The penalty provisions under section 271(1)(c) of the Income-tax Act, 1961, are penal in character and have to be strictly construed. The burden is on the department to establish that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income.

B.S.DHILLON, J.

1. The question of law referred to by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, is in the following terms :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the penalty of Rs. 6,000 imposed under section 271(1)(c) in respect of the sum of Rs. 41,067 assessed under section 41(1) ?"

2. Briefly stated, the facts giving rise to this reference are that the respondent, assessee-firm, Messrs. Aya Singh Ishar Singh, Taran Taran (Amritsar), claimed deduction on account of the payment of purchase tax in the assessment year 1959-60 to the extent of Rs. 23,078 and in the assessment year 1960-61 to the tune of Rs. 17,989. This claim was made on account of the provisions of the East Punjab General Sales Tax (Amendment) Act, 1958 (Punjab Act No. 7 of 1958), which was revalidated by the Punjab General Sales Tax (Amendment and Validation) Act, 1960 (Punjab Act No.17 of 1960), and the said Act was ultimately repealed on October 3, 1961. In the return filed by the assessee for the assessment year 1962-63, the assessee did not disclose the income of Rs. 41,067 which income had accrued to him in view of the provisions of section 41(1) of the Income-tax Act, 1961, because of the repeal of the Punjab General Sales Tax (Amendment and Validation) Act, 1960 (Punjab Act No. 17 of 1960), on October 3, 1961. The Income-tax Officer issued notice under section 148 of the Income-tax Act, 1961, on the ground of escapement of the income of the assessee for the assessment year 1962-63 and in response to the said notice, the assessee filed another return showing the same income as originally shown in the return. However, there was a note in the return that there was no escapement of income. During the course of the assessment proceedings, the assessee claimed that the amounts of purchase tax claimed had allowed as deduction in the assessment year 1959-60 and 1960-61 should be assessed in the assessment proceedings of the years 1959-60 and 1960-61 as the amounts were wrongly claimed and the same were wrongly allowed as deductions in those years. This plea of the assessee did not find favour with the Inspecting Assistant Commissioner of Income-tax on the ground that the liability of the assessee for paying the purchase tax ceased by the passing of Punjab Act No. 28 of 1961, which Act received the assent of the Governor on October 3, 1961 and, therefore, the said liability having ceased under the financial year 1961-62 being the previous year for the assessment year 1962-63, the assessee in view of the provisions of section 41 of the Income-tax Act, 1961, was deemed to have added to his income the amount of Rs. 41,067 and the total income was computed at Rs. 86,121. The assessment proceedings were completed on December 7, 1967, and then a notice was issued for the levy of penalty for concealment and because the minimum penalty leviable exceeded Rs. 1,000, therefore, the case was referred by the Income-tax Officer to the Inspecting Assistant Commissioner of Income-tax for imposing penalty. The plea of the assessee before the Inspecting Assistant Commissioner of Income-tax that the amount of Rs. 41,067 ought to have been assessed in the assessment year 1959-60 and 1960-61 failed. The Inspecting Assistant Commissioner of Income-tax imposed a penalty of Rs. 6,000 on the assessee and while imposing the said penalty, he recorded the following findings :

"The income was clearly to be assessed in this year and the assessee was not justified in not declaring the same. As the assessee furnished inaccurate particulars of its income, the provisions of section 271(1)(c) were clearly attracted."

3. Two appeals were filed by the assessee before the Income-tax Appellate Tribunal, Chandigarh. In one appeal the liability of the assessee for the assessment of Rs. 41,067 in the year 1962-63 was challenged and it was contended that the same should be assessed in the assessment years