Ramaprasad Rao, J.
1. Tax Case No. 59 of 1962 is in relation to the assessment made by the revenue under Section 34 of the Indian Income-tax Act, 1922, on the assessee and relates to the assessment years 1943-44 to 1947-48. Tax Case No. 206 of 1965 also relates to the same period, but concerns itself with the legality and propriety of the penalty levied on the assessee under Section 28(1)(c) of the Act. The Tribunal, in each of the cases as above, submitted independent questions for being answered by this court. The relevant facts are as follows :
The assessee was assessed as a Hindu undivided family. The assessee was mainly dealing in yarn and was manufacturing silk sarees as well. Assessments for the years under review were made under Section 23(3) of the Act. On written information furnished by the assessee's pleader, one Mr. Ramamurti Iyer, that silver bars of the assessee were kept in his house for some time and that such property belonged to the assessee, action was taken by the Income-tax Officer under Section 34 of the Act on the foot that he had information relating to sale of jewels in some years, acquisition of properties in some others and of bank deposits in yet others in the names of his mother-in-law and two wives. For the year 1943-44, the original assessment was completed on March 10, 1944, and he was assessed on an income of Rs. 53,628. Notice under Section 34 to reopen the assessment was given on December 11, 1950, and it was found that property of the value of Rs. 14,286 and jewels of the value of Rs. 13,178 were purchased from undisclosed money and hence an addition of Rs. 27,464 was made for this year. For the assessment year 1944-45, the original assessment proceedings were completed on February 25, 1947, andthe assessee was assessed on a total income of Rs. 42,459. On December 10, 1951, notice under Section 34 was given and consequent upon such reopening, a sum of Rs. 38,775 as the value of the properties, a sum of Rs. 90,000 as bank deposits in the names of his relatives, a sum of Rs. 618 as and for acquisition of interest on securities, and a sum of Rs. 523 being the annual value of certain other properties were discovered to have been secured by the assessee during this assessment year and consequently a sum of Rs. 1,29,916 was added in the reopening proceedings. In the assessment year 1945-46, the original assessment of which was completed on February 25, 1947, when the total income was reckoned at Rs. 74,318 was sought to be reopened by initiating notice under Section 34 on December 11, 1950, resulting in a total addition of Rs. 49,267 consisting of bank deposits in the names of relatives, sale or acquisition of jewels of the value of Rs. 17,900, interest on securities to the tune of Rs. 84 and other properties of the annual value of Rs. 523. Even so, for the assessment year 1946-47, a total addition of Rs. 74,542 was added on the original assessment made on March 15, 1948, in the sum of Rs. 23,616 on proceedings initiated under Section 34 of the Act on December 10, 1951. Here again, the additions consisted of the value of properties, bank deposits, interest on securities and the annual value of other properties secured from undisclosed sources. For the last assessment year 1947-48, three sums were added, namely, Rs. 10,800, Rs. 17,500 and Rs. 25,075. The original assessment for the year in question was completed on March 25, 1948. The re-opening of the assessment was done under Section 34 on August 26, 1950, and June 4, 1953, and the escaped income consisted of sale consideration for purchases of properties, bank deposits in the names of relatives, interest on securities and annual value of other small properties. The statement of the case in Tax Case No. 59 of 1962 sets out in detail the nature of escapement in each of the years under review. It is unnecessary to repeat them while answering the question under reference. We shall, however, succinctly refer to the relevant facts in each of the years so as to make this order complete.
2. On the facts arising in the reference, the following questions for our decision have been formulated by the Tribunal :
R.A. No. 712 :
(i) Whether the initiation of proceedings under Section 34 for all the years was justified ?
(ii) Whether the inclusion of Rs. 13,178 as the income of the assessee is lawful? And
(iii) Whether the inclusion of Rs. 14,286 representing the value of part of the properties standing in the name of Thayammal Rukmini Ammaland Saraswathi Ammal as having been acquired from undisclosed sources of the assessee is lawful '
R.A. No. 713 of 1947-48.
'Whether, on the facts and in the circumstances of the case, the supplementary assessment made under Section 34 by inclusion of Rs. 10,200 representing the deposits made by Thayammal in the bank as belonging to the assessee and as representing the income of the assessee is lawful ' R.A. No. 714 of 1944-45.
