COMMISSIONER OF INCOME TAX Vs. MATA PRASAD

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of this Court :

(2.) The reference relates to the assessment year 1973-74.

(3.) Briefly stated the facts involved in the present case are as under : The reference relates to the assessment year in question in respect of penalty imposed under Section 271(1)(c) of the Act. The respondent is a money-lender and he derived income from the pawning business. The Income-tax Department conducted a search on December 10, 1974. The respondent filed a return of income declaring an income of Rs. 7,500 which was subsequently revised on March 25, 1976, disclosing an income of Rs. 12,750 which included Rs. 250 as income from property and Rs. 5,000 being the income disclosed under the voluntary disclosure scheme. The Income-tax Officer had made assessment of income of Rs. 92,940 which was reduced by the Tribunal to Rs. 55,250. While doing so the unexplained investment in the business was taken by the Tribunal at Rs. 38,000. The Income-tax Officer initiated proceedings under Section 271(1)(c) of the Act and imposed penalty of Rs. 42,500. The penalty was imposed on the ground of unexplained investment of Rs. 38,000 and investment in the money-lending business of Rs. 4,500. The penalty was also confirmed by the Commissioner of Income-tax (Appeals). In further appeal the Tribunal has deleted the amount on the ground that in business the credits rotated over a period of 2 to 3 months. On this the Tribunal held that the assessee was able to explain the source of Rs. 37,000 out of the investment and it was only the balance of Rs. 38,000 which remained unexplained. Therefore no penalty was leviable.