K.S.Bhalla, J.

1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Amritsar, has referred the following two questions for the opinion of this court with regard to the assessment year 1970-71 concerning Prithipal Singh and Co., Ludhiana :

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding : (a) that the provisions of the Explanation to Section 271(1)(c) will not be attracted to the present case ?

(b) that the word income occurring in Clauses (c) and (iii) of Section 271(1) refers to a positive income only and not to a loss ?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in cancelling the penalty order passed by the Inspecting Assistant Commissioner by holding that no penalty could be levied against the assessee ?"

2. The assessee, which was a firm existing in the assessment year 1970-71, filed its return for the said assessment year on September 30, 1970, declaring loss of Rs. 3,35,830, The Income-tax Officer, vide his order, annexure "A", found that it was a case of concealment and suppression of income as the assessee had furnished inac