R.R.Misra, J. - (1.) The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question of law for the opinion of this court: " Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in cancelling the penalty of Rs. 16,500 imposed by the Inspecting Assistant Commissioner under Section 271(1)(c)?"
(2.) The assessee is a Hindu undivided family. For the assessment year 1964-65, it derived income from business in foodgrains, cement and cloth. It had filed a return of income of Rs. 17,122. The Income-tax Officer completed the assessment under Section 143(3) of the Income-tax Act, 1961, hereinafter referred to as "the Act". Subsequently, however, the Income-tax Officer received information that the assessee had received various bank drafts in the names of its employees and one member of the Hindu undivided family, namely, Sri Ram, amounting to Rs. 1,07,733 and did not record the transactions in question in its account books. Consequently, he issued notice under Section 148 of the Act for the assessment year 1964-65. In response to this notice, the assessee filed a return showing the same income of Rs. 17,122 as originally returned by it. The contention of the assessee before the Income-tax Officer was that the amount received by the employees of the Hindu undivided family and one of the members, in fact, belonged to Sri Ram, in his individual capacity, and the said amount did not belong to the Hindu undivided family. The Income-tax Officer, however, did not believe the explanation furnished by the assessee-Hindu undivided family and by taking an initial investment made outside the books at Rs. 10,000 he calculated the profit on the same at Rs. 7,500 and thereby made an addition of Rs. 17,500 to the total income of the assessee-Hindu undivided family.
(3.) Since Sri Sriram had admitted before the Income-tax Officer that the amount of Rs. 1,07,733 belonged to him, in his individual capacity, and did not belong to the Hindu undivided family. The Income-tax Officer, acting on the basis of the aforesaid admission, also added the very same amount of Rs. 17,500 in the individual assessment of Sri Sriram. The result was that so far as the Income-tax Officer was concerned, he had assessed Sri Sriram on the aforesaid amount of Rs. 17,500 in his individual capacity and had also framed the assessment on the assessee-Hindu undivided family after including the said amount of Rs. 17,500.;