1978 (4) TMI 44

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.... on that view, cancelling the penalty order under section 271(1)(c) ? " The statement of the case relates to the assessment year 1964-65, the relevant accounting year ending on December 31, 1963. In the course of of the assessment proceedings the ITO found that there was a cash credit of Rs. 50,000. The assessee's case was that it was a loan from Berlia Cloth Stores which belonged to one Ramchandra Berlia. The I.T.O. was not satisfied with the genuineness of the loan and issued a summons under s. 131 on Shri Berlia and, as he was out of Calcutta, his employee, Shri Masudilal Agarwalla, gave evidence before the ITO. The evidence of Shri Masudilal Agarwalla is as follows: He was the sole employee of Mr. Berlia ; his salary was Rs. 150 p....

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.... the assessee and considering the materials on the record held that the loan was not genuine and the aforesaid amount was the assessee's concealed income from undisclosed sources. He also held that the assessee had deliberately filed an incorrect return and accordingly he imposed a penalty of Rs. 38,099. The assessee filed an appeal from the penalty order. The departmental representative argued before the Tribunal that the Explanation under s. 271(1)(c) of the Act was applicable in the instant case. The Explanation runs thus: "Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or....

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....een shown that this letter was not correct. The creditor's employee did attend but his evidence which is negative cannot be treated as conclusive as far as penalty proceedings are concerned. We are of the opinion that after the decision of their Lordships of the Supreme Court in [1970] 76 ITR 696 (CIT v. Anwar Ali) it has been clarified that only because an addition has been made to the income of the assessee, it would not justify the imposition of penalty. In our view the position would stand even after the introduction of the Explanation to section 271(1)(c)." Mr. N. K. Poddar, learned advocate for the assessee, argues before us that the case of the CIT v. Anwar Ali [1970] 76 ITR 696 (SC), relied on by the Tribunal, still holds the fie....