COMMISSIONER OF INCOME TAX Vs. K GOVINDARAJULU NAIDU

JUDGEMENT

(1.) AT the instance of the Revenue, under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the following two questions of law have been referred to this court for its opinion, in respect of the assessment year 1964-65."(1) Whether, on the facts and in the circumstances of the case and having regard to the Explanation to section 271(1)(c), the Appellate Tribunal was right in law in cancelling the penalty levied under section 271 (1) (c) for the assessment year 1964-65 ?(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding and had valid materials to hold that the assessee has not concealed his income for the assessment year 1964-65 ?" * The assessee had not been assessed to income-tax till the assessment year 1963-64. With effect from January 1, 1964, the assessee became partner of the firm, Messrs. Inden Bisellers, contributing a capital of Rs. 30, 000. On January 5, 1965, the assessee filed a return disclosing an income of Rs. 56, 306, made up of Rs. 58, 719 being the share income from the said firm, less Rs. 2, 413 being the interest on borrowals for the assessment year 1964-65.

(2.) THOUGH, initially, the return filed by the assessee was accepted, subsequently, the assessment was reopened by the issue of notice under section 148 of the Act and in response to that notice, the assessee filed a return disclosing an income of Rs. 92, 584 made up of Rs. 59, 484 being his share of profits in the firm as determined in the assessment of the firm and Rs. 33, 100 being the income under the head "Other sources". A letter was also sent by the assessee to the effect that he had borrowed Rs. 33, 100 from multani bankers by executing hundis for the purpose of contributing his share of capital in the firm and that the whereabouts of the multani bankers were not known, as they had left the place and, therefore, he was offering the amount covered by the borrowings for assessment under the head "Other sources".

(3.) THE reasoning of the Tribunal holding that the assessee had discharged the onus under the Explanation and that the Department had not established the concealment clearly discloses that the Tribunal had misdirected itself regarding the scope and effect of the Explanation. THE Tribunal, in our view, had dealt with the matter as if the Revenue had to establish that the explanation of the assessee was false and the amount represented by the addition was the concealed income of the assessee and there was no material in support thereof.