'(1) Whether, on the facts and in the circumstances of the case, the supplementary assessment made by the inclusion of Rs. 38,775 representing the value of the properties purchased by Thayammal, Rukmini Ammal and Saraswathi Ammal during the accounting year by treating the said investments as income of the assessee is lawful ?
(2) Whether, on the facts and in the circumstances of the case, the supplementary assessment made under Section 34 by the inclusion of Rs. 90,000 representing the deposits made by Thayammal, Saraswathi Ammal and Rukmini Ammal, and Rajaguni Ammal in banks as belonging to the assessee and representing the income of the assessee is lawful ?'
R.A. No. 715 of 1945-46.
' Whether on the facts and in the circumstances of the case, the supplementary assessment made under Section 34 by the inclusion of Rs. 17,900 representing the sale proceeds of jewels as income of the assessee is lawful ' R.A. No. 716 of 1946-47.
' (1) Whether, on the facts and in the circumstances of the case, the supplementary assessment made under Section 34 by the inclusion of Rs. 12,094 representing the value of the properties purchased by Rukmini Ammal and Saraswathi Animal by treating the acquisition of the properties as representing the income of the assessee is valid ?
(2) Whether, on the facts and in the circumstances of the case, the supplementary assessment made under Section 34 by the inclusion of Rs. 30,000 representing the deposits by Thayammal in the bank as belonging to the assessee and representing the income of the assessee is lawful '
R.A. No. 717 of 1947-48. ' Whether, on the facts and in the circumstances of the case, the supplementary assessment made under Section 34 by the inclusion of Rs. 20,000 representing the deposits made by Thayammal in the bank as belonging to the assessee and as representing the income of the assessee is lawful '
3. For the year 1943-44 additions were made on the ground that the amounts expended for the purchase of properties and amounts realised bysale of jewels should be deemed to be the undisclosed income of the assessee. In March, 1942, jewels worth about Rs. 12,000 were sold and a consolidated entry regarding such transactions was made in the account books on March 28, 1942. Though these jewels were reported to be the jewels of the two wives of the assessee and though these ladies had folios in the books, the moneys realised by the sale of the jewels were not brought to their account. Similarly, the source of purchases of certain properties during the assessment year under review was not clearly explained. It was pleaded that the mother-in-law of the assessee invested certain amounts belonging to her and from and out of such investments the properties were purchased in the names of the wives of the assessee. It was also suggested that the mother-in-law was carrying on money-lending business of her own and this also constituted the nucleus for the purchase of the properties. The Income-tax Officer rejected the version and held that the mother-in-law had no requisite financial resources for making the investments and the moneys invested both in land and in bank deposits in the years 1943-44 and 1944-45 came from the assessee. On the Appellate Assistant Commissioner rejecting the theory put forward by the assessee as regards the source of the purchase price of the properties and the investments, the Tribunal considered at length the story of the assessee. They found it impossible to believe that the wives sold jewels in order to provide funds to the assessee. In fact, they were of the view that, when according to the mother-in-law of the assessee the wives of the assessee were duly provided for with enough and more funds and properties, there seems to be no necessity or reason for the housewives to sell jewels as if they were in impecunious circumstances and in order to provide funds for the business of their husbands. They characterised the entire transaction as ringing in untruth. Attention is pointedly drawn to the receipts given by the assessee himself in the case of the sale of jewels. They advert to the claim of Thayammal, the mother-in-law of the assessee, that she was doing cotton business of her own and find that it is for the first time in March, 1952, such a version is put forward by her. They were not impressed with the posse of witnesses examined in the case and pointed out that the witnesses were speaking about the alleged money-lending activities of the family, but there is no whisper about the cotton business. The account books said to have been kept by the family was subjected to expert examination both by the Government examiner of disputed documents and by an expert of the choice of the assessee and, after adverting to the material entries therein and the manner of such entries, the Tribunal found that the account books produced by the family cannot be said to be those kept in the ordinary course of business.
