1. The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty of Rs. 10,500 levied under the Explanation to Section 271(1)(c) ?"

2. The assessee is Messrs. Bhan Singh Buta Singh of Amritsar. They are commission agents of goats and sheep. In the assessment year 1963-64, the assessee filed a return showing his income as Rs. 60,166. This return was filed on 9th April, 1964. By then Section 271, as amended, was in the field, for this section had been made applicable with effect from 1st April, 1964. The total income of the assessee was computed by the Income-tax Officer at Rs. 1,27,820. The Income-tax Officer added back an amount of Rs. 41,420 which was claimed by the assessee as bad debts for the reason that the assessee had neither adduced any evidence to indicate the nature of the debt nor to establish that the debt had become bad. The Income-tax Officer further added an amount of Rs. 18,000 on account of cash credit in the account of Shri Sujan Singh Sadana as assessees income from undisclosed sources. The