1. This order will dispose of Income-tax Case No. 2 of 1971 and Income-tax Reference No. 30 of 1970.
2. The assessee is Messrs. Gumani Ram Siri Ram of Muktsar, district Ferozepur. In the assessment year 1964-65 while proceeding with the assessment, the Income-tax Officer noticed cash deposits of Rs. 12,000 appearing in the name of Messrs. Romesh Trading Company in the books of the assessee. The assessee was asked to prove the genuineness of these cash credit entries. The assessee stated that he was not in a position to prove the genuineness of these entries and made a statement 'surrendering squared up account of Rs. 12,000 in the name of Romesh Trading Company'. The assessee was then assessed to an income of Rs. 65,046 as against the returned income of Rs. 46,446. The income assessed included the amount of Rs. 12,000.
3. The assessment was followed by proceedings under Section 271(1)(c) of the Income-tax Act, 1961, and a penalty of Rs. 6,768 at 50 per cent. of the tax sought to be evaded was levied by the Inspecting Assistant Commissioner. Against his decision an appeal was taken to the Income-tax Appellate Tribunal. The Tribunal maintained the order levying the penalty but reduced the quantum to 1/3rd of the tax evaded. The assessee then moved the Tribunal under Section 256(1) of the Income-tax Act, 1961, for stating four questions of law for the opinion of this court. The Tribunal has referred the following question of law for our opinion :
'Whether, on the facts and in the circumstances of the case, a penalty could be levied on the cash deposits surrendered by the assessee out of his free will and whether any more material for the levy of penalty was required to be adduced by the, income-tax authorities ?'
4. The assessee was not satisfied with this order and made an application to this court under Section 256(2) of the Income-tax Act, 1961, and required that the Tribunal be directed to refer the following questions of law for the opinion of this court :
'1. Whether, on the facts and in the circumstances of the case, the initial satisfaction for the imposing of penalty should have been that of the Income-tax Officer or of the Inspecting Assistant Commissioner and whether the said satisfaction has been recorded ?
2. Whether, on the facts and in the circumstances of the case, the Explanation to Section 271(1) will apply particularly when the said Explanation came into force with effect from 1st April, 1964, while the alleged fictitious entry was made on 25th February, 1964 ?'
5. The learned counsel for the assessee while arguing Income-tax Case No. 2 of 1971 did not press for reference of the first question and conceded that the second question was only of an academic nature particularly when the Tribunal did not rely on the explanation in support of the order upholding the levy of penalty by the Appellate Assistant Commissioner.
6. This, therefore, leaves the question that is the subject-matter of Income-tax Reference No. 30 of 1970. So far as this question is concerned it appears to us that the answer to this question is concluded by the decision of the Supreme Court in Commissioner of Income-tax v. Anwar Ali,  76 I.T.R. 696 (S.C.). The facts of the Supreme Court decision are almost in pari materia with the facts of the present case. The only distinction that the learned counsel for the department could urge was that in the Supreme Court case the assessee's case was that he had received the amounts from his relations because of certain communal riots for safe custody. That explanation was rejected by the Income-tax Officer and the amount in question lying in deposit with the bank was treated as income of the assessee. In the present case the assessee furnished no explanation for the cash credit entries of Rs. 12,000. He surrendered this amount for the purpose of tax. But he made no statement that this amount was his income. Their Lordships of the Supreme Court in Anwar Ali's case, observed that :
'Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.'
7. In the present case there is no material whatever which can lead to the conclusion that the amount of Rs. 12,000 represents the income of the assessee. It will be significant in this behalf to note how the Income-tax Officer dealt with this matter. The Income-tax Officer in his assessment order observed as follows :
'Assessee was asked to file a list of cash credits and squared up accounts during this year. Assessee, vide his written reply on file, stated that there were no such accounts in this year. However, during the course of examination of cash books it was found that there was a credit of Rs. 12,000 which was squared on March 28, 1964, in the name of Messrs. Romesh Trading Company. The assessee was asked to prove the genuineness of this credit. It was stated by the assessee that he was not in a position to prove the genuineness of this credit. The same is being added back as income from other sources of the assessee.'
8. The Inspecting Assistant Commissioner on appeal in his order under Section 271(1) read with Section 274(2) of the Income-tax Act, 1961, observed as follows :
'From the above discussion it is very clear that the assessee on one pretext or the other was avoiding or postponing the levy of the penalty. As already mentioned above it concealed the fact before the Income-tax Officer when Shri Bhatia gave it in writing on 7th February, 1967, that there was no paid up or cash credit account in the books of accounts which was subsequently found to be false. The assessee itself agreed to the addition of Rs. 12,000 as well as of Rs. 9,000 in the trading account on its own free will. It was for the first time that the story of negligence of the munim was put up before me. Even here I gave the assessee full opportunity to represent its case. It sought an adjournment on 27th December, 1967, for the specific purpose of producing the munim and again failed to comply to it. In the circumstances, I hold that this amount of Rs. 12,000 actually belongs to the assessee and represents its concealed income.'
9. So far as the Tribunal is concerned it assumed that the amount of Rs. 12,000 represents the income of the assessee and proceeded on that basis. It will be apparent from the two orders already referred to that from the only circumstance that the amount of Rs. 12,000 was surrendered by the assessee an inference has been drawn that the amount represents the income of the assessee. In our opinion, this conclusion is not inevitable. There may be hundred reasons for the assessee to surrender this amount irrespective of the fact whether it was his income or not and it was incumbent, in view of the observations of the Supreme Court in Anwar Ali's case, for the Income-tax Officer to find on evidence that the amount of Rs. 12,000 represented the income of the assessee. Therefore, we are clearly of the view that the requirements of Sections 271(1)(c) have not been satisfied so as to bring the case of the assessee within the same.
10. For the reasons recorded above we answer the question referred to us as follows :
That, on the facts and in the circumstances of the case, a penalty could not be levied on the cash deposits surrendered by the assessee, unless there was material on the record to show that the surrendered item was his income.
11. However, there will be no order as to costs.