- (1.) This is an application under section 256(2) of the Income-Tax Act, 1961, filed by the Commissioner of Income-tax, Delhi-I, New Delhi, praying that the Income-tax Tribunal be required to state the case and refer the following question stated to arise out of the order of the said Tribunal, dated 4th February, 1975, in Income-tax Appeal No. 870 of 1972-73 relating to the assessment year 1965-66 :- "Whether on the facts and circumstances of the case the Tribunal was legally correct in holding that no penalty was leviable of the assessee company under the Explanation to section 271(1)(c) of the Income-tax Act, 1961 and thereby cancelling the penalty of Rs. 70,000/- imposed by the I.A.C.
(2.) The assessee is M/s. Hansraj Gupta & Co. (P) Ltd. It filed a return showing its income assessment Rs. 23,774/-. But, the Income-Tax Officer made several additions on account of (a) expenses claimed by the assessee assessment bad debts, repairs and travelling expenses (b) unexplained deposits amounting to Rs. 97,000/- and (c) interest on the said deposits amounting to Rs. 5,105/-. He assessed the total income at Rs. 2,96,688/-. He also took action under section 271(1)(c) of the Income-tax for concealment and furnishing inaccurate particulars of income and referred the case to the Inspecting Assistant Commissioner assessment the minimum penalty leviable exceeded Rs. 1,000/-.
(3.) The Inspecting Assistant Commissioner observed that the assessee company had not given any evidence to prove that certain cash credits amounting to Rs. 85,000/- and interest of Rs. 4,555/- thereon were genuine, that the only explanation furnished by the assessee was that the said cash credits (loans) were taken on hundis from Calcutta parties and no evidence could be produced about their genuineness on account of the disturbed conditions in Calcutta at the relevant time. In that view, the Inspecting Assistant Commissioner held that so far assessment the said cash credits of Rs. 85,000/- and the interest of Rs. 4,555/- are concerned, the assessee had offered no explanation to prove the nature and source of those credits, and that they have, therefore, been rightly treated as the assessees concealed income in view of the provision in the Explanation to Section 271(1)(c) of the Income-tax Act. In the result, he levied a penalty of Rs. 70,000/-.;