Suhas Chandra Sen, J. - (1.) In this matter, the following three questions of law have been referred to this court by the Tribunal under Section 256(1) of the I.T. Act, 1961 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that the sum of Rs. 40,000 added to the assessee's income from undisclosed sources could not be treated as ,a part of commercial profits of the assessee and could not accordingly be taken into account for the purpose of Section 104 of the I.T. Act, 1961, in determining if the payment of a dividend could not be unreasonable ?
(2.) Whether, on the facts and in the circumstances of the case, and in view of the fact that Rs. 40,000 from undisclosed sources having been determined as the income of the assessee, there was any further onus on the Department to prove that the said sum was the commercial income of the assessee for the purpose of declaration of dividend under Section 104 of the Income-tax Act, 1961 ?
(3.) Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the order made by the Income-tax Officer under Section 104 of the Income-tax Act, 1961 ?" 2. The assessee is a private limited company. The relevant assessment year is 1963-64. The assessment was completed on a sum of Rs. 75,200. After adjusting the tax paid, the ITO computed the distributable surplus at Rs. 37,600. As the assessee had failed to declare any dividend, the ITO served a notice upon the assessee to show cause why additional super-tax should not be levied. The assessee pleaded that no dividend could be declared during the relevant year of accounting due to smallness of income and past losses. The assessee's income included a sum of Rs. 40,000 which had been added back as income from undisclosed sources. The ITO treated the said addition of Rs. 40,000 as commercial profit and passed an order under Section 104 of the I.T. Act, 1961, against the assessee. 3. The only point of contention before us is that whether the sum of Rs. 40,000 which was added back as income from undisclosed sources, can be treated as commercial profit. The Tribunal, in our opinion, has taken a correct view of the matter. The proceedings under Section 104 of the Act is of penal nature and the onus is on the Department to prove that the sum of Rs. 40,000 was the undisclosed commercial profit of the assessee. It has been noted in the order of the Tribunal that in the penalty proceeding that was taken against the assessee, the sum of Rs. 40,000 was not treated as the assessee's income because the ITO was unable to discharge the onus of proving this, sum as the assessee's income. On a parity of reasoning, this sum could not be treated as the commercial income of the assessee for the purpose of Section 104(c) of the Act. The Tribunal came to the conclusion that the addition could not, in the facts of the case, be treated as commercial income of the assessee. In the facts of this case, it cannot be said that the decision of the Tribunal is perverse or erroneous.;