JUDGMENT

Dwivedi, J. - This is a reference u/s 66(1) of the Indian Income Tax Act, 1922. The Income Tax Appellate Tribunal has referred for the court's opinion this question :

" Whether/on the facts and circumstances of the case, the Tribunal was right in holding that the penalty of Rs. 2 lacs levied on the assessee was not sustainable in law ? "

2. It seems to us that the question is not happily framed. We are reframing the question in this manner :

" Whether, on the facts and in the circumstances of the case, the Tribunal's opinion that the penalty of Rs. 2 lacs could not be levied on the assessee is erroneous in law ? "

3. We now proceed to deal with the question as reframed by us.

4. The assessee, Raja Mohammed Amir Ahmad Khan, was a Taluqdar. His estate was situated in the District of Sitapur. He was assessed to Income Tax for the assessment year 1942-43, the relevant year being the year ending on September 30, 1941. The assessee had income from property, dividends and other sources. The Income Tax Officer assessed him for the relevant year on an income of Rs. 1,00,662. The assessment order was made on June 29, 1943. Later on, the Income Tax Officer initiated proceedings u/s 34 of the aforesaid Act in respect of a sum of Rs. 9,45,000. He was asked to give his explanation in respect of this amount.

5. The amount was credited in the amount books of M/s. M. M. Ispahani Co. Ltd., Calcutta, in the assessee's favour. He said that the estate used to pay gujara to his mother and grand-mother. Both of them had accumulated nearly about fifteen and a half lacs of rupees from their gujara income. Their day-to-day expenses were borne by the estate. When the mother died, the aforesaid amount was found in her almirah. Out of this amount, he deposited a sum of Rs. 9,45,000 with M/s. M. M. Ispahani Co. Ltd. He personally took the amount to Calcutta and deposited it with the said company.

6. In support of his explanation, he examined certain witnesses and produced some account books of the estate. The explanation was rejected by the Income Tax Officer. He was assessed to tax on the sum of Rs. 9,45,000. This amount was treated as his income from other sources. He filed an appeal but it was rejected. Then he went before the Tribunal. There also he did not succeed. Then there was a reference to this court but without success.

7. After the proceedings u/s 34 had come to an end, the Income Tax Officer started the proceedings for imposing penalty on him u/s 28(1)(c) of the aforesaid Act. He was asked to explain why a penalty should not be impose on him for having concealed his income of Rs. 9,45,000. He submitted an explanation. The explanation was the same, which he had given in the proceedings u/s 34. Some additional evidence was produced by him. The Income Tax Officer did not rely on his evidence and imposed a penalty of Rs. 2 lacs on him. On appeal, the Appellate Assistant Commissioner set aside the order of the Income Tax Officer. But the Income Tax Tribunal set aside the appellate order and directed the appellate authority to rehear the appeal. On remand, the appellate authority agreed with the Income Tax Officer and upheld his order of penalty. But the Tribunal differed from the aforesaid authorities and set aside their orders. The reference has now been made at the instance of the Commissioner of Income Tax.

8. Summing up the survey of the entire facts and circumstances of the case, the Tribunal said :

" The earlier finding of the department (the finding u/s 34 that the sum of Rs, 9,45,000 was the assessee's income from other sources) is not based on the falsity of the claim made by the assessee about the nature of the receipt but is based on their mere holding that it does not prove and their being in doubt whether it was correct or not and, therefore, the materials which the authorities had before them in the assessment proceedings cannot be said to be sufficient to justify the, finding adverse to the assessee in the penalty proceedings. The d