R.L. Gulati, J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as the 'new Act'), at the instance of the Commissioner of Income-tax, U.P. II, Lucknow.
2. The assessee is a Hindu undivided family which carries on business at Dehra Dun. For the assessment year 1951-52 an assessment order was passed against it under Section 23(3)/31/33 of the Income-tax Act, 1922 (hereinafter referred to as the 'old Act'), on a total income of Rs. 1,38,284 which included a sum of Rs. 1,00,000 as income from undisclosed sources. The sum of Rs. 1,00,000 was comprised of two sums of Rs. 50,000 each. The first sum of Rs. 50,000 was made up of four items credited on differentdates in September, 1950, in the names of two members of the assessee-family in the suspense account in the Mussoorie set of accounts of the assessee. The other sum of Rs. 50,000 appeared as cash credit in the names of the members of the assessee-family in the account books of M/s. Veer Industries Ltd., Delhi. The assessee was not able to explain the nature and source of these deposits and they were accordingly held by the Income-tax Officer to be income from undisclosed sources. The Income-tax Officer also initiated proceedings for the imposition of penalty under Section 271(1)(c) of the new Act, on the ground that the assessee had concealed its income to the extent of Rs. 1,00,000. The Inspecting Assistant Commissioner of Income-tax to whom the case was transferred ultimately levied a penalty of Rs. 35,000. On appeal, the Income-tax Appellate Tribunal set aside the penalty order. The Commissioner of Income-tax is aggrieved and has brought this reference on the following question of law;
'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in cancelling the penalty of Rs. 35,000 under Section 271(1)(c) of the Income-tax Act, 1961?'
3. Sri Deokinandan, learned counsel for the Commissioner, states that in fact two questions arose in this case which have been compressed by the Tribunal into one question as set out above. The two questions are:
'(i) Whether penalty under Section 271(1)(c) of the new Act could be imposed when the relevant assessment was made under the old Act and
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty ?'
4. So far as the first question is concerned, the learned counsel for the parties are agreed that in view of the decision of the Supreme Court in Jain Brothers v. Union of India : 77ITR107(SC) the question is no longer open and must be answered in favour of the department and against the assessee.
5. Now, coming to the second question, it appears that in the appeal of the assessee against the quantum of income, the Tribunal accepted the assessee's statement that out of cash credits of Rs. 50,000 appearing in the suspense account of the Mussoorie set of accounts a sum of Rs. 30,000 was available to the assessee out of the withdrawal made in the immediately preceding year. Thus, the income from undisclosed sources from Mussorrie set of accounts was reduced by Rs. 30,000.
6. The second amount of Rs. 50,000 was made up of two items of Rs. 25,000 each credited on 25th January, 1951, in the names of Chander Sain Jain and Manor Dass Jain, the two members of the assessee-family. With regard to these credits the assessee first stated in its letter dated June 15, 1963, addressed to the Income-tax Officer that the entries had been manipulated by one Chidami Lal of Firozabad, who had floated thecompany, to hide his own secret profits. In other words, the assesses disowned the credits. Three days later, on 18th June, 1963, the assessee-family wrote another letter to the Income-tax Officer saying;
'The entry of a sum of Rs. 50,000 shown as paid on 25th January, 1951, by us in the account of M/s. Veer Industries Ltd. is not genuine. However, the amount is surrendered as desired for inclusion in the income of the family for the assessment year 1951-52, provided no penalty is imposed.'
7. This letter, as is obvious from the assessment order dated August 30, 1963, was written by Sri Kailash Chand on behalf of the assessee after 'discussion' with the Income-tax Officer. The Income-tax Officer accordingly included this sum of Rs. 50,000 in the assessee's total income. The Income-tax Appellate Tribunal also confirmed this finding. However, in appeal against the penalty, the Tribunal after referring to the letter of the assessee dated 18th June, 1963, observed :
'We consider that, in view of this letter, there was basis for treating the deposit as income from other sources in the assessment for the year under appeal. But keeping in view the terms of the said letter and all the facts and circumstances of the case, we are unable to uphold the finding in the order appealed against in I.T.A. No. 7361 of 1965-66 that the assessee had introduced concealed income to the extent of Rs. 1 lakh and that penal action is called for.'
8. Again, in paragraph 12 of the said order the Tribunal observed:
'In the instant case, the deposit of Rs. 50,000 was surrendered for inclusion in the income of the family 'as desired', provided that no penalty is imposed. In our view, the fact that the deposit is assessed as income of the family does not by itself justify the department in imposing a penalty particularly in view of the terms of the letter dated 18-6-1963.'
