COMMISSIONER OF INCOME TAX Vs. RIKABDAS CHAGANRAJ

JUDGEMENT

(1.) WE are clearly of opinion that the reference to this court at the instance of the Commissioner of Income-tax should be answered in favour of the assessee. WE are concerned with the assessment year 1958-59, the corresponding accounting year having ended on October 23, 1957. The assessee in the relevant year was a firm of partnership carrying on business at Madras. In the course of the assessment proceedings, four credit entries, two in November, 1956, one in February, 1957, and the last in March, 1957, were found entered in the accounts against certain named persons. On each of the corresponding dates of credits, the cash balance in the books was far less than them. The assessee's explanation was that the credits were received from certain businessmen from North India, who came to Madras for making purchases, and, while en route to Pondi-cherry, deposited the sum with the assessee for safe custody. But the assessee failed to furnish the address of the parties. Relying on this fact and the other that the cash balance on each of the dates on which there was credit entry was much less than the deposit received, the Income-tax Officer declined to accept the explanation offered by the assessee and added the sum of Rs. 7,000 as undisclosed income, that being the peak credit, taking into consideration the dates of the credit and the dates of the repayment. Proceedings under Section 28(1)(c) followed, which resulted in the levy of a penalty of Rs. 4,800. The Tribunal, disagreeing with the revenue, held that the penalty was not justified.

(2.) IN the circumstances, the following question was referred to this court :

(3.) WE are satisfied that in this case the Tribunal has directed itself properly in law in approaching the material on record and had rightly concluded that the penalty levied on the assessee was not justified.