COMMISSIONER OF INCOME TAX Vs. CHANDRAKANT M TOLIA

JUDGEMENT

(1.) IN pursuance of the direction given by this Court, the Tribunal referred the following two questions for our opinion under s. 256(2) of the IT Act, 1961 (hereinafter referred to as "the Act") :

(2.) THESE tax cases relate to the asst. yrs. 1964-65 and 1965-66. The assessee (now deceased) was a partner in four firms, viz., (1) C. J. Sheth & Co., Madras; which was carrying on business as general merchants and in pharmaceuticals; (2) Rathod Trading Co., Madras; (3) Pacoda Metal Industries, and (4) C. J. Sheth & Co., Bangalore. Besides, he was also carrying on agency business and derived income by way of dividends, sitting fees, etc. He filed the return on 31st March, 1965, disclosing an income of Rs. 19,487 for the asst. yr. 1964-65. The assessment was completed on 12th March, 1969, on a total income of Rs. 1,26,511. In doing so, the ITO made an addition of Rs. 75,000 under the head "Other sources" representing the increase in the peak of the credits appearing in the names of various multani bankers in the books of the assessee. The ITO also disallowed Rs. 32,085 claimed to have been paid as interest by the assessee to the aforesaid multani bankers in determining the income under the head "Business". Such addition and disallowance were made on the ground that the assessee had not established the genuineness of the transactions evidenced by the credit entries in the names of the multani bankers and the entries relating to payment of interest.

(3.) HOWEVER, on appeal, the Tribunal, considering the various contentions raised by the assessee, came to the conclusion that there was no concealment on the part of the assessee so as to warrant penalty under s. 271(1)(c) of the Act for both the assessment years under consideration. Accordingly, the levy of penalty for the assessment years under consideration was cancelled.