JUDGMENT 1. - This application under section 256 (2) of the Income Tax Act, 1961 by the Additional Commissioner of Income-tax, Rajasthan, Jaipur is for directing the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur to refer to the Court for its opinion. The following question of law is said to arise from its order in Income-tax Appeal No. 6052/69-70 dated 3.2.72, namely. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty under section 271(1) (c) was not leviable for the assessment year 1963-64?" 2. During the assessment year 1963-64, the corresponding previous years being the financial year ending on 31-3-63; the assessee had undertaken contracts under the Irrigation Department of the Government of Rajasthan in connection with the Vallabhnagar project. The total Payment received during the assessment year 1963-64 amounted to Rs. 18,18,563. Out of this sum, Rs. 6,92,347/- were in respect of the contracts directly executed by the assessee and on which it disclosed a net profit rate of 10%. The assessee claimed to have got works executed to the extent of Rs. 11,30,333/- through subcontracts. The Income-tax Officer estimated the gross profit rate relating to the amount of Rs. 6,92,347/- at 12.5% and this estimated rate of the Income Officer was confirmed by the Appellate Assistant Commissioner and the Tribunal as well, as being reasonable. The Tribunal, however, held that while applying the gross profit rate of 12.5%, the value of the material supplied by the Government was to be excluded from the gross profits. With respect to the amount of Rs. 11,30,333/-, the ITO estimated the gross profit rate at 12.5% holding that the alleged sub-contracts were not proved, which finding was affirmed both by the Appellate Assistant Commissioner as cell as the Tribunal; but the rate of gross profit was reduced by them to 7.5% and accordingly they made an addition of Rs. 85,000/- and odd. 3. The Income-tax Officer started penalty proceedings against the assessee under section 271(1)(c) of the Act, having discovered certain cash credits of Rs. 40,000/- and the peak credits of Rs. 22,140/- in the Udarat Account. As the minimum penalty leviable exceeded Rs. 1,000/- the Income tax Officer referred the proceedings to the Inspecting Assistant Commissioner of Income-tax under section 274 (2) of the Act. 40,000/- and the peak credits of Rs. 22,140/- in the Udarat Account. As the minimum penalty leviable exceeded Rs. 1,000/- the Income tax Officer referred the proceedings to the Inspecting Assistant Commissioner of Income-tax under section 274 (2) of the Act. Thereafter, the Inspecting Assistant Commissioner of Income tax, by his order dated 20-2-70, imposed a penalty of Rs. 24,500/-. on the ground that the assessee had not disclosed income from sub-contracts amounting to Rs. 20,500/- and it also concealed a part of its income by way of cash credits amounting to Rs. 62,140/-. 4. The assessee appealed to the Appellate Tribunal both against the assessment of income-tax as well as the levy of penalty. The Tribunal held that in view of the large additions made in the assessee's total income during the year of accounting as well as in the earlier years, no separate addition of the cash credits amounting to Rs. 62,140/- as income from undisclosed source was justified. For the assessment year 1961-62, the enhancement of total Income was to the extent of Rs. 43,000/- and for the assessment year 1962-63, the enhancement of total income was to the extent of Rs. 32,000/-. For the assessment year in question, the enhancement, it was to the extent of nearly Rs. 85,000/-. The Tribunal held that the additions to the total income of the assessee in the years in question, by way of enhancement of profits 'were to the extent of Rs. 1,58000/-. The cash credits and the peak credits in the Udarat Account together amount to Rs. 62140/-. That being so, the Tribunal deleted the separate addition of Rs. 62,140/- from the total income of the assessee. 5. With regard to the levy of penalty, the Tribunal was of the view that no penalty was leviable under section 271(1) (c) for two reasons, first, as claimed by the assessee, by the terms of the sub-contract, the income of Rs. 20,500/-. would accrue to the assessee only when the security deposits of the sub-contractors were returned by the Irrigation Department Such deposits became returnable during the accounting year ending on March 31,1965 and the assessee had also duly entered an income of Rs. 24,200/- in respect of such contracts in its books of account for that accounting year. 20,500/-. would accrue to the assessee only when the security deposits of the sub-contractors were returned by the Irrigation Department Such deposits became returnable during the accounting year ending on March 31,1965 and the assessee had also duly entered an income of Rs. 24,200/- in respect of such contracts in its books of account for that accounting year. Secondly, the Department itself not having accepted the assessee's claim that there were sub-contracts given by it during the year of account, there could be no income from sub contracts alleged to have been concealed by the assessee. In the present case, the return of the assessee was filed on 11-10-63 i.e. before the enactment of explanation to section 271(1)(c). In view of all this, the Tribunal held that no case for the levy of penalty had been made out in respect of the alleged concealment of Rs. 20,500/- . 