COMMISSIONER OF INCOME TAX Vs. KRISHNA AND CO

JUDGEMENT

(1.) IN pursuance of the directions of this Court under S. 256(2), the following questions have been referred :

(2.) A scrutiny of the entries regarding the borrowings and repayments showed certain discrepancies. Though the addresses of all those bankers were shown to be in Madras, the credits as well as the debits appeared in the books in Tuticorin on the same day. They were claimed to have been borrowed or repaid in Madras on the same day. The ITO went into the source of these credits. The assessee produced the discharged hundis. The ITO considered that the bankers had merely lent their names in what was known as "bogus hawala transactions" The assessee was informed of the proposal to treat the amount as income, and the assessee "readily agreed" to the assessment of the peak credit and the interest thereon. A sum of Rs. 47,700 was accordingly added in the assessment. There was no appeal against this order.

(3.) SEC . 271(1)(c) provides for the levy of penalty in a case where the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. In the present case, as seen already, as soon as the ITO noticed certain features about the entries as well as about the persons, the assessee agreed to the assessment of the peak credit. The agreement could only be on the basis that the amounts belonged to the assessee and that the amounts earned by it were brought in the form of cash credits in the names of strangers.