- (1.) THE Income-tax Appellate Tribunal (Allahabad Bench) referred the following question relating to the assessment year 1969-70 for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in cancelling the penalty of Rs. 31,477 imposed by the Inspecting Assistant Commissioner under Section 271(1)(c) ?"
(2.) THE facts, briefly, are that the assessee, an unregistered firm engaged in the business of cold storage and manufacture of ice, filed a return showing a loss of Rs. 2,207 for the assessment year 1969-70. However, during the course of assessment proceedings, the following additions were made : JUDGEMENT_131_ITR219_1996Html1.htm These additions were sustained in appeal. While making the assessment, penalty proceedings were initiated under Section 271(1)(c) of the Income-tax Act, 1961 (for short, "the Act").
(3.) BEFORE the Income-tax Officer, the argument was that even if the explanation offered by the assessee in respect of cash credits is not supported by satisfactory evidence, it cannot be concluded that the assessee concealed the particulars of its income. Further argument was that the mere fact that the explanation of the assessee regarding the source and nature of cash credits appearing in the books has been rejected by the Income-tax Officer, would not in all cases, be sufficient material to come to the conclusion that the assessee has concealed the particulars of his income. These arguments proceeded on the basis of the rule laid down in CIT v. Anwar Ali [1970] 76 ITR 696 (SC), inter alia. The Income-tax Officer relying upon the Explanation to Section 271(1)(c) of the Act held that the total income returned by the assessee being less than 80 per cent, of the assessed income the assessee shall be deemed to have concealed the particulars of its income or furnished inaccurate particulars of such income for the purpose of Clause (c). He also held that the assessee failed to prove that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on its part. Such conclusion of the Inspecting Assistant Commissioner was based on the following observations : " Perusal of income-tax records of Sarder Malik Singh '(one of the partners in the assessee-firm)' for the assessment year 1969-70 shows cash credits to the tune of Rs. 20,435 appearing in his capital account, which he could not prove by any evidence whatsoever. Therefore, these cash credits were added as income from other sources of the assessee and treated as concealed income in his case. In the case of Sardar Harbans Singh, the other partner of the firm also, for the assessment year 1969-70 cash credits of Rs. 2,000 appeared in his capital account. The assessee could not offer any explanation regarding the nature and source of this deposit either before the Income-tax Officer or at the appellate stage. It is thus seen that appearance of unexplained cash credits in the case of the firm as well as the partners, mentioned above, is a common feature of this group. The assessee has failed to offer any evidence to prove the genuineness of the cash credits. The only conclusion, therefore, that can be drawn in this case is that the cash credit of Rs. 9,300 represents the concealed income of the assessee. . . . I further hold that wrong deductions and debits made by the assessee to the profit and loss account, document to furnishing of inaccurate particulars of income." ;