Judgment :- ISMAIL J. Pursuant to the direction of this court dated 30th March, 1970, the Income-tax Appellate Tribunal, Madras Bench, has referred the following questions of law for the opinion of this court : "1. Whether, on the fact and in the circumstances of the case, the addition of Rs. 47, 770 as representing the income of the assessee from undisclosed sources is justified in law ? 2. Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 3, 000 against the assessee for the assessment year 1960-61, under section 221(1) of the Income-tax Act, is justified in law ? 3. Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 11, 200 against the assessee for the assessment year 1960-61, under section 271(1)(c) of the Income-tax Act, 1961 is valid and justified in law ?" * The facts are simple. The assessee carries on business in oil seeds. For the year ending March 31, 1960, relevant to the assessment year 1960-61, the assessee filed a return disclosing an income of Rs. 6, 154. The assessment was completed accepting the income returned by the assessee. But later the Income-tax Officer found that the assessee had made certain purchases from Messrs. Narothmal and Company and Messrs. P. Vasanthalal and Company, to the extent of Rs. 14, 515 and Rs. 33, 255, respectively, and that though they had been recorded in the books of the assessee as credit purchases, they had been actually purchased by payment of cash through banks. In view of this, he reopened the assessment proceedings under section 147(b) of the Income-tax Act. After issuing a notice under section 148 of the Act to the assessee, the Income-tax Officer directed the assessee to explain the sources for cash payment to the bank and to offer explanation as to why the purchases had been shown as credit purchases, while actually they had been paid for in cash. In spite of repeated opportunities given to him the assessee did not produce any evidence for the purchases and the Income-tax Officer, who had obtained the dates of the purchases from Messrs. Vasanthalal and Company and Messrs. Narothmal and Company, came to the conclusion that the assessee himself paid for those purchases from his income from undisclosed sources. Consequently, he added a sum of Rs. Vasanthalal and Company and Messrs. Narothmal and Company, came to the conclusion that the assessee himself paid for those purchases from his income from undisclosed sources. Consequently, he added a sum of Rs. 47, 770 being the total of these two amounts as income of the assessee from undisclosed sources in the relevant year.The assessee filed an appeal before the Appellate Assistant Commissioner and for the first time contended before the Appellate Assistant Commissioner that he had borrowed from four persons in Pondicherry for financing the purchases referred to above and also filed before the Appellate Assistant Commissioner affidavits by the said four persons to the effect that they had advanced monies to the assessee. The Appellate Assistant Commissioner wanted to given an opportunity to the assessee to prove this new case put forward by him and, therefore, called for a report from the Income-tax Officer regarding the credit-worthiness of the said four persons, whom the assessee could produce before the Income-tax Officer and whom the officer could cross-examine. The Appellate Assistant Commissioner also stated that it was open to the Income-tax Officer to forward such other material as he could gather with regard to the credit-worthiness of the said four persons. The Income-tax Officer, after giving an opportunity to the assessee to produce the said four persons and after recording their evidence, submitted a report to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, who considered the report of the Income-tax Officer, on an appreciation of the evidence, came to the conclusion that the new case put forward by the assessee as to the loans having been taken from four persons in Pondicherry was an after-thought and that the evidence was insufficient to prove that monies has been borrowed by the assessee from the said four persons, with the result he confirmed the addition of Rs. 47, 770 as income from undisclosed sources made by the Income-tax Officer. The assessee preferred a further appeal to the Income-tax Appellate Tribunal and the Income-tax Appellate Tribunal confirmed the conclusion of the Appellate Assistant Commissioner holding that the evidence produced by the assessee was not acceptable to establish his case that he had borrowed the said sum from the four persons in Pondicherry. Along with this appeal, the Tribunal had disposed of four other appeals also, of which one appeal related to the levy of penalty of a sum of Rs. Along with this appeal, the Tribunal had disposed of four other appeals also, of which one appeal related to the levy of penalty of a sum of Rs. 11, 200 under section 271(1)(c) of the Income-tax Act, 1961 Realising this position only, Mr. K. Srinivasan, learned counsel for assessee, drew our attention to the order of the Appellate Assistant Commissioner dated 17th March, 