R.L.GULATI, J. - (1.) THIS is a reference under S. 256(1) of the INCOME TAX ACT, 1961 (hereinafter referred to as the "new Act"), at the instance of the CIT, U.P. II, Lucknow.
(2.) THE assessee is an HUF which carries on business at Dehra Dun. For the asst. year 1951 -52 an assessment order was passed against it under S. 23(3)/31/33 of the IT Act, 1922 (hereinafter referred to as the "old Act"), on a total income of Rs. 1,38,284 which included a sum of Rs. 1,00,000 as income from undisclosed sources. The sum of Rs. 1,00,000 was comprised of two sums of Rs. 50,000 each. The first sum of Rs. 50,000 was made up of four items credited on different dates in September, 1950, in the names of two members of the assessee -family in the suspense account in the Mussoorie set of accounts of the assessee. The other sum of Rs. 50,000 appeared as cash credit in the names of the members of the assessee -family in the account books of M/s Veer Industries Ltd., Delhi. The assessee was not able to explain the nature and source of these deposits and they were accordingly held by the ITO to be income from undisclosed sources. The ITO also initiated proceedings for the imposition of penalty under S. 271(1)(c) of the new Act, on the ground that the assessee had concealed its income to the extent of Rs. 1,00,000. The IAC to whom the case was transferred ultimately levied a penalty of Rs. 35,000. On appeal, the Tribunal set aside the penalty order. The CIT is aggrieved and has brought this reference on the following question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in cancelling the penalty of Rs. 35,000 under S. 271(1)(c) of the INCOME TAX ACT, 1961?" Sri Deokinandan, learned counsel for the CIT, states that in fact two questions arose in this case which have been compressed by the Tribunal into one question as set out above. The two questions are : "(i) Whether penalty under S. 271(1)(c) of the new Act could be imposed when the relevant assessment was made under the old Act ? and (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty ?"
(3.) SO far as the first question is concerned, the learned counsel for the parties are agreed that in view of the decision of the Supreme Court in Jain Brothers vs. Union of India (1970) 77 ITR 107 (SC) the question is no longer open and must be answered in favour of the Department and against the assessee.;