INCOME TAX OFFICER Vs. GIGGLES (P) LTD.

JUDGEMENT

(1.) THE revenue is in appeal challenging the action of the Commissioner (Appeals) in cancelling a penalty of Rs. 3,40,832 imposed on the respondent - assessed by the assessing officer under section 271(1)(c).

(2.) WE have heard both the parties and have also perused the orders passed by the tax authorities, both in respect of the penalty proceedings as also the quantum, the latter up to the order passed by the Tribunal. Before we proceed further, we would like to mention that the penalty under section 271(1)(c) has been imposed with reference to two items, the first being an addition on account of unexplained investment in stock amounting to Rs. 2,55,273 and the second being a disallowance of Rs. 1,99,171 on account of commission paid to the directors of the company and its manager. It is a matter of record that both the additions have been confirmed by the Tribunal. In the aforesaid background, the relevant facts pertaining to each of the additions are as under.

(3.) COMING to the first addition, there was a survey under section 133A at the business premises of the assessed at Delhi on 11 -3 -1987. In the course of the said survey the relevant details pertaining to the stock inventory were drawn -up as also the trading account on the date of the survey. A shortage of stock to the tune of Rs. 1,09,492 was noticed. Subsequently, while framing the assessment the assessing officer drew the trading account and found excess stock to the tune of Rs. 2,65,273 as per working at pp. 1 and 2 of the assessment order. The assessed was asked to explain the same.