Ajit K. Sengupta, J. - (1.) In this reference under Section 256(1) of the I.T. Act 1961, the following questions of law have been referred to this court for the assessment year 1963-64 : "1. Whether, on the facts and in the circumstances of the case and in view of the fact that the return of income was filed after April 1, 1964, the Tribunal was right in holding that the provisions of the Explanation to Section 271(1)(c) of the I.T. Act, 1961, introduced with effect from April 1, 1964, cannot be invoked in this case for the assessment year 1963-64 ?
(2.) Whether, on the facts and in the circumstances of the case, the imposition of penalty by the Inspecting Assistant Commissioner under Section 271(1)(c) was legally justified ?" 2. The assessee filed its return on October 17, 1966, for the assessment year 1963-64, showing an income of Rs. 2,33,085. The ITO found cash deposits aggregating to Rs. 1,65,294 in the assessee's account. One of such cash deposits was in the name of Amba Prosad Jyoti Prosad for Rs. 35,294. The ITO treated the entire deposits as income from undisclosed source. The ITO determined the total income at Rs. 5,27,184 which included the cash deposits held to be not genuine and treated as income from undisclosed sources. The ITO initiated proceedings under Section 271(1)(c) of the I.T. Act, 1961, and referred the matter to the IAC for imposition of penalty.
(3.) On appeal against the quantum, the AAC accepted the cash credits as genuine excepting one standing in the name of Amba Prosad Jyoti Prosad for Rs. 35,294. The income was reduced to Rs. 3,82,956. The IAC imposed a penalty of Rs. 22,500 holding that the sum of Rs. 35,294 representing the alleged loan in the name of Amba Prosad Jyoti Prosad was the concealed income of the assessee and the assessee had introduced its own concealed income in the guise of fictitious loan and is thus guilty of concealing income and of furnishing inaccurate particulars thereof.;