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Issues Involved:
1. Justification of the addition of Rs. 47,770 as income from undisclosed sources. 2. Justification of the levy of penalty of Rs. 3,000 under section 221(1) of the Income-tax Act for the assessment year 1960-61. 3. Validity and justification of the levy of penalty of Rs. 11,200 under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1960-61. Detailed Analysis: 1. Justification of the Addition of Rs. 47,770 as Income from Undisclosed Sources: The court examined whether the addition of Rs. 47,770 as income from undisclosed sources was justified. The assessee had shown certain purchases as credit purchases, but the Income-tax Officer found that these were actually paid in cash. The assessee failed to provide satisfactory evidence for the cash payments. The Appellate Assistant Commissioner and the Tribunal both concluded that the assessee's claim of borrowing money from four persons in Pondicherry was an afterthought and not substantiated by credible evidence. The court held that the Tribunal did not commit any error of law in its findings, stating, "The finding of the Tribunal that the assessee had not established that he had borrowed the monies in question from the said four persons in Pondicherry is a finding primarily on a question of fact." Therefore, the first question was answered in the affirmative and against the assessee. 2. Justification of the Levy of Penalty of Rs. 3,000 under Section 221(1): The court considered the levy of penalty of Rs. 3,000 under section 221(1) of the Income-tax Act. The assessee argued that the authorities had not considered his explanation for not paying the tax. However, the court noted that the statutory provision at the relevant time did not require the authorities to consider such an explanation. Section 221(1) stated, "When an assessee is in default or is deemed to be in default in making a payment of tax, he shall... be liable to pay by way of penalty, an amount which... does not exceed the amount of tax in arrears." The court concluded that the liability to pay the penalty was attracted by the mere commission of default, and thus, the second question was answered in the affirmative and against the assessee. 3. Validity and Justification of the Levy of Penalty of Rs. 11,200 under Section 271(1)(c): The court examined the levy of penalty of Rs. 11,200 under section 271(1)(c) of the Income-tax Act, 1961, which addresses the concealment of income or furnishing inaccurate particulars of income. The court referred to precedents, including the Supreme Court's decision in Commissioner of Income-tax v. Anwar Ali, which emphasized that the burden of proof lies on the department to establish that the assessee had concealed income. The court noted, "The deliberate act of the assessee in showing the cash purchases as credit purchase can lead only to one inference, namely, that he had consciously concealed the particulars of his income." The court found that the penalty was justified based on the combined facts that the assessee had shown false entries in his account books, failed to provide an explanation for a significant period, and presented a false case of borrowal. Consequently, the third question was answered in the affirmative and against the assessee. Conclusion: The court concluded that the addition of Rs. 47,770 as income from undisclosed sources, the levy of penalty of Rs. 3,000 under section 221(1), and the levy of penalty of Rs. 11,200 under section 271(1)(c) were all justified and valid in law. The department was entitled to its costs of the reference from the assessee, with counsel's fee fixed at Rs. 500.
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