9. Mr. Deokinandan urges that this is a case in which the assessee had admitted the sum of Rs. 50,000 to be its income and since this income had not been shown in the return, it was a case of clear concealment and the Tribunal was not justified in holding that the charge of concealment had not been proved against the assessee.
10. It is true that out of the cash credits of Rs. 1,00,000, a sum of Rs. 50,000 had been admitted by the assessee to be its income. It is not a case where an unexplained receipt has been treated to be the assessee's income because of his failure to explain its true source and nature. Where an assessee admits a cash credit or a deposit to be his income and surrenders it for assessment to tax, no further onus is left upon the department to prove the charge of concealment. Such a case would clearly not come within the principle enunciated by the Supreme Court in the case of Commissioner of Income-tax v. Anwar Ali : 76ITR696(SC) . But in the instant casethe admission of the assessee does not appear to be voluntary or free. It is clear that after the assessee had written its first letter disowning the cash credit, there was a discussion between its representative and the Income-tax Officer, as a result whereof the cash deposits were surrendered for assessment 'as desired provided no penalty was imposed'. The Income-tax Officer must have induced the assessee to surrender the cash deposit so as to avoid penalty which could be as high as one and a half times the tax sought to be evaded. It is possible that the surrender was made in order to escape the penal liability. It is also clear from the letter quoted above that some sort of assurance was given by the Income-tax Officer to the assessee that if the amount was offered for assessment, no penalty would be levied. It is upon these considerations that the Tribunal appears to have held that the charge of concealment was not proved. In our opinion the Tribunal was justified in doing so. The decision of the Delhi High Court in Durga Timber Works v. Commissioner of Income-tax : 79ITR63(Delhi) is clearly distinguishable. In that case, the assessee admitted certain investments to be its income. The admission, however, was not influenced or induced by the Income-tax Officer.
11. This takes us to the next contention of the learned counsel for the department. He relies on the Explanation appended to Section 271(1)(c) of the new Act. This Explanation was added by Section 40 of the Finance Act, 1964, and reads :
'Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under Section 143 or Section 144 or Section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of Clause (c) of this sub-section.'
12. According to this Explanation, an assessee shall be deemed to have concealed its income, etc., if the income returned by him is less than 80% of the income assessed by the Income-tax Officer, unless he proves that the concealment in the income was not due to any fraud or any gross or wilful neglect on his part. The argument is that in view of this Explanation the onus lay upon the assessee to disprove the charge of concealment by showing that the enhancement in the income was not due to any fraud or wilful or gross neglect on his part. The Tribunal committed an error of law in proceeding with the case as if the burden lay upon the department.
13. Now, it is clear that this point was not raised on behalf of the department before the Income-tax Appellate Tribunal. There is no reference to it in the appellate order of the Tribunal, nor is indeed any reference to it in the department's application under Section 256(1). Such a question, therefore, did not arise out of the order of the Tribunal, nor has indeed the Tribunal referred any such question to us. Mr. Deokinandan says that the point raised by him is merely an aspect of the question already referred to us and it is not a new question. We do not agree, because the applicability of the Explanation entails decision on certain questions of law and facts. The first question that immediately arises is as to whether the Explanation would be applicable to an assessment for the year prior to the assessment year 1964-65, the Explanation having been introduced with effect from 1st April, 1964. Mr. Deokinandan submits that the Explanation is procedural in nature and would apply to all proceedings pending after it came into force and thus the Tribunal was bound to take it into consideration when it decided the appeal on 13th July, 1967. Now, whether the Explanation is procedural or affects substantive rights is itself a question which is not free from doubt. The Explanation introduces a fundamental change inasmuch as the onus which normally lies upon the department in penal proceedings has been shifted to the assessee. It is not possible to say that such a provision is purely procedural in nature.
14. There is yet another aspect of the matter. For purposes of determining the applicability of the Explanation and the quantum of penalty, the income assessed is to be reduced by the amounts which have been disallowed out of the deductions claimed by an assessee. The income has to be recomputed as it were. No such recomputation has been made in the instant case obviously because the Explanation was never relied upon by the department at any stage before the income-tax authorities or before the Tribunal. The Tribunal has not and could not consider the question as to whether the Explanation was retrospective in nature so as to apply to the assessee's case. In the absence of any findings recorded by the Tribunal in this behalf, which would include findings of fact and law, it is not possible to hold that the point sought to be raised by the learned counsel is merely an aspect of the question already referred to us. In our opinion, it is entirely a new question and cannot be permitted to be raised at this stage. At any rate, such a question cannot be answered on the basis of the material before us.
15. For the reasons stated above, we answer question No. 2 in favour of the assessee and against the department. As no one has appeared on behalf of the assessee, there will be no order as to costs.