COMMISSIONER OF INCOME TAX Vs. RAIZALLY ABIDALLY

JUDGEMENT

(1.) WE are concerned in this reference under S. 256(1) of the IT Act 1961, with the asst. year 1966 67. The assessee is the proprietor of M/s Central Bakery. He had been assessed to income tax from 1950 onwards but had not produced any books of account. In the course of the assessment proceedings for the asst. year 1966 67, the assessee produced before the ITO a cash book and ledger. The ITO found that the books produced were not genuine and had been written up only to explain away investments made by the assessee of about rupees two lakhs. In the account books, the assessee had shown a cash credit of Rs. 40,000 as withdrawn from the "Tijori", in driblets of Rs. 10,000 each on December 2, 1964, December 22, 1964, February 28, 1965 and October 22, 1966. The ITO called upon the assessee to explain the source from which he became possessed of cash to the extent of Rs. 40,000. The assessee replied by letters dated January 5, 1970 and October 22, 1970, and pointed out that the cash came from his savings from business income earned by him since 1946 and that as he was an illiterate person, he had kept this amount in his safe. The ITO allowed a sum of Rs. 10,000 as coming from past savings but added the balance of Rs. 30,000 to the total income of the assessee as income from an undisclosed source. The ITO also estimated the assessee's income from business at Rs. 20,000 as against Rs. 16,312 declared by the assessee. On January 23, 1971, the ITO thus determined the total income of the assessee at Rs. 50,000. The assessee disputed the addition of Rs. 30,000 in appeals before the AAC and the Tribunal, both of which authorities rejected his contentions.

(2.) THE IAC served upon the assessee a notice to show cause under S. 274(2) of the IT Act, 1961. The assessee wrote in his explanation that the cash which was introduced into his books of account came from his savings made from income earned by him since 1946 from his business. The IAC did not accept the assessee's explanation and levied a penalty of Rs. 33,688 upon the assessee invoking the provisions of S. 271(1)(c) of the said Act and the Explanation thereto. The assessee carried the matter to the Tribunal. The Tribunal considered the questions raised by the appellant, namely, whether the addition of Rs. 30,000 to his income was justified and whether the IAC was in error in levying the, penalty, together. As regards the second question the Tribunal said thus :

(3.) HAVING regard to the Explanation, there is little doubt that the assessee must be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, unless he proved that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. The Tribunal failed to consider whether the assessee, by the explanation that he furnished in answer to the show cause notice issued to him by the IAC, had proved that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part.