THANIKKACHALAM J.

In compliance with the directions of this court in T. C. P. No. 224 of 1979, the Tribunal referred the following question for the opinion of this court under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act").

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee had not furnished inaccurate particulars of the income in the original return filed on March 17, 1972, and accordingly in deleting the penalty of Rs. 10, 000 imposed under section 271(1)(c) of the Act ?"

The assessee is a registered-firm doing business in jaggery at Vellore. On March 17, 1972, for the assessment year 1971-72, the assessee filed a return, disclosing the business income of Rs. 64, 234. In the course of examination of the accounts, the Income-tax Officer found that there was a credit for Rs. 10, 000 in the name of one Sri Gopal Mudaliar. The assessee filed a confirmatory letter from Gopal Mudaliar in support of the loan of Rs. 10, 000 taken from him. In the course of the enquiries made by the Income-tax Inspector, Gopal Mudaliar denied having advanced any loan to the assessee. Thereafter, on February 18, 1974, the assessee filed a revised return stating that in the absence of documentary evidence to prove the loan taken from Gopal Mudaliar, the amount of Rs. 10, 000 is offered as income for assessment

The Income-tax Officer initiated penalty proceedings under section 271(1)(c) of the Act. According to the Income-tax Officer, the assessee filed a revised return after the Department started enquiry and found that the credit was not a genuine, one. Since the assessee furnished inaccurate particulars of its income in the original return filed on March 17, 1972, penalty was levied under section 271(1)(c) to the extent of Rs. 10, 000. On appeal, the Appellate Assistant Commissioner confirmed the penalty levied by the Income-tax Officer. Aggrieved, the assessee filed a second appeal before the Tribunal. The Tribunal allowed the assessee's appeal and cancelled the penalty of Rs. 10, 000 imposed under section 271(1)(c) of the Act. According to the Tribunal, the assessee filed the return on the bona fide belief that he can establish the genuineness of the loan in view of the cash entry in the book and confirmatory letter from the creditor. It was also pointed out that before the revised return was filed the assessee became aware of the Inspector's report. Therefore, according to the Tribunal, the assessee cannot be charged guilty of concealment or furnishing of inaccurate particulars of its incomeLearned senior standing counsel for the Department submitted that the penalty levied under section 271(1)(c) of the Act cannot be cancelled on the sole ground that the assessee filed a revised statement before completing the assessment by the Income-tax Officer. According to learned senior standing counsel the assessee failed to establish his bona fides in thinking the genuineness of the cash credit found in the account books while the original return was filed. It was further submitted that after the investigation made by the Inspector of Income-tax Department, the assessee came forward with a revised return. Therefore, on the date of filing the revised return, the assessee would have had the knowledge of the view taken by the Department on the cash credit found in the name of Gopal Mudaliar. Ultimately, learned senior standing counsel submitted that the Tribunal was not correct in cancelling the penalty levied under section 271(1)(c) of the Act. We have also heard learned counsel for the assessee, who supported the order passed by the Tribunal

According to the facts arising in this case, for the assessment year 1971-72, the assessee filed the original return on March 17, 1972. In the original return, the cash credit found in the account books in the name of Gopal Mudaliar of Rs. 10, 000 was not disclosed. The assessee filed a revised return on