COMMISSIONER OF INCOME TAX Vs. JAMNADAS AND COMPANY

JUDGEMENT

(1.) THE present reference under S. 256(1) of the IT Act raises the following questions for our opinion :

(2.) THE assessee being a registered partnership firm, was engaged in the business of cotton, cotton seeds, etc. and for the asst. year 1972 73 it had returned an income of Rs. 1,31,460. The business premises of the assessee were searched by the ST authorities and on the basis of certain documents discovered and seized, and which came to the attention of the ITO, it was discovered that the assessee was engaged in transactions which were not reflected in the regular books of account. Therefore, certain additions were made to the income returned by the assessee. In the present reference we are concerned only with the addition in respect of cash credit entries for which no evidence was offered by the assessee as regards their genuineness. This amount of addition was originally Rs. 1,22,500, which was reduced by the AAC in an appeal by the assessee to Rs. 77,500.

(3.) THE IAC imposed a penalty of Rs. 80,000 which was challenged by the assessee in appeal before the Tribunal. The Tribunal came to the conclusion that in the instant case the returned income did not fall short of 80% of the correct income and, therefore, the Explanation below cl. (c) of sub s. (1) of S. 271 of the Act (as in force at the relevant time) was not attracted. Hence the present reference by the Revenue.