K.P. Singh, J. - (1.) This reference has been made by the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, on the direction of this court in terms of Section 256(2) of the Income-tax Act, 1961. The Tribunal has drawn up the statement of facts and has referred the following questions for the opinion of this court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in placing the burden of proof on the Department in a case covered by the Explanation to Section 271(1)(c) of the Income-tax Act, 1961?
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the penalty of Rs. 19,000 imposed by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Income-tax Act, 1961 ?" 2. The relevant assessment year under our consideration is 1967-68. The Income-tax Officer by his judgment dated January 2, 1970, did not believe the stand of the assessee that he had spent the money out of his past savings and running income towards the expenses in connection with bus No. UPD 7036 and bus No. UPD 9039 in the relevant year. The Income-tax Officer, against the returned income of Rs. 10,225, made an assessment on the assessee on a total income of Rs. 28,670. According to him, since the assessee had concealed particulars of his income, action under Section 274/271(1)(c) was suggested to be taken separately. The Inspecting Assistant Commissioner of Income-tax, Lucknow, through his order dated February 15,1972, imposed a penalty of Rs. 19,000 and directed the Income-tax Officer to issue the demand notice and challan.
(3.) In appeal against the order of the Inspecting Assistant Commissioner, the Tribunal set aside the order imposing penalty by the Inspecting Assistant Commissioner as is evident from the order of the Tribunal dated September 19, 1973. In paragraph 2 of the order, the Tribunal expressed itself as below : "The penalty in the present case has been imposed in terms of the Explanation to Section 271(1)(c) of the Act. The assessee maintained regular books of account on the basis of which he filed the return. The Revenue did not accept the investment made by the assessee during the year for the acquisition of buses and thereby certain additions were made and thus disparity arose between the income assessed and income returned. The Revenue has not proved that the disparity arose because the assessee earned a higher income but he did not disclose it in his return and thereby he either concealed the amount or filed inaccurate particulars of his income. Negative burden on the assessee, in view of the Explanation to Section 271(1)(c) was discharged when the assessee filed the return on the basis of his books of account. The Revenue has mainly relied on the assessment order where the addition had been made for unexplained investment. But the. Revenue has not proved by cogent material that the assessee either earned a higher profit and he did not disclose the income in his return. In the absence of material to prove the concealment of income, we cannot sustain the penalty and hence the penalty order passed by the Inspecting Assistant Commissioner is set aside. The Income-tax Officer is directed to refund the penalty if already collected.";