N.D. Ojha, C.J. - (1.)THE Tribunal, Indore Bench, Indore, has referred the following two questions to this court for its opinion :
"(1) Whether, on the facts and in the circumstances of the case, the deemed income of Rs. 20,000 added to the total income of the assessee in the assessment year in question could be considered for the purpose of levy of penalty under Section 1 271(1)(c) of the Income-tax Act, 1961 ?

(2) If the answer to the above question is in the affirmative, whether the levy of penalty could be justified in terms of the Explanation to Section 1 271(1)(c) of the Income-tax Act, notwithstanding the fact that the said Explanation was not invoked by the Department while levying the penalty in question ?"

(2.)THE facts in a nutshell which are necessary for answering the aforesaid two questions are that during the assessment year 1973-74, the asses-see filed a return declaring a total income of Rs. 4,678. However, the assessment was completed on a total income of Rs. 49, 403. THE explanation given by the assessee except with regard to Rs. 20,000 was accepted. With regard to the sum of Rs. 20,000, the finding of the Tribunal in the assessment proceedings was that the assessee has not explained satisfactorily the non-disclosure of the said amount in the return. Proceedings for imposition of penalty were also initiated against the assessee and the Inspecting Assistant Commissioner, vide his order dated February 3, 1978, imposed a sum of Rs. 20,000 as penalty on the assessee on the finding that he was guilty of concealment of income as contemplated by Section 1 271(1)(c) of the Income-tax Act, 1961 ("the Act"). This order , however, was reversed by the Tribunal. In reversing the order of the Inspecting Assistant Commissioner, the relevant finding which was recorded by the Tribunal, reads as hereunder :
"But in order to hold an assessee liable for penalty, the mere fact that the explanation given by the assessee about the cash available with him is disbelieved, is not sufficient. Reference may be made in this behalf to the famous decisions of the Supreme Court in CIT v. Anwar Ali [1970] 76 ITR 696 and CIT v. Khoday Eswarsa and Sons [1972] 83 ITR 369 and the decision of the Punjab High Court in Addl. CIT v. Karnail Singh V. Kaleran [1974] 94 ITR 505, and other decisions after the amendment in the Income-tax Act and the addition of an Explanation to Section 1 271(1)(c) according to which the onus of proof is placed upon the assessee under certain circumstances. Some more authorities may be noticed which are CIT v. Punjabhai Shah [1968] 67 ITR 337 (MP), CIT v. Satish Churn Law [1969] 71 ITR 275 (Cal), State of Orissa v. Maharaja Shri B.P. Singh Deo [1970] 76 ITR 690 (SC), Gumani Ram Siri Ram v. CIT [1972] 85 ITR 67 (P&H) and 56 ITR 799 (M) (sic.).".

The Tribunal also pointed out that the unexplained cash in the possession of the assessee cannot, in all cases, be said to be his income. It is only a deemed income which may be brought to tax and unless the Department shows that this amount was actually earned by the assessee during the accounting year in question, it would not be proper to levy penalty on the ground of alleged concealment. It is thus apparent that the Tribunal, in allowing the appeal filed by the assessee and setting aside the penalty, was of the view that the burden lay on the Department to prove that the amount was actually earned by the assessee during the accounting year in question. At the instance of the Commissioner, however, the aforesaid two questions were referred by the Tribunal to this court for its opinion.

It has been urged by learned counsel for the Department that the Tribunal, in allowing the appeal and reversing the finding of the Inspecting Assistant Commissioner, has failed to consider the import of the amendment made in Section 1 271 with effect from April 1, 1964, by the Finance Act, 1964, and, consequently, the conclusion reached by the Tribunal was not correct. According to learned counsel for the Department, the two questions referred to us, therefore, deserve to be answered in favour of the Department.

(3.)HAVING heard learned counsel for the parties, we are of the opinion that there is substance in the submission made by counsel for the Department. The amendment which was made in Section 1 271 by the Finance Act, 1964, may be stated. In Clause (c) the word "deliberately" occurring after the words "particulars of his income or" was omitted. The following Explanation to Sub-section (1) was inserted :
''Explanation : Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under Section 1143 or Section 1144 or Section 1147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of Clause (c) of this sub-section."

The Explanation so added by the Finance Act, 1964, remained operative till March 31, 1976, when the Taxation Laws (Amendment) Act, 1975, came into force. Explanations 1 to 4 were substituted with effect from April 1, 1976, for the Explanation as originally enacted by the Finance Act, 1964. Since the assessment year in the instant case was 1973-74, Section 1 271 as it stood after its amendment by the Finance Act, 1964, and before its amendment by the Taxation Laws (Amendment) Act, 1975, would be applicable.