Madhava Reddy, J.
1. The question referred to us at the instance of the Department is:
'Whether on the facts and in the circumstances of the case and having regard to the fact that no inflation in purchases had been established the Tribunal ought to have sustained a penalty under section 28 (1) (c) on the ground that cash credits to the tune of Rs. 24,710/- remained unexplained, and had been kept in view in estimating the assessee's income from business for the year of account'.
2. The assess-firm carried on business of manufacture and sale of ground-nut oil. For the assessment year 1948-49 it returned a net profit of Rs. 29,570/-. The income Tax Officer. however added two more items (1) a sum of Rs. 11,026/- towards under-valuation of closing stock and (2) an addition of Rs. 38,700/- by way of undisclosed profits. The second of these additions was made because the Income Tax Officer on a scrutiny of the Account Books found certain defects of account maintained by the assesses-firm. The Income-tax Officer, was of the opinion that the purchase prices entered in the Books were inflated and in particular he cited eight instances of purchase prices so inflated. He also noticed unexplained cash deposit of Rs. 24,700/- credited in the Suspense Account of the assess -firm. Taking into account these facts the assess-firm was assessed on a total income of Rs. 79,296/- . The Income Tax Officer also proceeded to levy penalty. Certain other proceedings questioning the jurisdiction f the Department to levy penalty on the assess firm which was dissolved were taken. It is not necessary for the purpose of this case to refer to those proceedings in detail. Suffice to mention that the income returned by the assess-firm was not accepted and ultimately it was assessed on a higher income than the one returned by it in view of the inflated figures of purchase prices given to explain cash balance in the Suspense Account of the assess-firm. The Income Tax Officer, proceeded to levy penalty under Section 28 (1) (c) of the Act and levied a penalty of Rs. 23,000/-. On appeal the Appellant Assistant Commissioner confirmed the order,. But on further appeal by the assess to the appellate Tribunal on a review of the entire material on record. it came to the conclusion that the Department's case of purchase prices being inflected by the assess with a view to explain the reduced income returned by it was not correct and held that the purchase prices were not so inflated. It however, was of the view that the cash credits to the tune of Rs. 24,710/- remained unexplained. But a mere unsatisfactory nature of the explanation regarding the cash credits, in the opinion of the Tribunal did not justify the penal action against the assess. In the result, the appeal preferred by the assess was allowed and the penalty set aside.
3. In proceeding to decide this question refered to us we have to take note of the fact that the eight instances of purchases by the assess-firm which disclosed inflated prices noted by the Income Tax Officer were scruitinised by the Appellate Tribunal and were found to be not correct. In regard to each item it gave detailed reasons for holding that the purchase price shown in the Account Books was not inflated and whether or not this finding is justified on the facts and circumstances of the case does not fall for our consideration. The only question is whether the cash credits to the turn of Rs. 24,710/- which remained unexplained could from the basis for justifying imposition of penalty. While the failure to explain the cash credits could from the basis for including the said items as part of the income of the assess-firm, for the burden is upon the assess to explain tall the cash credits whether that by itself could form the basis for imposition of penalty under Section 28 (1) (c) of the Act, is a matter which must defend on the facts and circumstances of each case. In to instant case the Tribunal on a review of the evidence found that one of the two grounds mentioned by the Income Tax Authorities for imposing the penalty was not correct and came to the conclusion that the other ground could not justify the imposition of penalty. We are not in a position to hold otherwise. But we deem it necessary to add that we should not be understood as laying down tat in no case the mere presence of unexplained cash credits in the accounts of the assess could by itself not form the basis for imposition of penalty. Under S.28 (1) (c) imposition of penalty is justified whenever the Income-tax authorities are satisfied that any person has concealed the particulars of the income or deliberately furnished inaccurate particulars of such income Whether the assess has concealed particulars of his income or has deliberately furnished inaccurate particulars so such income is always a question of fact. On the particular facts and circumstances of this case, we are of the opinion that the Tribunal was right in holding that the failure to explain the cash credits by itself was not sufficient to impose penalty. under Section 28 (1) (c) of the Act.
4. The question is answered accordingly in favour of the assess. There will be no order as to costs.
5. Reference answered accordingly.