1965, by which he called for a report from the Income-tax Officer. As we pointed out already, before the Appellate Assistant Commissioner, affidavits from the four persons had been filed and, with reference to this, the Appellate Assistant Commissioner recorded : "I find from the record that this aspect has not been looked into by the Income-tax Officer. He is, therefore, directed to enquire into the credit worthiness of these parties who would be produced before him by the appellant (assessee) and submit his report after cross examining them. He may also collect further materials which might be necessary to decided on the credit worthiness of these parties." * The contention of the learned counsel for the assessee is that the Appellate Assistant Commissioner directed the Income-tax Officer to enquire into the credit worthiness of the four persons thereby indicating that the Appellate Assistant Commissioner accepted the fact that the said four persons had advanced monies to the assessee and that, therefore, it was not open to him at a later stage to reject the evidence of those four persons and come to the conclusion that they had not advanced monies in the present case. We are not able to accept this argument. The above extract from the order to the Appellate Assistant Commissioner does not restrict in any sense the scope of the enquiry to be conducted by the Income-tax Officer. As a matter of fact, the entire case of the assessee was that he had borrowed monies from the four persons referred to already and only with reference to that contention the Appellate Assistant Commissioner directed the Income-tax Officer to conduct an enquiry and send a report. These is absolutely nothing in the order to the Appellate Assistant Commissioner dated March, 17, 1965, restricting the scope of the enquiry or even impliedly showing that he had accepted the case of the assessee that he had borrowed monies from the said four persons. These is absolutely nothing in the order to the Appellate Assistant Commissioner dated March, 17, 1965, restricting the scope of the enquiry or even impliedly showing that he had accepted the case of the assessee that he had borrowed monies from the said four persons. Under these circumstances, we are of the opinion that the Tribunal cannot be said to have committed any error of law in holding that the case of the assessee that he had borrowed monies from four Pondicherry parties had not been made out. Accordingly, we answer the first question in the affirmative and against the assessee.As far as the third question is concerned, it relates to the levy of penalty under section 271(1)(c) of the Income-tax Act, 1961. That provision provides for levy of penalty if an assessee has concealed particulars of income or furnished inaccurate particulars of such income. The learned counsel for the assessee contended that the mere fact that the income-tax authorities refused to accept the explanation offered by the assessee in respect of the said sum of Rs. 47, 770 and added the said sum as the income of the assessee would not automatically establish that the assessee had concealed particulars of his income or finished inaccurate particulars of such income, and that, therefore, the levy of penalty was not warranted in the circumstances of this case. In support of this plea, he relied on a decision of Bombay High Courts in Commissioner of Income-tax v. Gokuldas Harivallabhdas and the observation of the Supreme Court in Commissioner of Income-tax v. Anwar Ali where the Supreme Court has approved the decision of the Bombay High Court referred to above. In the first decision referred to above, the Bombay High Court observed (page 105) : "The proceedings under section 28(1)(c) (corresponding to section 271(1)(c) of the Income-tax Act, 1961) in their very nature are penal proceedings, and the elementary principle of criminal jurisprudence must apply to these proceeding, and nothing is more elementary at least in this country in criminal jurisprudence than the principle that the burden of proving that the accused is guilty is always upon the prosecution, and Mr. Joshi seems to suggest, though not quite definitely, because be cannot do so, but impliedly that the principle somehow gets altered when we come to the revenue law. Now, the assesses is not charged with having given a false explanation. Joshi seems to suggest, though not quite definitely, because be cannot do so, but impliedly that the principle somehow gets altered when we come to the revenue law. Now, the assesses is not charged with having given a false explanation. This is not the gist of the offence under section 28(1)(c). The gist of the offence under section 28(1)(c) is that the assessee concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. Therefore, the department must establish that the receipt of Rs. 15, 203 constitutes 'income' of the assessee. There is not an iota of evidence on the record except the explanation given by the assessee, which explanation has been found to be false. Now it does not follow that because the particular explanation