- (1.) The High Court answered in the negative and in favour of the Revenue the following questions : "1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact, in deleting the penalty levied under S. 271(1)(c) of the I.-T. Act 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact, in holding that this is an agreed assessment on the basis of which penalty is not leviable 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and facts, in holding that penalty cannot be levied as the Assessing Officer in the proposal under S. 271(1)(c) had not referred to Explanation (1B) to S. 271(1)(c) - The assessee is in appeal by special leave.
(2.) For the assessment year 1986-87 the assessee, which is a partnership firm, filed a return of income which stated that its total income was Rs. 6,76,890/-. The assessment was completed determining the total income of the assessee at Rs. 7,90,170/-. This included a sum of Rs. 93,000/- assessed as income from other sources.
(3.) The assessee purchased rice from suppliers in Andhra Pradesh. The rice was some times sent directly and payment therefor was made by demand draft or telegraphic transfer. During the course of the assessment proceedings the Assessing Officer noticed that a demand draft and a telegraphic transfer were not entered by the assessee in its cash book on the dates on which the same were purchased and made, respectively. A demand draft of Rs. 50,000/- had been purchased on 27th January, 1986 in favour of M/s. Sree Jayalaxmi Enterprises, Byravapatanam, Andhra Pradesh, but, in the assessee's accounts, this amount was entered only on 4th February, 1986. The assessee had made a telegraphic transfer through the Andhra Bank, Calicut on 24th March, 1986 to Madavenkataratanam and others, Bhimavaram, Andhra Pradesh; this transaction again was entered only on 24th April, 1986, when these were pointed out to the assessee, it submitted a letter dated 28th August, 1989 stating that as sufficient cash balance was not available to it on the dates of the transactions, it had obtained hand loans from friends and, as it expected to repay such loans within a short time, no entries were made in the books of accounts in respect thereof. The letter also stated that since it was unable to furnish evidence for such loans, it offered the amount of Rs. 93,000/- as additional income. The assessment was accordingly made treating the sum of Rs. 93,000/- as unexplained investment.;