4 At this stage it is convenient to refer to the story put forward by the assessee as regards bank deposits as well: It is alleged that such bank deposits discovered during the assessment years commencing from 1944-45 to 1947-48 did all emanate from the mother-in-law of the assessee and for this purpose the alleged opulence of the mother-in-law was greatly stressed. Reliance was placed on the money-lending business and the cotton business of Thayammal. The Tribunal, in a very detailed and considered order of theirs, found that the account books produced by Thayammal cannot be countenanced and, in fact, quoted a particular instance in 1944-45 to discredit the entire theory as regards the opulence of Thayammal. During the year 1944-45 there was a credit for Rs. 350 in the name of Thayammal on December 11, 1943. A debit for this amount also appears in the account books. No explanation whatsoever had been forthcoming as to what Thayammal did with her funds from 1935 to 1941 when the deposits started and the purchases of properties were made. Malli Chettiar, one of the witnesses, definitely states that Thayammal was not keeping accounts. We are not satisfied that a proper explanation was at any time offered before the revenue or the Tribunal for accepting the story put forward by the assessee that the deposits in the course of years and the purchase of properties in each of the assessment years were made from funds other than those belonging to the assessee. Rightly, therefore, for the year 1943-44 the Tribunal rejected the contention that a sum of Rs. 14,286 was provided for by Thayammal for the purchase of properties during the accounting year. Even so, we are not satisfied that there was material before the Tribunal to dislodge the findings of the revenue that the amount of Rs. 13,178 representing the value of jewels came from the assessee.
5. For the year 1944-45 the Tribunal had ample material to find that the purchase of the properties and the investments on fixed deposits on February 8, 1943, and June 16, 1943, were made and ought to have been made from the funds of the assessee and not through funds belonging to third persons including Thayammal.
6. In the assessment year 1945-46 the addition of Rs. 17,900 was rightly sustained. For the assessment year 194.6-47 we are unable to find anything strange in the conclusion of the Tribunal when they held that they were unable to believe that Rs. 10,000 was, given by Thayammal and the other Rs. 20,000 was made up in the way in which the assessee wanted them to believe. For the last year 1947-48 the Tribunal again holds that the version of the assessee that the investments and the properties were made and purchased from funds given to him by his wives, daughters and sons cannot be believed.
7. As this court exercises jurisdiction only in an advisory capacity in proceedings under Section 66 of the Indian Income-tax Act, 1922, and as itdoes not act as an appellate court, we feel that we are justified in upholding the findings of fact of the Tribunal which are based on material, and Indeed ample material.
8. One other common question that was seriously urged by Mr. K. Rajah Iyer, learned counsel for the assessee, is that the Income-tax Officer was in error in having reopened the assessment under Section 34 of the Income-tax Act. This contention proceeds on the basis that when original assessments were completed in the instant case in their respective years, the Income-tax Officer had all the materials before him and if he was not circumspect at that time so as to bring into the net of taxation various amounts which were indeed assessable and exigible to tax, he cannot, at a later stage, on the same material, reopen the assessment on the ground that some income of the assessee has escaped assessment. Indeed, the floodgates of investigation in the instant case were opened by a letter written to the department by an advocate of the assessee. On such information secured regarding the secret keeping of certain gold and silver bars at the residence of the advocate, which were later taken away by the assessee, a re-examination of the accounts and a probe into further details were called for. This resulted in the proceedings under Section 34 and in the additions of income as stated above. The question which arises immediately for consideration is whether the Income-tax Officer had reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under Section 22 for any year, or to disclose fully and truly all material facts necessary for his assessment for that year, the income chargeable to tax has escaped assessment for that year. The contention of the learned counsel for the assessee is that in the instant case it cannot be said that the necessary limbs of Section 34 have been satisfied in the case, for there was a totality of disclosure of the assets and income of the assessee even during the original proceedings. No doubt, as already stated, the investigation started on information secured through an advocate of the family who later turned hostile to them. But at that point of time it has to be considered whether the Income-tax Officer had reason to believe that there was no totality of disclosure or fullness of disclosure of material facts. The expression ' reason to believe ' appearing in Section 34 has been the subject-matter of many judicial precedents. The ratio of such well-accepted authoritative pronouncements appear to be that if the Income-tax Officer acts as a reasonable and prudent man on the basis of information secured by him that there is a case for reopening, then Section 34 can well be pressed into service and the assessments reopened. As a consequence of such reopening, certain other facts might come to light. There is no interdict or a ban under Section 34 for the assessing officer to take into consideration such facts which come to lighteither by discovery or by a fuller probe into the matter and reassess the assessee in default if circumstances require. A mere submission by the assessee that the entire account books were before the assessing officer even in the first instance is not always the necessary criteria to judge whether a reopening under Section 34 is possible. Each case depends on its own facts and circumstances. As seen from the narrative of facts earlier, the reassessments in the respective years under consideration were based on a just and a proper probe into the accounts, though, no doubt, the necessity for such reopening was based on material which might not form the basis or the sine qua non for the ultimate reassessment.