6. Feeling aggrieved, the Additional Commissioner of Income-tax, Rajasthan, Jaipur applied to the Tribunal under section 256 (1) of the Art to draw up a statement of the case and refer to the Court for its opinion, the aforesaid question of law. Incidentally, the Department has not challenged the order of the Tribunal in goat turn appeal i e as regards the deletion of Rs. 62,140/- as income from under is closed source from the order of assessment. The tribunal by its order dated 4-9-72 declined to make a reference holding that the question involved was not a question of law. As regards the first item of Rs. 20,500/-, being the income accruing from the sub-contracts, the Tribunal observed that its finding was a finding of a fact. So far as the second question viz. the cash credits treated as undisclosed income was concerned, the Tribunal held that it was covered by the decision of the Supreme Court in CIT West Bengal and another v. Anwar Ali, (1970) 76 ITR 696 and, therefore, any reference on that question shall be purely academic. 7. Shri S.K. Mal Lodha, learned counsel appearing on behalf of the Revenue submits that the assessee had siphoned off the profits by alleging that he got works executed to the extent of Rs. 11,30,333/- through sub-contracts which the Tribunal found not to be genuine and, Therefore, the penalty proceedings were rightly initiated under section 271 (1) (c) of the Act. It is said that the cash credits of Rs. 11,30,333/- through sub-contracts which the Tribunal found not to be genuine and, Therefore, the penalty proceedings were rightly initiated under section 271 (1) (c) of the Act. It is said that the cash credits of Rs. 62,140/- must have relation to the works worth Rs. 11,30,333/- through so-called subcontracts. Reliance is placed on the decision of the Supreme Court in D.M. Mansavi v. Commissioner of Income Tax Gujarat, II (1972) 86 ITR 557 . The contention is that the alleged contracts were nothing but a device to secret away the profits. The entirety of circumstances, according to the learned counsel, reasonably point to the conclusion that the disputed amount of Rs. 62,140/- represented income and that assessee had consciously concealed the particulars of its income or had deliberately furnished inaccurate particulars by setting up the alleged sub-contracts. 8. In D.M. Mansavi's case, supra, the Supreme Court after referring to Anwar Ali's case, observed:- "On the basis of the dictum laid down in the above case, it is urged by Mr. Chagla that from the mere fact the explanation of the assessee in the present case was found to be false it did not follow that the disputed amount represented his income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. In this respect we find that in the present case the inference that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars is based not merely upon the falsity of the explanation given by the assessee. On the contrary, it is made amply clear by the order of the Tribunal that there was positive material to indicate that the business of the Kohinoor Mills belonged to the assessee & the whole scheme was to disguise the profits off the assessee as those of a firm of four partners. The present is not a case of inference from mere falsity of explanation given by the assessee - but a case wherein there are definite findings that a device had been deliberately treated by the assessee for the purpose of concealing his income. The assessee as such can derive no assistance from Anwar Ali's case." In the facts and circumstances of the present case, however, there was no question of the alleged sub-contracts being a device for the purpose of concealment. The assessee as such can derive no assistance from Anwar Ali's case." In the facts and circumstances of the present case, however, there was no question of the alleged sub-contracts being a device for the purpose of concealment. The Tribunal has nowhere held that the whole scheme was to disguise the profits of the assessee. In D.M. Mansavi's case, supra, there was positive material to indicate that the business of the Kohinoor Mills belonged to the assessee. On the contrary, in the present case, the Tribunal has upheld the application of a lower rate of gross profits at 7.5% on works executed through sub-contracts. 9. That apart, when the Revenue does not accept the genuineness of the sub -contracts, there was n) question of concealment of profits earned from such sub-contracts. There was really nothing to prevent the Revenue from applying a uniform gross profits rate of 12.5%, on the total income of the assessee. For reasons best known to it, the Department has not applied for a reference against the order of the Tribunal applying a gross profit rate of 7.5% on works executed through sub-contracts. It has also not applied for reference against the order of the Tribunal deleting the additions of Rs. 62,140/- from the original assessment proceedings, while computing the tax. We find no basis for the submission that the cash credits of Rs. 62,140/- should be correlated to the profits of the alleged sub-contracts. 10. It was nevertheless strenuously urged that the whole scheme was to disguise the profits of the assessee and, therefore, the disputed amount of Rs. 62,140/- represented its income. 11. Much stress was laid on the following observation of the Tribunal while dealing with the cash credits of Rs. 62,140/-, namely- "We have also to keep in view the finding that the assessee has derived more income from the so-called sub contracts than what is stipulated in the contract agreements. A linking up between the estimated profits and the cash credits could not therefore be ruled out. Keeping these facts before us, we are of the view that the above cash credits could reasonably be held to have been covered by the estimated addition made to the assessee's profits." In our view, nothing really turns on this, because ultimately the Tribunal has deleted the addition of Rs. 62,140/- as income from undisclosed sources. 