COMMISSIONER OF INCOME TAX Vs. BHIMRAJ CHANDAK

JUDGEMENT

(1.) AS directed by this court under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act), the Income-tax Appellate Tribunal, 'B' Bench, Patna, has referred the following question of law to this court for its opinion :

(2.) THE material facts giving rise to this reference, briefly, are as follows : THE assessee was assessed in the status of a Hindu undivided family and derived income from timber business. For the assessment year 1968-69, the assessee filed a return disclosing income of Rs. 6,912. THE Income-tax Officer, however, computed the total income of the assessee at Rs. 32,170. While framing the assessment, the Income-tax Officer also found that there was a cash credit of Rs. 6,600 in the name of one Shri Ratan Lal Chandak. THE assessee was called upon to explain the genuineness of this deposit but no explanation was offered by the assessee. THE Income-tax Officer, accordingly, passed the order of assessment. On appeal, the Appellate Assistant Commissioner upheld the addition of Rs. 6,600 with regard to cash credit but reduced the amount of income computed by the Income-tax Officer to Rs. 29,270 by deleting certain additions made by the Income-tax Officer. THE Income-tax Officer also issued a notice to the assessee to show cause why penalty be not imposed under Section 271(1)(c) of the Act and referred the matter to the Inspecting Assistant Commissioner under Section 274(2) of the Act. THE assessee did not show any cause and did not even appear before the Inspecting Assistant Commissioner. THE Inspecting Assistant Commissioner held that as the assessee could not adduce any evidence regarding the source of the cash credit, the assessee was liable to pay penalty under Section 271(1)(c) of the Act, in view of the Explanation to Section 271(1)(c), which, in the opinion of the Inspecting Assistant Commissioner, was attracted in the circumstances of the case. THE Inspecting Assistant Commissioner thus imposed a penalty of Rs. 6,600. Aggrieved by the order passed by the Inspecting Assistant Commissioner, the assessee preferred an appeal before the Tribunal. THE Tribunal held that the order of the Inspecting Assistant Commissioner showed that he had merely proceeded on the basis of the order of assessment and that there should have been something more on record to sustain the order of penalty. THE Tribunal held that as no such material was on the record, the order of penalty was liable to be set aside.