9. In Commissioner of Income-tax v. Jagan Nath Maheshwary the Punjab High Court observed:
' The word 'information' is, therefore, synonymous with knowledge or awareness, in contradistinction to apprehension, suspicion or misgiving,
The words ' definite information ' and ' discovers' in Section 34 do not bear any rigid or narrow etymological meaning, but are to be interpreted in their broad and generally accepted sense. The only restriction in using the words ' definite information ', which the framers of Section 34 had in view, was to prevent the Income-tax Officers from making assessments blindly and officiously or on the basis of rumours, gossip or vague apprehensions. The Income-tax Officer is not called upon to discover the exact quality or quantity of the omission ; it is sufficient if he finds that there has been some omission and it is immaterial if it is greater or smaller than he had supposed it to be. It is no less a discovery when the actual omission is of some different kind to the supposed omission.'
10. In conclusion the learned judges would add :
'The rule of interpretation of fiscal enactments, that in case of doubt the construction most beneficial to the taxpayer should be adopted, is subject to the overriding rule against the impairment of obligation. '
11. In Seth Kalekhan Mahomed Hanif v. Commissioner of Income-tax : 34ITR669(MP) it was held:
' The mere production of account books at the time of the original assessment did not fasten knowledge upon the department as to the existence of any cash credits therein and the department was not estopped from discovering any cash credits which had been overlooked in the original assessment proceedings ; Section 34 covered such a case.'
12. In Calcutta Discount Co. Ltd. v. Income-tax Officer Calcutta, : 41ITR191(SC) the Supreme Court has expatiated the expression 'reason to believe' as postulating belief and the existence of reasons for that belief. Their Lordships proceed to say :
' The belief must be held in good faith ; it cannot be merely a pretence. ... It contemplates existence of reasons on which the belief is founded, and not merely a belief in the existence of reasons inducing the belief . , .
The court is not concerned with the question whether the materials may be regarded by a court, before which a dispute is raised, to be sufficient to sustain the belief entertained by the Income-tax Officer.
The duty imposed by the Act upon the taxpayer is to make a full and true disclosure of all material facts necessary for the assessment; . . .'
13. In K. S. Abdul Sattar v. Commissioner of Income-tax : 47ITR621(AP) the following passage is apposite to this case :
' Once a case is reopened under Section 34 of the Income-tax Act, the Income-tax Officer is not limited to the information which he had received and on the strength of which he had asked for a reopening of the assessment and reassessment of the assessee. If he were to discover other cash credits after issuing the notice, he is entitled to take them into account in the income of the assessee and to assess such income if it had escaped assessment earlier. The term 'such income' in Section 34 refers to the entire escaped income, not only to that part of it with respect to which the Income-tax Officer had definite information, in consequence of which he had discovered the escapement,'
14. In Sankaralinga Nadar v. Commissioner of Income-tax : 48ITR314(Mad) this court observed;
' . . . . income which escapes assessment as a result of the lack of vigilance of the Income-tax Officer or due to inadvertence or negligence or to the perfunctory performance of his duties without due care and caution can well, be within the ambit of Section 34(1)(b) provided the requirements of that section are satisfied. '
15. Kale Khan Mohammad Hanif v. Commissioner of Income-tax : 50ITR1(SC) is authority for the view that in reassessment proceedings under Section 34 of the Income-tax Act, 1922, cash credits in the accounts of the assessee, which had been overlooked in the original assessment, can be brought to tax as representing income from undisclosed sources. The scope of the jurisdiction has been well brought out by Veeraswami J., speaking for the Division Bench, in T. S. PL. P. Chidambaram Chettiar v. Commissioner of Income-tax : 62ITR774(Mad) as follows :
'For invoking jurisdiction under Section 34(1)(a) and initiating action thereunder, it is not necessary that omission or failure on the part of the assessee and escapement of income from assessment should be found as a condition precedent. It is sufficient if the Income-tax Officer has reason to believe that income has escaped assessment on account of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment of a particular year. The burden to disclose facts is primarily on the assessee and any information that the department may have will not dispense with the necessity of the assessee to discharge his duty.'
