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Issues involved: Determination of income, rejection of assessee's explanation, examination of bank manager behind the assessee's back, imposition of penalty under section 271(1)(c) of the Income-tax Act.
Summary: The assessee, a registered firm engaged in the business of brooms and jungle products, was assessed for the year 1962-63. The Income-tax Officer added a sum of Rs. 41,075 as income from concealed sources, which the assessee contested. The Appellate Tribunal upheld the addition and imposed a penalty under section 271(1)(c) of the Act. The main contention was regarding the explanation provided by the assessee for the said amount, which was related to a withdrawal from a local bank branch. The assessee claimed a peculiar commercial practice in the area for the delay in crediting the amount in their accounts. The Income-tax Officer, without informing the assessee, examined the bank manager, leading to the rejection of the explanation and the subsequent imposition of the penalty. The Appellate Tribunal's adverse inference against the assessee for not examining the bank manager in the presence of the assessee was challenged. It was argued that the assessee was prejudiced due to the examination conducted behind their back. The court agreed that the assessee had been prejudiced by this action and directed the Appellate Tribunal to reconsider the matter with the bank manager's evidence on record. The court declined to answer questions 1 and 3 at the moment, emphasizing that the outcome would depend on the correlation of entries in the accounts with the bank transactions. The decision on the addition and penalty would be based on the new evidence presented. The court concluded by stating that the forums below should ensure a fair consideration of the questions based on the new evidence and left the decision on costs open. Judge Das concurred with the judgment.
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