12. Keeping these facts before us, we are of the view that the above cash credits could reasonably be held to have been covered by the estimated addition made to the assessee's profits." In our view, nothing really turns on this, because ultimately the Tribunal has deleted the addition of Rs. 62,140/- as income from undisclosed sources. 12. Learned counsel for the Revenue next drew our attention to the fact that it was conceded before the Tribunal that the books of account of the assessee suffered from defects and, therefore, proviso to section 145 of the Act applicable in computing a gross profit rate of 12.5% and that the case set up by the assessee regarding of genuine sub-contracts was held by the Tribunal not to be sustainable in view of the unsatisfactory nature of the evidence. Learned counsel for the Revenue pointed but that the Tribunal, on the totality of the evidence, found it difficult to say that the genuineness of these sub-contracts had been established and, therefore, the alleged sub-contracts were nothing but a device. On the strength of the cases reported in Messrs. Srinivas Ramkumar v. Commissioner of Income Tax, (1948) 16 ITR 254 , Lakhmi Chand Baijnath v. Commissioner of Income-Tax West Bengal, (1959) 35 ITR 416 and Daulatram Rawatmull v. Commissioner of Income Tax Calcutta, (1967) 64 ITR 593 , it was urged that the cash credits amounting to Rs. 62,140/- should be regarded as income from undisclosed sources. We are afraid, the contention is wholly misconceived. 13. As already stated, the Revenue has not applied to the Appellate Tribunal under section 256 (1) of the Act to state a case with respect to the deletion of Rs. 62,140/-. It must, therefore, be taken to have accepted the finding of the Tribunal that Rs. 62,140/- did not represent the income of the asseessee in the accounting year. In that view, we fail to appreciate the relevance of the decisions in Messrs Srinivas Ramkumar, Lakhmichand Baijnath and Daulatram Rawatmull's cases. The order of the Tribunal has attained finality which cannot be upset in penalty proceedings. 14. 62,140/- did not represent the income of the asseessee in the accounting year. In that view, we fail to appreciate the relevance of the decisions in Messrs Srinivas Ramkumar, Lakhmichand Baijnath and Daulatram Rawatmull's cases. The order of the Tribunal has attained finality which cannot be upset in penalty proceedings. 14. The Tribunal having held that it was not unlikely looking to the large additions which had been made to the assessee's total income during the year of account as well as in the earlier years i.e. there would be enough funds to cover cash credits appearing in the books of accounts of the assessee, there was no question of any concealment on the part of the assessee. As regards the alleged subcontracts, the finding of the Tribunal involves a question of fact. It has held that under the terms of the sub-contracts, the income of Rs. 20,500/- was to accrue to the assessee only when the security deposits of the subcontractors were returned by the Irrigation Department. These deposits became returnable during the accounting year ended 31-3-1965 and the assessee had also duty entered the income of Rs. 24,500/- in respect of such contracts in his books of accounts its for that accounting year Thus, on this basis the Tribunal rightly observed that it could not be said that there was no concealment of income for the assessment year 1963-64. 15. As observed by the Supreme Court in Commissioner of Income Tax v. Anwar Ali, (1970) 76 ITR 696 , the finding of the Tribunal in the original assessment proceedings, for computing the tax, that there were sufficient funds in the hands of the assessee to cover the cash credit, was itself evidence in the penalty proceedings that there was no concealment. As field by their Lordships, the burden was on the Revenue that the cash credits represented the concealed income of the assessee for the purpose of levying a penalty under Section 271(1)(c). That burden the Revenue has failed to discharge. 16. The same view has been reiterated by the Supreme Court in Commissioner of Income-Tax Madras v. Khoday Eswarsa and Sons, (1972) 83 ITR 369 . 17. The decision in the Additional Commissioner of Income-Tax Gujarat, Ahmedebad v. Chandravilas Hotel, (Civil Appeal Nos. 1649 & 1950 of 1973 decided on 1-8-77) is clearly distinguishable. 16. The same view has been reiterated by the Supreme Court in Commissioner of Income-Tax Madras v. Khoday Eswarsa and Sons, (1972) 83 ITR 369 . 17. The decision in the Additional Commissioner of Income-Tax Gujarat, Ahmedebad v. Chandravilas Hotel, (Civil Appeal Nos. 1649 & 1950 of 1973 decided on 1-8-77) is clearly distinguishable. There, the Supreme Court directed the High Court to call for a statement of the case whether there was substantial additions of the undisclosed income and the matter was covered not only by the provisions contained in section 271(1, (c) of the Act, but also by the Explanation thereto That make all the difference. 18. The application for reference under section 256(1) of the Income Tax Act, 1961 is therefore, rejected. The costs shall be borne by the parties as incurred.Reference rejected. *******