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 holding that no penalty was leviable in this case under Section 271(1)(c) read with the Explanation thereto and in deleting the penalty of Rs. 50,000 levied by the Inspecting Assistant Commissioner ?"

2. In the assessment year 1966-67, the Income-tax Officer received information that the assessee had been found in possession of cash amounting to Rs. 1,72,679 by the police at Ambala Cantt. bus stand on March 1, 1966. A notice was issued to him under Section 139(2) of the Income-tax Act, 1961 (hereinafter called "the Act"). The assessee filed his return on August 6, 1966, declaring an income of Rs. 163 from interest. Notices were issued to the assessee under Sections 142(1), 143(2) and 131 of the Act He was examined at considerable length and thereafter the Income-tax Officer assessed him on an income of Rs. 1,77,842. The break up of this income is as follows :

(a) Income from interest as declared--Rs. 163.

(b) Amount recovered by the police in possession of the assess