COMMISSIONER OF INCOME TAX Vs. HIRALAL SHANKARLAL

JUDGEMENT

(1.) At the instance of the Revenue, the Income-tax Appellate Tribunal has submitted this statement of the case and has referred the following question of law for the opinion of this court :

(2.) The assessee carries on business, wholesale and retail, in cloth and jute. For the assessment year 1964-65, the assessee, on December 7, 1964 filed a return showing total income of Rs. 49,558. The Income-tax Officer found that in the assessee's books, there was an entry dated April 18, 1962, showing a cash credit of Rs. 25,000 in the name of one Jagadish Prosad Agarwalla. The assessee pleaded that the entry represented a loan transaction from Jagadish Prosad Agarwalla. In support, he filed a confirmation letter from the creditor. The Income-tax Officer, however, disbelieved the case of the assessee. He held that the loan transaction was not genuine. The assessee's claim of having paid a sum of Rs. 1,500 as interest to the said creditor was also disallowed. He held that the amount of Rs. 25,000 represented the assessee's income from undisclosed sources. He included the sum of Rs. 25,000 and assessed the total income at Rs. 94,560.

(3.) Penalty proceedings were also commenced in respect of the cash credit of Rs. 25,000. Since the minimum penalty leviable was more than Rs. 1,000, the case was referred to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner held that the assessee failed to prove the genuine character of the alleged cash credit. It represented an unexplained cash credit and the assessee should have shown the same as part of taxable income in the return. The assessee failed to do that and resorted to further concealment by claiming bogus expense of interest of Rs. 1,500. The assessee was liable for omitting to show most of the taxable income in the return. He, went on to hold that the Explanation to Section 271(1)(c) was applicable. The assessee has done nothing to show or to prove that the omission to return the correct income was not due to any fraud or gross or wilful neglect on his part. The concealment, therefore, has to be presumed. He held that the assessee was guilty of concealment and levied a penalty of Rs. 17,500.