TMI Blog1986 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... lar item of entry and treated the said sum of Rs. 1,20,000 as the assessee's income from other sources. He also disallowed the assessee's claim of deduction of Rs. 10,846 which was claimed to have been paid to Shankarlal Dulichand by way of interest. The taxable income of the assessee was computed accordingly. Being aggrieved, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner found that the creditor, Shankarlal Dulichand, was a registered firm consisting of five partners and that it was an assessee under the Income-tax Act. He also found from the report of the inspector dated July 26, 1969, that the firm had since closed down and its partners were not traceable. He next cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speculative. The Tribunal, however, after considering the cash credits covered by the earlier disclosures of the assessee, held that the cash credit shown in the name of Shankarlal Dulichand could be explained from such disclosures and the cash rotation statement except to the extent of Rs. 40,000. The Tribunal reversed the finding of the Appellate Assistant Commissioner and restored the addition to the extent of Rs. 40,000. The claim for deduction of Rs. 10,846 alleged to have been paid by way of interest was also disallowed and the addition of the said amount was restored. On the basis of the aforesaid, penalty proceedings were initiated by the Inspecting Assistant Commissioner under section 274 of the Income-tax Act, 1961, and by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. On an application of the Revenue under section 256(1) of the Income-tax Act, the following question has been referred as a question of law arising out of the order of the Tribunal for the opinion of this court: " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no penalty was leviable under section 271(1)(c) read with the provisions of the Explanation thereto ? " It appears that the facts found by the Tribunal have not been challenged as perverse or based on no evidence. It is settled law that mere addition to the taxable income does not automatically lead to an order of penalty. Further investigation and finding is necessary before penalty can be imposed. In the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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