16. The following passage from Kantamani Venkata Narayana & Sons v. First Additional Income-tax Officer, Rajahmundry, : 63ITR638(SC) is also instructive:
' The assessee does not discharge his duty to disclose fully and truly material facts necessary for the assessment of the relevant year by merely producing the books of account or other evidence. He has to bring to the notice of the Income-tax Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that, from the books produced, the Income-tax Officer, if he had been circumspect, could have found out the truth, he is not on that account precluded from exercising the power to assess income which had escaped assessment.'
17. The later analytical exposition of the law underlying reopening of assessment has been succinctly stated by the Supreme Court in S. Narayanappa v. Commissioner of Income-tax, : 63ITR219(SC) :
' Two conditions must be satisfied in order to confer jurisdiction on the Income-tax Officer to issue the notice under Section 34 of the Income-tax Act in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year, viz., (i) the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax had been under-assessed ; and (ii) he must have reason to believe that such ' under-assessment ' had occurred by reason of either, (a) omission or failure on the part of the assessee to make a return of his income under Section 22, or (b) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer acquires jurisdiction to issue a notice under the section. If there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under Section 34. Whether these grounds are adequate or not is not a matter for the court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue. It is of course open for the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. In otherwords, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief.
The expression 'reason to believe' in Section 34 does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith ; it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under Section 34 of the Act is open to challenge in a court of law. '
18. To sum up, the Income-tax Officer while exercising jurisdiction under Section 34 had reason to believe that there was an escapement and he found as a matter of fact the casual connection between the materials and the primary facts found by him in the reopening proceedings and the escapement as such and there being sufficient nexus between the two, he had authority to act as he did and find as he concluded. The jurisdictional fact discovered and found by the revenue and ultimately sustained by the Tribunal has been so found by it within the framework of law and, therefore, the revenue had ample jurisdiction to reopen the same. The assessee cannot barely take shelter on the theory that all the account books were before the original authority and a little more of circumspection on his part should have brought to light the so-called primary facts laterly discovered by the reopening authorities. This is a vain argument and without any substance. It is necessary that when an assessment is reopened, a doctrinaire approach to the problem is not the thing which has to be conceived. As is ordinarily understood in common law, the cause of action is only the result of a bundle of facts and if on a proper appreciation of such bundle of facts, whether at the initial stage or at the later reopening stage which was initiated because of reasonable belief on the part of the revenue, then such intimate relationship between the new facts and the escapement being brought to light, such income which has escaped assessment ought to be and in the instant case has been properly brought to tax.
19. Therefore, we answer questions Nos. 2 and 3 in R. A. No. 712 relating to 1943-44 in the affirmative and against the assessee. In R. A. No. 714 relating to the year 1944-45 we answer the two questions in the affirmative and against the assessee. Our answer to the questions in R. A. No. 715 for the year 1945-46 is in the affirmative ' and against the assessee. Similarly, our answer to the two questions in R. A. No, 716 relating to the year 1946-47 is in the affirmative and against the assessee. Our answer to each of the questions in R. A. Nos. 713 and 717 for the year 1947-48 is in the affirmative and against the assessee. Counsel's fee, Rs. 250.
