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