Chinnappa Reddy, J.:— The respondent-assessee, an abkari contractor, submitted a return for the assessment year 1959-60 showing an income of Rs. 7,704, though the disclosed total sales were to the tune of Rs. 10,92,132. The Income-tax Officer on an examination of the assessee's books found that on two dates, namely, December 12, 1957, and January 16, 1958, the expenses exceeded the available cash by Rs. 17,720 and Rs. 65,066 respectively. The Income-tax Officer also noticed deposits aggregating to Rs. 28,200 in the name of some sendhi shop-keepers. The assessee explained that the excess of expenditure over available cash was covered by amounts belonging to shop-keepers and kept in deposit with him but which had not been entered in the books and were available with him. He also offered an alternative explanation that it was possible that expenditure incurred earlier which was not recorded then and there was recorded later. With regard to the cash deposits the assessee examined some shop-keepers before the Income-tax Officer to prove that they had deposited some amounts with the assessee as security. The Income-tax Officer did not accept the explanation of the assessee though he gave credit for a sum of Rs. 7,200 which was withdrawn previously. He held that the excess of expenditure over available cash on December 12, 1957, and January 16, 1958, and the cash deposits aggregating to Rs. 21,000 were unexplained. He, therefore, rejected the books of the assessee as unreliable and proceeded to determine the assessee's income on the basis of the number of trees, the average yield of sendhi per tree and its average selling price. He assessed the assessee on an income of Rs. 5,00,018 but did not make a separate addition of the items of excess expenditure and cash deposits. The assessee preferred successive appeals to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal and the net result of the appeals was that he was assessed on an income of Rs. 1,30,000 in addition to the book profits. In the course of the assessment proceedings a notice under section 274 of the Income-tax Act, 1961, was issued and the proceeding for the levy of penalty in pursuance of the notice was referred to the Inspecting Assistant Commissioner. Before the Inspecting Assistant Commissioner the assessee reiterated the explanation which he had offered in the course of the assessment proceedings. The Inspecting Assistant Commissioner rejected the explanation and held that the items of cash deficit and cash deposits represented concealed income on account of the suppressed yield and low selling rate mentioned in the books. He held that the assessee concealed the particulars and imposed a penalty of Rs. 75,000 under section 271(1)(c) of the Income-tax Act, 1961. On an appeal preferred by the assessee the Income-tax Appellate Tribunal held that there was no positive material to establish that the cash deposits represented concealed income. They said “no inference can be had from the facts before us that not only the assessee diverted some of the excess income from business as determined in the assessments in the garb of these cash deposits. There is no positive material to warrant a presumption that cash deposits are lateral to the excess yield of sendhi”. Dealing with cash deficits the Tribunal noticed that in the previous assessment years “intangible additions” aggregating to over Rs. 2 lakhs had been made. The Tribunal thought that these amounts might have been ploughed back into the business. They said:

“Considering the largeness of the intangible additions we are satisfied that though the assessee failed to explain the deficit cash balances in the assessment proceedings, yet in the penalty proceedings, which are quite distinct and separate, the availability of intangible additions could be agitated……In the instant case, the departmental representative was unable to show by any tangible material that the intangible additions made in the earlier years, which was the real income to the assessee in a strict sense, was either wiped off or was extinguished.”

2. The Tribunal allowed the appeal and set aside the order of the Inspecting Assistant Commissioner imposing the penalty. At the instance of the Commissioner of Income-tax the following question has been referred to us under section 256 of the Income-tax Act of 1961:

“Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that no penalty is leviable?”

