Law: Income Tax Act, 1961

Section: 271(1)(c),256(1),132(1)

JUDGMENT 1. The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this Court: 2. At the instance of the assessee: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in dismissing the appeal filed by the assessee against the order passed under section 271(1)(c) by the Departmental authorities ?" 3. At the instance of the revenue: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961 ?" 4. The reference relates to the year 1983-84 in respect of the penalty proceedings initiated under section 271(1)(a) and 271(1)(c) of the Act. 5. Briefly stated the facts giving rise to the present reference are as follows: 6. The assessee deals in trading of silk yarn. During search and seizure operations under section 132(1) of the Income-tax Act, 1961, at the residential premises of Shri Jagdamba Prasad Tulsiyan, brother of a lady partner of the firm, two challan Nos. Y/16 and Y/17 both dated 23-8-1982, and both being in the name of the assessee were found and seized. After making inquiries from Bihar Mercantile Union from whom purchases were made through the abovementioned two challans unexplained capital of Rs. 93,000 and undisclosed profit amounting to Rs. 55,000 were added to the total income of the assessee. Penalty proceedings under section 271(1)(c) were also initiated. In the quantum appeal, the learned first appellate authority upheld the addition of Rs. 93,000 but reduced the addition from Rs. 50,000 to Rs. 33,000 on account of undisclosed profit. 7. The Assessing Officer imposed penalty of Rs. 75,000. Aggrieved with the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The learned first appellate court upheld the imposition of penalty, but reduced it to Rs. 77,500 in round figure. 8. Aggrieved with the order of the Commissioner of Income-tax (Appeals) the assessee preferred an appeal before the Tribunal, which for the…

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