SUDHINDRA MOHAN GUHA, J.

( 1 ) THIS reference under Section 256 (2) of the I. T. Act, 1961, at the instance of the Commissioner of Income-tax, West Bengal-I, Calcutta, is in connection with the assessment years 1960-61, 1961-62 and 1962-63.

( 2 ) THE assessee was M/s. Bhuramal Manikchand, dealing in jute and cloth with head office at Calcutta and branches at Dhubri, Agartala and Alipurduar. In the course of assessment proceedings, the ITO noticed certain cash credits in the assessee's accounts and being not satisfied with the nature of sources of these cash credits, the relevant assessments were completed making additions of Rs. 1,22,500, Rs. 95,000 and Rs. 18,440 for those three years, respectively, as income from undisclosed sources. Penalty proceedings under Section 27i (1) (c), which were initiated by treating the aforesaid additions as items of concealed income by the ITO, were referred under Section 274 (2) to the IAC for disposal, In respect of the assessment year 1960-61 there were cash deposits of Rs. 7,000, Rs. 5,000, Rs, 10,000, Rs. 3,000, Rs. 1,000, Rs. 2,000 and Rs. 2,500 in the names of Deepchand Surana, Nouratmal Surana, Mahalchand Ghorawar, Promode Ranjan Ghose, Banwarilal Jain, Sudhir Chandra Saha and Smt. Mohini Devi Choraria, respectively, Sri Deepchand Surana, who was examined by the ITO, claimed to have deposited the amount out of his past savings made in Pakistan out of his salary income of Rs. 300 per month. Having regard to the lack of evidence for the remittance of the money, and the fact that he was being unemployed for more than 18 months and having regard to the size of his family, the I. T. authorities were not satisfied with his explanation regarding the sources of the amount. Sri Nouratmal Surana was not produced before the ITO. Sri Mahalchand Ghorawar, who was examined by the ITO, claimed to have made advances out of his savings. He was found to be an employee of the assessee drawing a petty salary. Here, in this case also, having regard to the size of his family and in the absence of proof of his claim regarding the sources of the amount, his explanation was also disbelieved. Sri Ghorawar was assessed to income-tax. Other items of cash credits were similarly disbelieved to be genuine.

( 3 ) THE next item of addition of Rs. 40,000 was made by the ITO by scrutinising the books of account of the head office with reference to the books of Dhubri branch. It was found that the total remittance of certain amount from the head office to Dhubri branch were entered in the accounts at both the places on identical dates. The remittances were said to have been made through messengers by air or through air service personnel. After considering the assessee's explanation a sum of Rs. 1,30,000 was included in the assessment which was, however, reduced to Rs. 40,000 in appeal before the AAC. In these circumstances, the amount was treated as concealed income.

( 4 ) COMING to the last item of Rs. 52,000 the sum was included in the assessment after making a scrutiny of certain documents and the books of account seized by the Enforcement Directorate from the assessee's premises. These related to the assessee's transactions with his Dhubri branch. The assessee admitted that these were not transactions of its accounts and contended that these were not their transactions. This explanation was again not acceptable to the I. T. authorities and consequently there was an addition of Rs. 52,000 which was, however, reduced in appeal before the Tribunal to Rs. 35,000 after completion of the penalty order. On the basis of these facts and circumstances, the IAC imposed a penalty of Rs. 1 lakh.

( 5 ) IN respect of the assessment year 1961-62, there were additions of Rs. 2,000 as fictitious cash credits in the name of Sri Mahalchand Ghorawar, Rs. 50,000 unexplained cash shown as remittances between the head office and Agartala branch and Rs. 43,000 unexplained cash shown as remittance between the head office and Dhubri branc

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