SATISH CHANDRA, C.J. - (1.) FOR the assessment year 1967 -68, the Tribunal has referred for our opinion the following question of law : 'Whether, on the facts and in the circumstances of the case, there was any material to warrant the conclusion that the assessee had established that he was not guilty of fraud or wilful or gross negligence in furnishing the particulars of his income within the meaning of the Explanation to Section 271(1)(c) of the Income -tax Act, 1961 ?'
(2.) THE assessee owns a truck which is run in partnership with some other persons. He had 50 per cent, shares in two partnership firms. He filed a return on 29th July, 1968, disclosing an income of Rs. 4,000. The ITO, having come to know that the assessee had made investments to the tune of Rs. 1 -5,000 in purchasing a truck, called upon the assessee to explain its source. The explanation offered by the assessee was not found believable and a sum of Rs. 13,000 was added as income from undisclosed sources. The ITO initiated penalty proceedings. The IAC found that the assessee did not maintain accounts of his income and outgoings. He did not produce any documentary evidence to sustain his explanation that he had taken Rs. 2,000 as loan from his father -in -law or that he had available with him savings to the extent of Rs. 13,000 from past income. He also relied on the circumstance that even in the preceding year 1966 -67, a sum of Rs. 10,792 was treated as the assessee's income from undisclosed sources to cover the investments that the assessee had made in that year. He ultimately concluded that the assessee was guilty of fraud, gross or wilful negligence within the meaning of the Explanation to Section 271(1)(c) of the Act. He found that the assessee was guilty of concealing the particulars of his income and was liable to penalty. He imposed a sum of Rs. 14,000 as penalty.
(3.) THE assessee appealed to the Tribunal. The Tribunal, while allowing the appeal, held: 'The explanation offered by the assessee cannot be said to be entirely untenable, nor can it be said to be so unreasonable as to warrant a conclusion that the assessee was guilty of fraud, gross or wilful neglect.....whenthe explanation offered by the assessee was found unacceptable it does not conclusively establish that the assessee had committed a fraud in filing thereturn of income or was negligent wilfully or grossly. The evidence on record falls short for warranting such a conclusion.' ;