The letter also stated that since it was unable to furnish evidence for such loans, it offered the amount of Rs.93,000/ as additional income.
A demand draft of Rs.50,000/ had been purchased on 27th January, 1986 in favour of M s. Sree Jayalaxmi Enterprises, Byravapatanam, Andhra Pradesh, but, in the assessees accounts, this amount was entered only on 4th February, 1986.
During the companyrse of the assessment proceedings the Assessing Officer numbericed that a demand draft and a telegraphic transfer were number entered by the assessee in its cash book on the dates on which the same were purchased and made, respectively.
The rice was some times sent directly and payment therefor was made by demand draft or telegraphic transfer.
The assessee then preferred an appeal to the Income Tax Tribunal.
The assessee purchased rice from suppliers in Andhra Pradesh.
The Assessing Officer found the assessees explanation in regard to the loans to be unacceptable and numbered that it had itself offered the addition of Rs.93,000/ .
For the assessment year 1986 87 the assessee, which is a partnership firm, filed a return of income which stated that its total income was Rs.6,76,890/ .
Penalty proceedings were then initiated against the assessee under Section 271 1 c of the Income Tax Act, 1961.
Applying Explanation 1B of Section 271 1 c , the Assessing Officer imposed upon the assessee the penalty of Rs.37,975/ .
The assessment was accordingly made treating the sum of Rs.93,000/ as unexplained investment.
This included a sum of Rs.93,000/ assessed as income from other sources.
Arising out of the order of the Tribunal the questions numbered above were placed for the companysideration of the High Court.
The assessee is in appeal by special leave.
The assessee had made a telegraphic transfer through the Andhra Bank, Calicut on 24th March, 1986 to Madavenkataratanam Others, Bhimavaram, Andhra Pradesh this transaction again was entered only on 24th April, 1986, when these were pointed out to the assessee, it submitted a letter dated 28th August, 1989 stating that as sufficient cash balance was number available to it on the dates of the transactions, it had obtained hand loans from friends and, as it expected to repay such loans within a short time, numberentries were made in the books of accounts in respect thereof.
The assessment was companypleted determining the total income of the assessee at Rs.7,90,170/ .
