Ajit Kumar Sengupta, J.
1. For the assessment years 1952-53 and 1953-54, the Tribunal referred the following question of law under Section 66(1) of the Indian Income-tax Act, 1922, for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty imposed under Section 28(1)(c) of the Indian Income-tax Act, 1922 '
The assessee, a partnership firm, carried on business as selling agents of Burmah-Shell products, It has numerous branches in India with its head office at Calcutta. In both the years under reference, the original assessments were reopened on the grounds that income to the tune of Rs. 2,50,336 in the assessment year 1952-53 and Rs. 16,500 in the assessment year 1953-54 had escaped assessment. In the returns submitted after the reopening of the assessments, the assessee disclosed amounts of Rs. 2,50,336 and Rs. 24,039 for the respective assessment years 1952-53 and1953-54 in Part D of the return claiming that those amounts were not liable to be included in the assessments. The assessee's plea with respect to these amounts was that the assessee's branches collected amounts for charity in the bills and that these amounts remained with the branches, that in some of the cases the amounts of charity were not disclosed in the accounts while in others these amounts were entered in the account books. The assessee's further explanation was that these collections for charity were not spent by the branches and were later on transferred to the head office and that as these amounts were in the nature of a trust with the assessee, these did not form part of the assessee's income and could not be included in its income. The assessee-firm was dissolved in 1957 and the assets and liabilities of the assessee were distributed amongst the partners by an award. The Income-tax Officer found that a sum of Rs. 2,07,380 was distributed amongst the partners according to their shares. The assessee failed to produce evidence to show that the branches had collected these amounts on the bills as charity. The Income-tax Officer also found that an amount of Rs. 16,500 received from the branches did not appear in the account books of the assessee and the amount on account of chanty for the assessment year 1953-54 was Rs. 40,539. The Income-tax Officer was also of the opinion that the assessee failed to explain why these amounts were not spent for charity and why the amounts standing on account of charity was distributed amongst the partners according to their shares. The Income-tax Officer did not accept the explanation of the assessee that the amounts of Rs. 2,50,336 and Rs. 40,539 were for charity realised by the assessee and he treated the same as the income of the assessee from undisclosed sources for the respective assessment years. The Income-tax Officer initiated penalty proceedings under Section 28(1)(c) of the Indian Income-tax Act, 1922, for both the years and by issue of notices called upon the assessee to show cause why penalty be not imposed for these years. These notices were served on the assessee on November 24, 1962. The Income-tax Officer for the reasons given by him in the assessment orders treated the additions of Rs. 2,30,236 and Rs. 40,539 as the concealed income of the assessee and imposed the penalties for the two years by his order passed on August 12, 1970.
2. The assessee preferred appeals against the assessments to the Appellate Assistant Commissioner but the additions were sustained in the quantum appeals by the Appellate Assistant Commissioner. The assessee also preferred appeals against the orders of imposition of penalties by the Income-tax Officer. The Appellate Assistant Commissioner in both the years agreed with the Income-tax Officer and sustained the penalties imposed by the Income-tax Officer in the penalty orders. The assessee went in appealbefore the Tribunal, The Tribunal, after considering the respective submissions, held as follows:
' The assessee's explanation was that the amounts in both the years were received on account of charity. The assessee failed to produce satisfactory evidence in support of its plea and the Income-tax Officer made the additions considering the amounts of both the years as the income of the assessee from undisclosed sources. Penalty proceedings are criminal in nature. The onus of proving that the additions represented the income of the assessee and that the assessee concealed the same or gave inaccurate particulars of the same rested on the Department. The Department did not collect any material to discharge that onus. The balance of Rs. 2,07,380 as it stood at the time of dissolution of the assessee-firm was by the award distributed amongst the partners but that by itself is not sufficient to establish the income nature of the amounts. The ratio of the case of CIT v. Anwar Ali : 76ITR696(SC) applies to the facts of the present case and the penalty orders cannot be sustained.'
The question is whether in these facts the Tribunal was justified in cancelling the orders of penalty. The Income-tax Officer has imposed penalty under Section 28(1)(c) of the Act on the ground that the assessee was guilty of the offences of concealing particulars of its income in the original, assessments. It is true that the assessee disclosed the receipts, which according to the Income-tax Officer, escaped assessment, in the part of of the relevant return but such disclosure cannot absolve the assessee from the statutory liability in ,not disclosing the same in the original returns. It is now well settled that even if the assessee is guilty of no default in a proceeding under Section 147 of the 1961 Act (corresponding to Section 34 of the 1922 Act), a penalty may still be imposed in such proceeding in respect of the original default which resulted in escapement of income from tax in the relevant assessment year. The question is whether, on the facts and circumstances of the case, the condition precedent for imposition of penalty has been justified. The Income-tax Officer came to the finding in the assessment proceedings for the assessment years in question that the assessee failed to explain the nature and source of the receipts claimed to be on account of charity. The findings given in assessment proceedings are relevant and admissible material in penalty proceedings, but such finding and material alone cannot justify the imposition of penalty because the considerations that arises in penalty proceedings are different from those in the assessment proceeding. The explanation of the assessee may be disbelieved. It may be false. But this circumstance alone cannot justify the penalty being imposed. The Revenue must prove that the additions which have been made to the income because of the rejection of the explanation of the assesseerepresent the assessee's income and there must be facts leading to the reasonable and ^indisputable conclusion that such amounts as added to the income of the assessee are its income. Section 28(1 )(c) of the 1922 Act provides that , the penalty could be imposed by the Income-tax Officer if there is conscious and deliberate concealment on the part of the assessee. The facts and circumstances of the particular case must justify the levy of penalty. In this case, the Tribunal, on appreciation of the evidence before them, held that the Department did not collect any material to discharge the onus which lay on the Department to prove that the additions represented the income of the assessee and that the assessee concealed the same or furnished inaccurate particulars of the same. This finding is a finding of fact which has not been challenged by any specific question by the Revenue. In the penalty proceeding, the nature and character of the addition have not been established. The findings in the assessment order are all that weighed with the Income-tax Officer. In our view, the principles which have been laid down by the Supreme Court in the case of CIT v. Anwar Ali : 76ITR696(SC) will govern this case. The Supreme Court at page 701 held thus :
' It must be remembered that the proceedings under Section 28 are of a penal nature and the burden is on the Department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. 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. '
We have already indicated that apart from the falsity of the explanation and inference drawn for such failure, there is no other material to hold conclusively that the assessee had concealed the particulars of its income or had deliberately furnished inaccurate particulars in respect of the same. There is no material to show that the amounts in question are the income of the assessee which the assessee had concealed or that the assessee had deliberately furnished inaccurate particulars.
3. In the result, the question must be answered in the affirmative in favour of the assessee.
4. There will be no order as to costs.
Dipak Kumar Sen, J.
5. I agree.