Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court:
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty levied upon the assessee under the Explanation to Section 271(1)(c) of the Act relating to the assessment year 1964-65 '
2. The statement of the case relates to the penalty levied under Section 271(1)(c) of the I.T. Act, 1961, relating to the assessment year 1964-65.
3. The assessee is a registered firm stated to be engaged in the manufacture and sale of steam and hydraulic packings. It declared income of Rs. 55,721 in its P & L A/c, for the assessment year concerned 1964-65, corresponding to the previous year ending on 31st March, 1964. In the proceedings for assessment to tax, the ITO found credits in the accounts of four hundiwallas. The ITO held that, in the absence of satisfactory evidence, the assessee had agreed to the taking of the peak credit of Rs. 15,000 as its income from undisclosed sources, the ITO started penalty proceedings under Section 271(1)(c) read with Section 274 of the Act and as the minimum penalty leviable exceeded Rs. 1,000, the case was referred to the IAC for the purpose of levying penalty. The IAC held that the onus had not been discharged by the assessee and that the assessee could be penalised tinder the Explanation to Section 271(1)(c). He further held :
' I find that the return of income was filed only on 19th July, 1968, Actually, the amount of penalty leviable would be based on the provisions of the I.T. Act applicable to returns filed after 1st April, 1968. In such case penalty will be a minimum of the income sought to be evaded and maximum of twice the amount. In the instant case income sought to be evaded would be Rs: 15,000 and interest wrongly claimed of Rs. 1,485, amounting in all to Rs. 16,485, and this is minimum penalty leviable. Taking into account all circumstances of the case, I hereby impose penalty of Rs. 16,500 Under Section 271(1)(c) of the I.T. Act, 1961.'
4. The assessee carried the matter before the Tribunal and contended that no penalty could be levied under the Explanation to Section 271(1)(c) of the I.T. Act, 1961 ; that the Department could not prove concealment of income ; that merely because the assessee agreed to be assessed in respect of the hundi loans there could not be any presumption or admission of concealment. The assessee relied on the Punjab High Court decision in the case of Gumani Ram Siri Ram , The Revenue, on the other hand, relied on the decision of the Delhi High Court in the case of Durga Timber Works : 79ITR63(Delhi) . It further pointed out that before the AAC the assessee took the contention that the addition of the peak credits of hundi loans should be telescoped with the addition to the trading results and that there was a clear admission that the hundi loans represented income from business.
5. The matter thereafter went to the Tribunal. The Tribunal deleted the penalty for the following reasons :
' The assessee had filed an income of Rs. 55,720 and he was finally assessed on Rs. 77,713, i.e., after the AAC's order. There is a margin of more than 20% between the income returned and the income assessed and, therefore, the Explanation will apply. It is for the assessee, therefore, to prove that there was no fraud or wilful neglect. We accept his submission that merely because he has not been able to explain the hundi loans there can be no case of fraud or wilful neglect. A person may not be able to prove a loan which had taken place some years back for various reasons. A mere inability to prove a loan cannot be, therefore, held as evidence of fraud. Therefore, on this ground there cannot be any levy of penalty. We also agree that no penalty can be levied merely because the assessee surrendered certain receipts for taxation. However, in this case, the assessee had accepted before the Appellate Assistant Commissioner that the trading account addition, could be telescoped with the hundi additions. Therefore, a case can be made out that the hundi additions represent the assessee's business income of Rs. 13,689. This has also been noticed by the Inspecting Assistant Commissioner in his order. On going through the details of the case we find that the peak is represented by borrowing in the name of Narayan Singh Nandlal--Rs. 5,000 on 5th April, 1963, and in the name of Pahala Rai Raghumall--Rs. 5,000 on 7th April, 1963, and Rs. 5,000 on 25th June, 1963. Thus, Rs. 10,000 of these loans had been received within 7 days of the accounting year beginning. Now, the question would arise whether it is probable that the entire trading additions for the whole year would have accrued to the assessee on the first few days of the accounting year. The trading account shows sales of Rs. 5.3 lakhs throughout the accounting year andit would naturally follow that the addition of Rs. 13,689 should be deemed to have accrued throughout the accounting year. Therefore, on probabilities, it appears that the hundi loans could not represent the trading account additions for the whole year. Therefore, the argument that it represents the business income cannot be accepted. It is true that the assessee has agreed for the addition but then, as many High Courts upheld, the agreement may be for so many reasons. We will, therefore, hold that it is not a fit case for the imposition of penalty. The order is cancelled.'
6. Upon these facts the question as indicated above has been referred to us. On behalf of the Revenue it was submitted that there was sufficient evidence to hold that the assessee was liable to penalty. In this connection, reliance was placed on certain observations of the Delhi High Court in the case of Durga Timber Works v. CIT : 79ITR63(Delhi) . There the facts were significantly different. There the assessee had admitted that ' the two amounts could be treated as its concealed income and included in its total income for that year '. If that is the position, where, on an admission by the assessee that it was its concealed income and not merely an acceptance of the position that the amount in question be added to its income, in such a case, if on an appraisal of the entire evidence the Tribunal came to a conclusion that penalty was not leviable, in our opinion, under the frame of the question referred to us, that finding cannot be challenged. In the instant case, as we have set out, no finding of fact has been challenged as perverse. It is the ultimate conclusion which has been challenged. Thus, if the facts found by the Tribunal stand, then the conclusion remains unassailable.
7. Therefore, in our opinion, the question must be answered in the negative and in favour of the assessee.
8. In the facts of the case parties will pay and bear their own costs.
Suhas Chandra Sen, J.
9. I agree.