( 1 ) THIS is a reference under Section 256 (1) of the I. T. Act, 1961. The question before us is as follows :"whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee could not be deemed to have concealed the particulars of its income or furnished inaccurate particulars thereof within the meaning of the Explanation to Section 271 (2) (c) of the Income-tax Act, 1961, and, on that view, cancelling the penalty order under Section 271 (1) (c)?"

( 2 ) THE statement of the case relates to the assessment year 1964-65, the relevant accounting year ending on December 31, 1963. In the course of of the assessment proceedings the ITO found that there was a cash credit of Rs. 50,000. The assessee's case was that it was a loan from Berlia Cloth Stores which belonged to one Ramchandra Berlia. The I. T. O. was not satisfied with the genuineness of the loan and issued a summons under Section 131 on Shri Berlia and, as he was out of Calcutta, his employee, Shri Masudilal Agarwalla, gave evidence before the ITO.

( 3 ) THE evidence of Shri Masudilal Agarwalla is as follows : He was the sole employee of Mr. Berlia ; his salary was Rs. 15