Law:

Section:

Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1961-62 - No satisfactory explanation was furnished by assessee regarding cash credits found in his books in form of telegraphic transfers - Accordingly, certain amount was added in his income as income from undisclosed sources which was reduced in first appeal and then in second appeal without mentioning anything which was inconsistent with reasons given by ITO in making additions - Whether since reasons given by ITO for making addition were cogent, plausible and independent of additions made for any subsequent year, mere fact that additions made in subsequent years had been deleted did not provide foundation for deleting addition made in year under consideration - Held, yes Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For conealment of income - Assessment year 1961-62 - Whether on facts stated under head 'cash credits', since income returned by assessee was less than 80 per cent of income assessed and no plausible explanation was given by assessee in that regard, presumption arising by virtue of Explanation to section 271(1)(c) remained unrebutted and Tribunal was right in sustaining levy of penalty - Held, yes FACTS For the assessment year in question, the ITO estimated the sales of assessee-firm from business in sale and purchase of iron goods, at Rs. 2,50,000 and applied a gross profit rate of 9 per cent. On that basis, he computed gross income at Rs. 22,500, out of which a sum of Rs. 7,500 was allowed as expenditure. However, the ITO also found that the assessee had introduced certain cash credits amounting to Rs. 2,62,688 in the form of telegraphic transfers, for which the assessee could not give any satisfactory explanation and, therefore, he estimated that the maximum amount of Rs. 1,80,000 alone could be accepted as remittances made out of the sales. Consequently, he added the remaining amount of Rs. 82,688 to the assessee's total income as income from undisclosed sources. The assessee's first appeal to the AAC partly succeeded and the addition made by the ITO was reduced to Rs. 50,000. The assessee's further appeal to the Tribunal was also partly allowed and this…

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