Mishra, J. - (1.)THIS is a reference under Section 256(1) of the I.T. Act, 1961, by the Income-tax Appellate Tribunal, at the instance of the assessee, whereby the following question has been referred for our opinion :
"Whether, on the facts and in the circumstances of the case, the Appellate Trjbunal was justified in holding that the proceedings under Section 147(a) of the Income-tax Act, 1961, were validly initiated against the assessee in respect of the assessment years 1967-68 and 1969-70 ?"

(2.)THE assessee is a registered firm carrying on the business in adat. THE firm is constituted of two partners, namely, Dineshkumar and Kamal-kumar. Originally, the assessment for the assessment years (for short, "the A.Ys.") 1967-68 and 1969-70 were completed on a total incomes of Rs. 26,914 and Rs. 23,016 on Novembers, 1968, and July 27, 1970, respectively. While completing these assessments the ITO had allowed the assessee's claim for payment of interest amounting to Rs. 1,488 and Rs. 2,446 paid to Smt. Chandravalbai. He also did not take any action in respect of the fresh credits introduced in her name during the above two assessment years. After completion of the aforesaid assessment, the ITO took up the assessment proceedings for the A.Ys. 1972-73 and examined the genuineness of the cash credits in the name of Smt. Chandravalbai. Daring the above year, there was a credit balance of Rs. 21,248 in her name including Rs. 5,000, which were credited during the accounting period relevant for the A.Ys. 1972-73. In the books of accounts of the assessee, there was yet another account in her name styled as "Chandravalbai pyau", which showed a credit balance of Rs. 10,000. THE ITO required the assessee to establish the genuineness of the credits in the accounts of the lady and in this process he examined the creditor. Smt. Chandravalbai admitted having advanced the said amount to the assessee. As regards the source, she stated that she had a sum of Rs. 24,000 with her in the year 1943, which was kept by her at home. THE ITO did not accept this contention in view of a statement to the effect in a will executed by her on June 1, 1973, wherein although there was mention of some immovable properties and ornaments, yet there was no mention of the aforesaid amount. THE ITO, therefore, concluded that Smt. Chandravalbai had no cash available with her to advance any amount to the assessee-firm, the partners of which were her close relations. He, therefore, ignored the statement of Smt. Chandraval-1 bai and included towards the total income of the assessee a sum of Rs. 5,000 as income from undisclosed sources. This amount represented the fresh deposits appearing in the name of the lady during the accounting year relevant for the A.Ys. 1972-73. THE findings of the ITO were upheld by the AAC and also by the Tribunal to the extent of Rs. 4,000.
Later on, a penalty of Rs. 4,000 was imposed by the ITO under Section 271(1)(c) of the Act, which was also upheld by the Tribunal.

On the basis of the facts which were found during the proceedings for the assessment years 1972-73, the ITO initiated action under Section 147 of the I.T. Act, 1961, in respect of the A.Ys. 1967-68 and 1969-70. During these two A.Ys. there were fresh credits to the extent of Rs. 3,500 and Rs. 5,000, respectively, in the account of the lady. Interest to the extent of Rs. 1,488 and Rs. 2,446 was also claimed as having been paid to Smt. Chandravalbai and these sums were originally allowed by the ITO. After reopening the assessments the ITO added back the fresh cash credits of Rs. 3,500 and Rs. 5,000 and also disallowed the interest of Rs. 1,448 and Rs. 2,446 which were originally allowed.

(3.)AGAINST the reassessments so made by the ITO, the assessee went in appeal before the AAC challenging the order of the ITO on the grounds that the ITO had no jurisdiction to initiate proceedings under Section 147{a) of the Act and that the quantum of penalty was excessive. The AAC held that the assessee did not disclose the full particulars of Smt. Chandraval-bai's account fully and truly at the time of original assessment and, hence, the ITO was quite competent to reopen the said proceedings on the basis of the information which came into his possession at the time of completing the assessment for the A.Ys. 1972-73. On merits also the contention of the assessee was rejected, on the basis of the findings of the Income-tax Appellate Tribunal relating to the appeal for the A.Ys. 1972-73.
Against the order of the AAC the assessee filed an appeal before the Income-tax Appellate Tribunal assailing the order of the AAC. The Tribunal rejected the appeal. Thereafter, on an application under Section 256(1) of the I.T. Act, 1961, by the assessee the aforesaid question has been referred to us by the Tribunal for our opinion.