COMMISSIONER OF INCOME TAX Vs. SATISH CHURN LAW

JUDGEMENT

(1.) THIS reference, under s. 66(1) of the Indian IT Act, 1922, has been made in the circumstances hereinafter related. The statement of case relates to the asst. yr. 1951-52. The assessee is an individual having business in share dealings. He has also some income from property, dividends and other sources. The ITO found that the assessee had purchased 3,000 shares of Rani Cherra Tea Co. Ltd. for Rs. 33,000 and 2,500 shares of Indian Iron and Steel Co. Ltd. for Rs. 48,281, the total value of investment being Rs. 81,281; but the investment in purchasing shares of Rani Cherra Tea Co. Ltd. for Rs. 33,000 was not entered in the books of the assessee. When the assessee was called upon to explain the source of the investment, he alleged that he had borrowed Rs. 80,940 from his wife. Called upon further to explain how his wife had amassed so much money in her hands, it was said that she received Rs. 32,000 from her father in 1940 and the balance constituted her savings from out of monthly payments of Rs. 500, made to her by the assessee, for her personal expenses, during the last 10 years. The ITO accepted the existence of savings to the extent of Rs. 38,000 and treated the balance of Rs. 53,000 as income from undisclosed sources. With the other parts of the assessment order we are not concerned in this reference.

(2.) THE assessee appealed before the AAC. THE AAC sustained the addition of Rs. 53,000 to the income of the assessee from undisclosed sources. THEreupon, by a notice dt. 29th March, 1955, the ITO called upon the assessee to show cause why penalty should not be levied upon him for failure to prove the source of the funds with which the investment had been made. In the course of the penalty proceedings, the ITO referred to the acquisition of shares by the assessee. valued at Rs. 81,000, outside the books. He observed that the assessee's story that he had borrowed money from his wife was false and that he attempted to support the false statement by production of a fabricated cash book; that the assessee had not established the rates at which he purchased the shares and also had not disclosed the names of the vendors. Accordingly, he held that the assessee had concealed particulars of his income and deliberately furnished a false and improbable explanation. He, therefore, levied a penalty of Rs. 20,000 under s. 28(1)(c) of the Act.