K.K. Dube, J.
1. The following question of law has been referred for our opinion at the instance of the assessee:
'Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in imposing penalty on the assessee under Section 271(1)(c) of the I.T. Act, 1961 ?'
2. The assessee derived income from money-lending, house property and brokerage on sale and purchase of land. For the assessment year 1960-61, the assessee filed a return on July 23, 1964, showing income from money-lending at Rs. 215 and from house property at Rs. 260. The assessee did not maintain books of account in the form of cash book and ledger. The ITO on the basis of the previous record estimated the capital invested in money-lending at Rs. 78,000 and on that basis came to a conclusion that the income from interest would be Rs. 9,600. During the same year, the assessee had constructed a house, the cost of which was shown by the assessee to be Rs. 7,000. This was not accepted and the ITO estimated the cost at RS. 10,000. The sum of Rs. 3,000 was treated as income from undisclosed sources. For the same year, the assessee had shown sales of land of the value of Rs. 29,305. Out of this amount, the assessee had satisfactorily explained and accounted for Rs. 12,015 but for the rest his explanation was not accepted. The ITO found that the assessee could not explain how the rest of the 'amount was arrived at' nor offered any explanation as to the 'source of the amount'. The ITO initiated penalty proceedings. As the minimum penalty imposable exceeded Rs. 1,000, he referred the matter to the IAC, who, after taking into consideration the explanation given by the assessee, imposed a penalty of Rs. 5,000.
3. The assessee filed an appeal before the Tribunal. The Tribunal was of the opinion that in respect of the income from interest and the estimate of cost of house and the sale of land, the ITO had estimated the income as the assessee's explanation was not satisfactory. The assessee had concealed his income and the penalty proceedings were rightly attracted. The question that arises for our consideration is whether the penalty proceedings were justified.
4. The assessee had not maintained any cash book or ledger and it was open to the ITO to make a fair estimate of the income of the assessee. As far as the amount of Rs. 17,290, which was shown to be from sale of land was concerned, his explanation was not accepted. The ITO was of the view that the assessee had failed to explain that the income arose from agriculture. As against this, the assessee was of the view that his income was not taxable during that year and, therefore, he had not filed any return. The penalty proceedings under Section 271(1)(c) are akin to criminal proceedings and the onus lay on the Department to show that the amount of income concealed by the assessee was of revenue nature and was assessable as income and that the assessee had concealed it or deliberately furnished false particulars in regard thereto. Merely because the assessee's explanation was rejected by the Department, it would not necessarily give rise to an inference that the assessee has surreptitiously suppressed income. There should be material on record to prove the nature of the income and that it was taxable. The findings given in the assessment proceedings for determining or computing the tax are not conclusive as far as the penalty proceedings are concerned. The entirety of circumstances must be taken into consideration and they must reasonably point to the conclusion that the disputed amount represented income, and that the assessee had consciously concealed the particulars of income or had deliberately furnished inaccurate particulars. We will have to see whether there is any evidence to suggest that the assessee had deliberately concealed the income and consciously chosen to give inaccurate particulars of the income.
5. The ITO assessed the circulating capital invested in money-lending business. But this estimate, howsoever reasonable it may be, is not based on any material on record. Similarly, as regards the expenses incurred in construction of the building, it is estimated that it ought to cost Rs. 10,000 and not Rs. 7,000, as estimated by the assessee. The assessee's explanation that he made income from agricultural sources has been rejected. Now, since the estimate by the Department is far in excess of the estimate made by the assessee, the Department wants to conclude that there is a deliberate suppression of income. Such a conclusion would be wholly justified if there is anything on record from which it could be reasonably inferred that the assessee had suppressed the income and had given wrong particulars in his return. At least the circumstances of the case must lead to an inference that what the assessing officer concluded was true. In other words, the circumstances and the material on record show that the assessee had suppressed the income and deliberately given a false return.
6. In constructing a house with better management it may be possible to raise the construction, as the assessee has done, on spending Rs. 7,000. There is nothing to show that such a construction can be done only at a cost of Rs. 10,000 or more. Therefore, as far as this part of the case is concerned, even though the estimate of the assessee was not accepted, it will not be proper to hold that the assessee deliberately gave inaccurate particulars.
7. The penalty proceedings being penal in character the Department must establish that the receipt of the amount in dispute constituted income of the assessee. Apart from the falsity of the explanation, the Department must have before it, before levying penalty, material or evidence from which it could be inferred that the particulars of his income had been deliberately furnished inaccurately. Now, it may well be that even if the assessee had capital, it may not have been invested in money-lending during the year in question. The assessee made a profit from the sale of land. Such an income may be liable either to income-tax or capital gains tax. But unless the statute places the burden on the assessee for the purposes of penalty proceedings, the mere non-explanation or even a false explanation could not be penalised. From the fact that the assessee failed to prove that the income was from agriculture, no inference could be made either of concealment or of wilfulness in furnishing inaccurate particulars. There is no material or evidence apart from the assessment order from which it could be reasonably inferred that the assessee concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same. We are, therefore, of the opinion that in the circumstances of the case, the penalty of Rs; 5,000 ought not to have been imposed.
8. We answer the question in the negative and are of the opinion that there was no circumstance by which the Tribunal, in law, would be justified in imposing penalty on the assessee under Section 271(1)(c) of the I.T. Act, 1961.