1982 (6) TMI 12

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....the case relates to the penalty levied under s. 271(1)(c) of the I.T. Act, 1961, relating to the assessment year 1964-65. The assessee is a registered firm stated to be engaged in the manufacture and sale of steam and hydraulic packings. It declared income of Rs. 55,721 in its P & L A/c, for the assessment year concerned 1964-65, corresponding to the previous year ending on 31st March, 1964. In the proceedings for assessment to tax, the ITO found credits in the accounts of four hundiwallas. The ITO held that, in the absence of satisfactory evidence, the assessee had agreed to the taking of the peak credit of Rs. 15,000 as its income from undisclosed sources, the ITO started penalty proceedings under s. 271(1)(c) read with s. 274(2) of th....

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....urga Timber Works [1971] 79 ITR 63. It further pointed out that before the AAC the assessee took the contention that the addition of the peak credits of hundi loans should be telescoped with the addition to the trading results and that there was a clear admission that the hundi loans represented income from business. The matter thereafter went to the Tribunal. The Tribunal deleted the penalty for the following reasons : " The assessee had filed an income of Rs. 55,720 and he was finally assessed on Rs. 77,713, i.e., after the AAC's order. There is a margin of more than 20% between the income returned and the income assessed and, therefore, the Explanation will apply. It is for the assessee, therefore, to prove that there was no fraud ....

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....e accounting year and it would naturally follow that the addition of Rs. 13,689 should be deemed to have accrued throughout the accounting year. Therefore, on probabilities, it appears that the hundi loans could not represent the trading account additions for the whole year. Therefore, the argument that it represents the business income cannot be accepted. It is true that the assessee has agreed for the addition but then, as many High Courts upheld, the agreement may be for so many reasons. We will, therefore, hold that it is not a fit case for the imposition of penalty. The order is cancelled." Upon these facts the question as indicated above has been referred to us. On behalf of the Revenue it was submitted that there was sufficient ev....