20. Tax Case No. 206 of 1965.--In this tax case the propriety and legality of the penalty levied against the assessee in the relevant years which were the subject-matter of Tax Case No. 59 of 1962 are being challenged. It is unnecessary to repeat the facts excepting to advert to certain material circumstances therein. From the resume of the facts as set out in Tax Case No. 59 of 1962 it is clear that the assessee did squarely place, even at the time when the original assessment proceedings were pending, all his account books and primary facts. The Income-tax Officer, who originally assessed the assessee, however, should be presumed to have been circumspect ; but in the result, however, he did not discover any escapement in tax, nor did he find that the assessee concealed his income wantonly and deliberately furnished inaccurate particulars for purposes of his adjudication. The later events, however, disclosed that the pleader of the family, who was apparently not well disposed with them, furnished certain information to the department which necessitated a reopening of the assessments under Section 34. We have already held that the revenue had ample jurisdiction to reopen the closed assessments, for they had sufficient material and information, and in consequence reasonable belief in entertaining an opinion that certain income of the assessee has escaped assessment. Thus, the jurisdictional fact having been found by the revenue to be available to them for the reopening of the assessment, the assessee cannot question the jurisdiction of the revenue to embark upon a re-enquiry into his accounts and a re-probe into the primary facts which were already before them during the original assessment. No doubt, an assessee cannot, by placing all his accounts and disclosing the facts known to him and apparent from the record of his accounts, claim that no further action can be taken by the revenue. But it is also equally a salient principle of law that if there has been an open disclosure of material and primary facts when the original assessment was taken up, then it would be highly inequitable and indeed unjust if a penalty is unlawfully levied on the assessee, if on the subsequent probe of events escapement is discovered. It is also clear in the instant case that the assessee gave an explanation to the department as to how the cash credits in his accounts can be explained and how much amounts which either remained as cash credits in bank deposits or otherwise or constituted the source for the purchase of properties in the names of his wives ; this explanation, however, did not find favour with the revenue which held that the assessee's version was not worthy of credence. The theory put forward by the assessee and the reaction of the department to such an explanation have already been fully set out by us in T. C. No. 59 of 1962. The sale of jewels by the wives of the assessee was found to be unacceptable ; that the mother-in law of the assessee carried on a money-lending business or a cotton business did not find favourwith the revenue ; that the properties purchased during the relevant years in question could not have been purchased from a source other than the undisclosed source of income of the assessee was also found by the revenue as against the assessee. In fact, the Tribunal gave ample opportunities to the assessee by remanding the case for further enquiry. In the remand proceedings 13 witnesses were examined and after securing the remand report, the Tribunal upheld the additions made in the several years in question.
21. Consequent upon this, the Income-tax Officer initiated penalty proceedings under Section 28(1)(c). In reply to the penalty notices, the assessee explained that the credits representing the sale of jewels were genuine credits and that vouchers in support of the same were produced and accepted by the Income-tax Officer in the original assessment proceedings. In regard to the acquisition of properties and bank deposits it was explained that they had been acquired from the funds of the mother-in-law, Thayammal, and the assessee had no connection with them. The assessee, therefore, claimed that no penalty was exigible in respect of any of the additions relied on by the Income-tax Officer so as to initiate proceedings under Section 28(1)(c) of the Act. The Income-tax Officer rejected the explanation and held that the provisions of Section 28(1)(c) were attracted. The appeal to the Appellate Assistant Commissioner was partially successful. On an appeal by the department, and the assessee against the decision of the Appellate Assistant Commissioner, the Tribunal held that the assessee had not made a full and complete disclosure of all material facts and set aside the Appellate Assistant Commissioner's order and restored that of the Income-tax Officer. The Tribunal, for the relevant years in question, have levied the following penalty for the assessment years noted below :
22. The burden of the song of the assessee in the penalty proceedings is that there was no fresh disclosure of facts before the revenue during the reassessment proceedings and that even at the stage of the original assessment he had disclosed all relevant facts and that, therefore, penalty is not justified. As already stated, the Income-tax Officer was not satisfied with the explanation. But the Appellate Assistant Commissioner, while considering the appeals for the assessment years 1943-44 and 1944-45 observed that the assessee cannot be stated to have deliberately suppressed the investments in the names of himself, his wives, mother-in-law, etc. The Income-tax Officer has not found out anything on his own account. He,therefore, reduced the penalty in part. The Tribunal, on the other hand, accepting the department's contention that the assessee's explanation was couched in general terms and was vague and that it did not amount to disclosure of true and the entire primary facts, was constrained to set aside the Appellate Assistant Commissioner's order and restore that of the Income-tax Officer. Even so, for the year 1944-45, the Tribunal, after considering the records and the quality of the discovery made by the department in the reassessment proceedings vis-a-vis the explanation given by the assessee for the year in question, allowed the departmental appeal and fixed the penalty as stated above. A similar view was taken by the Tribunal as regards the years 1945-46, 1946-47 and 1947-48 and penalty was imposed on the assessee in the manner stated above.
