Rastogi, J. - (1.) THE Income-tax Appellate Tribunal, Delhi Bench 'B' in compliance with the direction of this court dated May 6, 1976, has referred the following question of law for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the penalty ?"
(2.) THE assessment year involved is 1965-66. THE respondent-assessee, a private limited company, was engaged in the business of running a cold storage and manufacture and sale of kattha. For the aforesaid assessment year, the assessee filed its return showing an income of Rs. 1,74,613. During the course of the assessment proceedings the ITO found that the assessee had also purchased firewood trees at auction and that though transport charges in respect of firewood were debited in the accounts, the firewood transported from the jungle did not find a place in the books of account. On enquiry the assessee explained that it had consumed firewood in its boiler in the manufacture of kattha and part of the same was sold in the market for Rs. 28,624. Quantitative details of the firewood extracted and consumed in the manufacture of kattha were not available and hence the ITO estimated the assessee's consumption of firewood at Rs. 22,000 and estimated the excess firewood available for sale but not accounted for at 37,500 quintals. Taking the price of the firewood at Rs. 4 per quintal, the ITO made an addition of Rs. 1,50,000. On appeal, that addition was reduced to Rs. 1,06,000. From the order of the AAC appeals were filed, both by the Revenue and the assessee. The Tribunal required the assessee to furnish a comparative statement of firewood consumed by it in the manufacture of kattha in some of the previous years. The assessee could not do so and also conceded that the quantity of firewood purchased was not mentioned in the books. The same was the position regarding the recovery of firewood from the jungle. The Tribunal found that the assessee had taken firewood trees from the Government. It had extracted firewood. Its claim that the firewood recovered was not available for sale was not satisfactory and, therefore, there was no alternative except to hold that approximately 25,000 quintals of firewood had remained unaccounted for. The Tribunal considered it fair and reasonable to estimate the value of the same at Rs. 50,000. Apart from this, the ITO found cash deposits in various sets of accounts of the assessee. The details of these deposits were as under : JUDGEMENT_492_ITR146_1984Html1.htm
(3.) THE ITO did not accept the assessee's explanation in regard to these cash deposits and added back the entire amount to the assessee's income as income from undisclosed sources. THE AAC confirmed that addition. When the matter came in appeal before the Tribunal, the additions representing credits totalling Rs. 10,000 in the Bareilly set and Rs. 6,500 in the Asansol set were not pressed. As regards the credits appearing in the head office set, the assessee's explanation was that it had taken loans through one Chhaju Ram Sharma, an employee of Laxmiji Sugar Mills, and his affidavit was filed. THE Tribunal found that the affidavit was vague and, without any supporting evidence, was not reliable. Hence, the addition in regard to these deposits was confirmed. As regards the remaining deposits appearing in the Asansol set, the addition of Rs. 15,000 representing credit in the name of Lal Chand Ram Chand was not seriously disputed. About the other two credits appearing in the names of Banshidhar Shyam Lal and Hasnanand Jiwandass, the Tribunal has held that the assessee had discharged the onus and these deposits were genuine. In the 'result, the addition of Rs. 41,500 on account of unexplained deposits was confirmed. Since the income returned was less than eighty per cent, of the total income assessed, the ITO took action under Section 271(1)(c) read with the Explanation thereto of the I.T. Act, 1961, hereafter "the Act", and referred the case to the IAC. The IAC issued a show-cause notice to the assessee in reply to which it furnished an explanation. After considering that explanation the IAC held that the assessee was guilty of concealment of its income and imposed a penalty in the sum of Rs. 1,60,000 which was almost one and one-half times of the difference between the income returned and the income assessed.;