An assessee's admission of undisclosed income during assessment proceedings is sufficient to establish concealment of income for the purpose of imposing a penalty under Section 27l(1)(c) of the Income-tax Act, 1961.

Bhopinder Singh Dhillon, J.

1. This judgment will dispose of Income-tax Reference No. 12 of 197?.

2. Briefly stated, the facts giving rise to this reference are that the petitioner-firm. Messrs. Mahavir Metal Works, Kapurthala, is engaged in the manufacture and sale of aluminium utensils with its head office at Kapurthala. This firm, apart from its branch at Delhi, had another branch at Trivandrum under the style of Kolpunj Enterprises where it was carrying on the business of manufacture and sale of Bandsaw Blades and wire netting. The petitioner-firm is alleged to have raised loans from some of the parties at Madras which were taken against hundis for a specified period. The branch of the petitioner-firm at Trivandrum was closed some time during August, 1963. In the course of assessment proceedings, for the assessment year 1964-65, the Income-tax Officer enquired from the petitioner-firm about these loans. The firm produced evidence in the form of hundis before the Income-tax Officer. The Income-tax Officer was also informed that some of the loans were received by drafts and even the payments towards interest were made by drafts. The Income-tax Officer was not satisfied and he required the petitioner-firm to produce the parties along with their confirmatory letters. This could not be done as, according to the petitioner-firm, the business at Trivandrum had been closed and the latest whereabouts of the persons from whom the loans were taken were not known. Therefore, the firm surrendered the loan amounts aggregating to Rs. 35,000 raised from these parties. The said amount of Rs. 35,000, along with the interest of Rs. 2,728 alleged to have been paid to these parties, were thus assessed as the income of the petitioner-firm and subsequently in the penalty proceedings, on these facts, a penalty of Rs. 12,000 was imposed. The petitioner-firm filed an appeal before the Tribunal that no penalty was exigible, but the Tribunal taking note of the surrender of the amount of Rs. 35,000 as the assessees income from undisclosed sources came to the conclusion that the penalty was exigible. It is on these facts that the following question of law has been referred for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty was exigible under Section 27l(1)(c)?"

3. After hearing the learned counsel for the parties I am of the opinion that this question must be answered in the affirmative and in favour of the revenue. It is well-settled by now that the penalty proceedings are of a penal nature and it is for the department to establish that the assessee was guilty of concealment of the particulars of income. The mere fact that the assessee has given a false explanation, does not prove that the disputed amount constitutes income of the assessee. Moreover, the finding given during the course of the assessment proceedings that a particular receipt is income after rejecting the explanation given by the assessee as false would, prima facie, be sufficient for establishing in the penalty pro ceedings that the disputed amount was the assessees income, but it must be remembered that since the said proceedings are of penal nature, the burden is on the department to prove that a particular amount is a revenue receipt. The finding given in the assessment proceedings that the explana tion furnished by the assessee was false cannot be taken to be conclusive. Before the penalty can be imposed, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had. consciously concealed the particulars or had deliberately furnished inaccurate particulars. Reference in this connection may be made to Commissioner of Income-tax v. Anwar Ali, [1970] 76 I.T.R. 696, [1971] 1 S.C.R. 446 (SC.) and Commissioner of Income-tax v. Khoday Eswarsa and Sons, [1972] 83 I.T.R. 369 (S.C.). Therefore, keeping in view this positi