given by the assessee is false, therefore, necessarily the receipt of Rs. 15, 203 constitutes a taxable income of the assessee. There may be a hundred and one other possibilities as to how this receipt came into the books of accounts of the assessee." * In the second decision, the Supreme Court before which the decision of the Bombay High Court was cited, after referring to the said decision with approval, proceeded to point out (page 701) : "Another point is whether a finding given in the assessment proceeding that a particular receipt is income after rejecting the explanation given by the assessee as false would, prima facie, be sufficient for establishing, in proceedings under section 28, that the disputed amount was the assessee's income. It must be remembered that the proceedings under section 28 are of a penal nature and the burden is on the department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars." * We are of the opinion that neither of the two decisions is of any assistance to the case of the assessee in the present case. In the present case, it is not merely a question of the department not a accepting the explanation given by the assessee as to the persons from whom he got the money. As a matter of fact, before the assessee came up with the explanation that he borrowed the money from four persons in Pondicherry, he had earlier suppressed the very existence of the money itself by showing in his accounts that he purchased oil seeds on credit, while as a matter of fact he had actually paid cash for the said purchase. Therefore, it cannot be contended that the penalty has been levied in the present case solely by rejecting the explanation offered by the assessee with regard to the source of Rs. 47, 700. Therefore, it cannot be contended that the penalty has been levied in the present case solely by rejecting the explanation offered by the assessee with regard to the source of Rs. 47, 700. On the other hand, the penalty has been levied as a result of the inference drawn from the combined operation of the following facts :(1) that the assessee has deliberately shown in his account books that he purchased oil seeds on credit, while as a matter of fact he had paid cash for the same; (2) that when the assessee was called upon to explain this position as to why he made such false entries in his accounts books for a period of nearly two years, namely, from August 1962 to 1964, when the assessment proceedings after the issue of notice under section 148 of the Income-tax Act, 1961, were pending before the Income-tax Officer, the assessee did not come forward with any explanation in this behalf at all; (3) that the assessee came forward with a new case of borrowal from four persons in Pondicherry only before the Appellate Assistant Commissioner; and (4) that the case of borrowal was found to be false. These facts and the inference drawn by the authorities from these facts will clearly satisfy the requirements laid down by the Supreme Court constituting the last sentence in the extract given above, namely (page 701) : "Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars." * The deliberate act of the assessee in showing the cash purchases as credit purchase can lead only to one inference, namely, that he had consciously concealed the particulars of his income. Under these circumstances, we are unable to accept the contention of the learned counsel for the assessee in this behalf and, therefore, we answer the third question in the affirmative and against the assessee. As far as the second question is concerned, the only argument advanced before us is that the authorities had not considered the explanation of the assessee for not paying the tax. As a matter of fact, the statutory provision, as it stood at the relevant time, did not contemplate the assessee giving any such explanation and the authorities accepting such explanation. As a matter of fact, the statutory provision, as it stood at the relevant time, did not contemplate the assessee giving any such explanation and the authorities accepting such explanation. Section 221(1) of the Income-tax Act, 1961, as it stood at the relevant time, read as follows : "When an assessee is in default or deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under sub section (2) of section 220, be liable to pay by way of penalty, an amount which, in the case of a continuing default, may be increased from time to time, so, however, that the total amount of penalty does not exceed the amount of tax in arrears : Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard." * Therefore, the liability to pay the penalty is attracted by the mere commission of default and hence there was no question of the assessee offering any explanation as to why the default has occurred and the officer accepting such explanation. Under these circumstances, our answer to the second question is also in the affirmative and against the assessee. The department will be entitled to its costs of this reference from the assessee. Counsel's fee is fixed at Rs. 500 (Rs.Five Hundred Only).