23. Section 28 dealing with concealment of income or improper distribution of profits appearing in Chapter IV by itself is a self contained section which is sufficiently instructive. The object of Section 28 is to make tax evasion unremunerative. But the main provisions therein and particularly Section 28(1)(c) under which the present proceedings have been initiated by the revenue, relating to the imposition of penalty being essentially a penal provision, it has to pass muster of the essential qualitative test in criminal jurisprudence that an offence if alleged by the prosecutor should be brought home to the accused. The passage of Lord Wright in Fattorini (Thomas) (Lancashire) Ltd. v. Inland Revenue Commissioners,  11 I.T.R. 50 relevant to the subject, has become a locus classicus on the same:
' The onus in such a proceeding was not of an ambulatory or shifting character but the onus was finally upon the crown to prove its right to impose what was a severe penalty.'
24. There being no possibility of boggling, the offence should be established beyond reasonable doubt to visit the consequential penalty. The revenue being a quasi-judicial authority dealing with rights of subjects and invested with powers to inflict punishment on defaulting assessees, has to act judicially and in accordance with the accepted canons of the concerned law. Section 28(1) (c) prescribes the hypothesis on which a punishment to a delinquent assessee can rest. This section deals with concealment of income or improper distribution of profits. In the course of any proceedings under the Act, if the revenue is satisfied that any person has concealed the particulars of his income, or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, in addition to the amount of the income-tax and super-tax, if any payable by him, a sum not exceeding one and a half times that amount which would have been avoided if the income as returned by such person had been accepted as the correct income. The main limb of section 28(1) (c) reflects a wanton overt act on the part of the assessee in concealing the particulars of his income or in the deliberate furnishing of inaccurate particulars or primary facts. It is only in cases of designed concealment of income and wanton avoidance of true particulars or primary facts that penalty would be attracted as provided.
25. One other aspect which has already been touched upon, has to be borne in mind to sustain a penalty in proceedings under Section 28(1)(c). When the assessee furnishes a reasonable and a plausible explanation of the source and nature of the credits shown in his books, it cannot be said that his explanation which did not find favour with the revenue, though false, should not be equated to a deliberate suppression of the particulars of his income within the meaning of Section 28(1)(c). Nor could it be said that, in a case where there has been a disclosure of all account books and primary facts, and which were not scrutinised fully in the first instance and later probed into resulting in a reassessment under Section 34, the assessee is guilty of deliberate suppression of the particulars of his income or wanton avoidance of accurate particulars. In a case where the explanation of the assessee is found to be false, he is not being charged for having given a false explanation. In fact, that is not the sine qua non of the offence under Section 28(1)(c). The ingredients of the offence under Section 28(1)(c) are that the assessee concealed the particulars of his income, or deliberately furnished inaccurate particulars of such income. In C.V. Govindarajulu Iyer v. Commissioner of Income-tax : 16ITR391(Mad) Rajamannar C.J., speaking for the Bench, observed while considering the power of the Income-tax Officer to levy a penalty under Section 28(1) in the following words:
' There may be one possible qualification of his power, and that is when the default or the act which is the basis of the imposition of the penalty was within the knowledge of the officer who passed the final order in the prior proceeding and if that officer had failed to exercise his power under Section 28 during the course of the proceeding before him. Possibly in that case he would have no power. '
26. This case was considered also by the Supreme Court in N. A. Malbary & Bros. v. Commissioner of Income-tax, : 51ITR295(SC) wherein the proposition as put forward by the learned Chief Justice, was held to be hot applicable to the facts of that particular case. Viewed in this light, it is fpr us to consider whether the imposition of penalty on the assessee in these proceedings for the above relevant years is legal.
