Judgement

GROVER, J. : This is an appeal by special leave from a judgment of the Calcutta High Court answering the following question which was referred to it by the Tribunal in the negative and in favour of the assessee.

"Whether on the facts and in the circumstances of the case, the Income tax authorities were justified in imposing a penalty on the assessee under Section 28 (1) (c) of the Income-tax Act?"

The assessee during the assessment year 1947-48, the corresponding previous year being the financial year ending on March 31, 1947 was a partner in the firm of M/s. Haji Sk. Md. Hussain Md. Jan of Calcutta. The Income-tax Officer while making the assessment discovered an undisclosed bank account of the assessee with the Central Bank of India Ltd., Bettiah, Bihar. It was found that a cash deposit of Rs. 87,000/- had been made by the assessee on November 21, 1946 in that Bank. He was asked to explain the source of the amount of deposit. According to his explanation all his relations got panicky during the communal riots in Bihar in the year 1946 and entrusted him with whatever cash amounts they had with them at that time for safe custody. It was stated that a sum of Rs. 87,000/- had been received in the following manner :

Zahir Hussain & Md. Zahir (cousin) ... Rs. 18,500/-

Mohammad Jan (deceased father) .. Rs. 1,000/-

Mohd. Haniff (cousin) ... Rs. 1,750/-

Khairunnessa Bibi (mother) ... Rs. 23,000/-

Safihan Bibi (sister) ... Rs. 13,000/-

Fatema Bibi (wife) ... Rs. 15,750/-

Hasuia Bibi (brother s wife) ... Rs. 12,000/-

Total Rs. 87,000/-

These amounts which were received by the assessee from his relations were deposited by him in a fixed deposit account in the joint name of himself and his minor sons in the Bank at Bettiah. The Income-tax Officer did not accept the explanation of the assessee and held that the sum of Rs. 87,000/- represented income from undisclosed sources. He added the amount to the total income of the assessee in his personal assessment. This addition was maintained by the Appellate Assistant Commissioner in appeal. The Appellate Tribunal also agreed with the decision of the Income-tax Officer and the Appellate Assistant Commissioner.

2. Penalty proceedings were initiated after the assessment and in due course the Income-tax Officer imposed a penalty amounting to Rupees 66,000/- on the assessee under S. 28 (1) (c) for concealing income and deliberately furnishing inaccurate particulars. The Appellate Assistant Commissioner in appeal held that the case clearly called for a penal action but he reduced the amount of penalty by Rs. 22,000/-. Subsequently he rectified his order under Section 35 and confirmed the penalty of Rs. 66,000/- imposed by the Income-tax Officer. The assessee went up to the Appellate Tribunal in appeal. The Tribunal took the view that penalty proceedings were of a criminal nature. The onus lay on the department to show by adequate evidence that the amount of the cash stated to have been concealed by the assessee was of a revenue nature and was assessable as income and that the assessee had concealed it or deliberately furnished false particulars in regard thereto. This onus, in the opinion of the Tribunal, was not discharged by the Income-tax authorities by showing merely that the explanation given by the assessee in the assessment proceedings was found to be unacceptable. The Income-tax Officer, according to the Tribunal, must find some material part from the falsity of the assessee s explanation to support his finding that the receipt from undisclosed sources was income. As no satisfactory evidence had been produced by the department to establish that the amount in question represented the income of the assessee the Tribunal held that no penalty could be imposed.

3. Now penalty can be imposed under Section 28 (1) (c) if the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal in the course of any proceedings under the Income-tax Act, 1922 is satisfied that any pers