R.N.MISRA, J. - (1.)THE Tribunal, Cuttack Bench, has stated this case at the instance of the CIT and referred the following question for the opinion of the Court :
"Whether, on the facts and circumstances of the case and on a true interpretation of S. 271(1)(c) r/w ss. 68 and 2(24) of the IT Act, 1961, the Tribunal was right in requiring the Revenue to prove that the amount added under S. 68 of the Act was in fact the income of the assessee to sustain the imposition of the penalty for concealment of such amount in the return of income?"

(2.)ASSESSEE is a firm deriving income from business in china clay and iron mines and the relevant year of assessment is 1965 66 corresponding to the accounting period ending on December 31, 1964. Assessee returned an income of Rs. 18,199 but the ITO determined the same at Rs. 1,61,389. This amount of total income included a sum of Rs. 69,900 which the assessee claimed were cash credits, but the ITO added it as the assessee's income under S. 68 of the IT Act.
Penalty proceeding was initiated under S. 271(1)(c) of the Act and the ITO referred the matter to the IAC. The IAC imposed penalty of Rs. 25,000 taking into consideration the entire cash of Rs. 69,900. By then the assessee's first appeal against the quantum assessment was pending disposal before the AAC.

(3.)ASSESSEE challenged the levy of penalty before the Tribunal and claimed that the AAC had deleted a sum of Rs. 50,000 out of the cash credits. It appeared that by the time the Tribunal came to deal with the penalty appeal, the second appeal relating to the quantum matter had already been finalised and the Tribunal had already upheld a sum of Rs. 19,900 out of the cash credits. Before the Tribunal in the appeal against penalty matter, it was claimed that the evidence on record clearly demonstrated the bona fides of the assessee and there was, therefore, no intention to commit any fraud and the burden should be on the Revenue to prove that the amount added in the assessment was the income of the assessee before the assessee could be penalised for concealment of income. The Tribunal took into account the Explanation to S. 271(1)(c) of the Act which was admittedly applicable even if the ultimate addition out of the cash credits was confined to Rs. 19,900 and came to hold :
"... Even though the accounts of the assessee were perused by the ITO, there is nothing on record to show that this plea of the assessee was false so as to indicate that the action of the assessee in not disclosing its credits in the return arose from any fraud or any gross or wilful neglect on its part. We are of the opinion that the assessee had discharged the initial negative onus cast by the Explanation to S. 271(1)(c) and therefore, the burden shifted to the Revenue to prove that the amounts added were in fact the income of the assessee. There is nothing on record to show that the amounts added were in fact the income of the assessee and the Revenue relied entirely upon s. 68, according to which unexplained cash credits would be deemed to be the income of the assessee. In our opinion, penalty can be levied only for concealment of actual income and not for the concealment of an amount which is deemed to be the income under S. 68 of the Act. Sec. 2 (24) which defines income does not include the amount deemed to be the income of the assessee under S. 68. Therefore, in the absence of cogent evidence on record to show that the amount added in the assessment was in fact the income of the assessee, it cannot be said that the assessee was guilty of concealing the particulars of its income..."