27. We have indicated already that proceedings under 'section 34 of theIncome-tax Act were initiated because of some information given by anadvocate of the family. However, during such reopening, the Income-taxOfficer, on the very same material which was scrutinised earlier by a similar officer in the original proceedings, came to the conclusion that certain cash credits in the books of account were not satisfactorily explained. In the words of Rajamannar C.J., the officer who dealt with the original proceedings knew or at any rate had knowledge of the act complained of against the assessee ; for he had before him the very information which was the subject-matter of scrutiny for a second time under Section 34 of the Act by a similar officer. No doubt, the explanation which was called upon and given by the assessee was not accepted. This would not lead necessarily to the result that the ingredients of Section 28(1)(c) of the Act have been satisfied. In fact, it was not a formal explanation which the assessee intended to give. He desired to substantiate his contention by producing as additional evidence the account books of Thayammal and examined several witnesses in support of his case. There has been, therefore, full enquiry into the matter and ultimately the explanation of the assessee was not accepted. There was, therefore, a second approach to the problem by the Income-tax Officer on the material newly discovered by him in the proceedings under Section 34. It cannot be generalised that whenever and howsoever the explanation given by the assessee is found to be false and improbable, that would amount to the assessee exposing himself to the penalty leviable under Section 28(1)(c). It is imperative that the department should establish the assessee's guilt and it is not for the assessee to prove his innocence. In the instant case it cannot be said that, as pointed out by Chagla C.J. in Commissioner of Income-tax v. Gokuldas Harivallabhdas, : AIR1959Bom96 :
'The charge against an assessee under Section 28(1)(c) being that he gave inaccurate particulars about his income, it is not possible to infer from the falseness of his explanation that the receipt necessarily constitutes an income of the assessee. '
28. In all the years under review, the assessee gave an explanation which was not acceptable and, therefore, held to be false. It has to be remembered that the Income-tax Officer who originally assessed these proceedings had occasion to consider this very material before him, but he was not circumspect enough to discover any income which has escaped assessment. By reason of the non-acceptance of the explanation of the assessee the credits and other items, which were added on as additional income, were taken into consideration as deemed income of the assessee on the ground that he should have earned the same from undisclosed sources. This would not enable the Income-tax Officer, in the facts and circumstances of this case, to levy the penalty as imposed by him. In this view, the order of the Tribunal, which set aside the order of the Appellate AssistantCommissioner appears to be erroneous. We, therefore, answer the following questions formulated by the Tribunal in the negative and in favour of the assessee with costs. Counsel's fee Rs. 250.
29. 1943-44 :
'Whether, on the facts and circumstances, the Appellate Tribunal was justified in law in reversing the decision of the Appellate Assistant Commissioner and restoring the penalty of Rs. 8,000 levied by the Income-tax Officer under Section 28(1)(c) of the Indian Income-tax Act, 1922, for the assessment year 1943-44 ?'
'Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in law in reversing the decision of the Appellate Assistant Commissioner and restoring the penalty of Rs. 42,000 levied by the Income-tax Officer under Section 28(1)(c) of the Indian Income-tax Act, 1922, for the assessment year 1944-45 ?'
31. 1945-46 :
' Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified, in reversing in part, the decision of the Appellate Assistant Commissioner and restoring the penalty levied by the Income-tax Officer under Section 28(1)(c) of the Indian Income-tax Act, 1922, to the extent of Rs. 5,000 for the assessment year 1945-46 '
32. 1946-47 :
' Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in reversing in part the decision of the Appellate Assistant Commissioner and restoring the penalty levied by the Income-tax Officer under Section 28(1)(c) of the Act to the extent of Rs. 7,500 for the assessment year 1946-47 '
33. 1947-48 :
' (i) Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in reversing in part the decision of the Appellate Assistant Commissioner and restoring the penalty levied by the Income-tax Officer under Section 28(1)(c) to the extent of Rs. 4,000 for the assessment year 1947-48 ?
(ii) Whether, on the facts and circumstances of the case, any penalty could be levied by the Income-tax Officer under Section 28(1)(c) of the Act in respect of the sum of Rs. 12,200 in the present proceedings. '