systems Ltd v CIT Supreme CourtHelps taxpayerOverruled
  My assessment ended in a loss, only a smaller loss than I returned. Can concealment penalty under section 271(1)(c) still be levied for a year before April 2003?
  No, for years before the Finance Act 2002 amendment took effect. The Supreme Court allowed the assessees' appeals and set aside the Delhi High Court. It held that as Explanation 4 to section 271(1)(c) stood before that amendment, both clause (a) and clause (c) presupposed a positive assessed income on which tax was payable; the only difference was whether the return itself showed a loss or a profit. The existence of a liability to pay tax was a condition precedent to penalty, and it was the Finance Act 2002, with effect from 1 April 2003, that first removed it. That amendment is substantive and prospective, so penalty could not be levied where the assessment ended in a loss.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.