3. Considerable argument was addressed to us on the question of burden of proof and the nature of such burden. We will, therefore, discuss that question first. Several cases were cited before us dealing with “unexplained cash credits”. The law is now well settled that in assessment proceedings it is open to an Income-tax Officer to hold that an unexplained cash credit is income of the assessee and no further burden lies on the Income-tax Officer to show that the income is from any particular source. The presumption which an Income-tax Officer may draw that an unexplained cash credit is an income receipt and that it falls under under the head “Income from other sources” is a presumption which flows naturally from the circumstance that all facts which can establish the nature and source of the cash credits are peculiarly within the knowledge of the assessee (vide Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 SC., Commissioner Of Income Tax, U.P v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 SC. and Commissioner Of Income-Tax, A.P v. Krishna Mining Co. [1972] 83 ITR 860 AP.. However, the finding of an Income-tax Officer in assessment proceedings that an “unexplained cash credit” represents income is not conclusive in proceedings for the levy of a penalty, the nature of the two proceedings being different. Assessment proceedings are revenue proceedings while penalty proceedings are criminal or quasi-criminal proceedings in nature. Being a proceeding of a criminal or quasi-criminal nature, it has been held under the Income-tax Act of 1922, the burden of establishing that an unexplained cash credit was income was on the department. It has also been held that the mere fact that the explanation of an assessee was false would not necessarily lead to the inference that the disputed amount represented income. It was also pointed out that the finding given in assessment proceedings, while it was not conclusive, would, nonetheless, be good evidence (vide Commissioner of Income-tax v. Anwar Ali [1970] 76 ITR 696, 701 SC. and Commissioner of Income tax v. Khoday Eswarsa & Sons [1972] 83 ITR 369 SC.). In Anwar Ali's case, the Supreme Court observed:

“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.”

4. That was the state of the law under the Income-tax Act of 1922. In the two cases mentioned by us their Lordships, naturally, did not indicate the nature of the other circumstances which might have to be proved to hold an assessee guilty of concealing his income or deliberately furnishing inaccurate particulars of his income as that must necessarily vary from case to case. It might be that the onus would be heavy in some cases and light in others depending on the facts and circumstances of the case. The burden on the department would not of course be higher than the burden on the prosecution in a criminal case. We are referring to the burden in a criminal case because in criminal law it is well settled that, in cases depending upon circumstantial evidence, the failure of the accused to explain the circumstances brought out in the evidence against him or a false explanation offered by the accused is itself an additional circumstance against the accused which might often be treated as the link completing the chain of circumstantial evidence. The learned counsel for the assessee appeared to labour under the impression that the decision in Anwar Ali's case gave the assessee a wide berth in penalty proceedings and that the department was obliged to establish some strong direct link to prove that an unexplained cash credit was an income receipt. It is not so. It should be remembered that even in criminal cases, on occasions, very little other evidence is considered necessary beyond the principal incriminating circumstance. For example, in prosecutions for offences under sections 379 and 411, Indian Penal Code, a criminal court is entitled to draw a presumption of guilt from the mere fact that a person is found in possession of stolen goods soon after the commission of the theft if that person is unable to account for his possession. The first illustration to section 114 of the Evidence Act provides for such a presumption. In such cases the only circumstance in addition to the fact of possession is the proximity of time. It has also been held that in a prosecution for an offence under section 409 an inference of dishonest misappropriation may readily be made where there is a failure to account. In such a case the prosecution is not obliged to prove the mode of conversion. Persons have been convicted of the offence of murder where the evidence against the accused was that he was last seen in the company of the murdered person at or about the time of occurrence and some article belonging to the dead person was later found in the possession of the accused, such possession remaining unexplained. Again, illustration A to Explanation (I) of section 14 of the Evidence Act provides that where a person is accused of being the receiver of stolen goods knowing them to be stolen and it is proved that he was in possession of a particular stolen article the fact that at the same time he was in the possession of many other stolen goods is relevant as tending to show that he knew that each and all of the articles in his possession were stolen. We may also refer to section 15 of the Evidence Act which provides that when the question is regarding the knowledge or intention of a person, the fact that an act formed part of a series of similar occurrences in each of which the person doing the act was concerned is relevant. As we said earlier, the burden of proof in penalty proceedings cannot be higher than the burden of proof in criminal cases. We think that the quantum of evidence to establish that an unexplained cash credit is an income receipt must vary from case to case depending on the facts and circumstances of the particular case. In proceedings for the levy of penalty, the false explanation of an assessee regarding a cash credit may legitimately lead to the conclusion that it represents concealed income if, for example, there is no other possible explanation from the record or if there are other similar unexplained cash credits suggesting the existence of a pattern or design or if the books of the assessee are found to be thoroughly unreliable or if the income returned by the assessee is a gross under-estimate or if the past history of the assessee shows that he was regularly indulging in suppressing income or some such other circumstances.

5. In the present case, there were not one or two but several cash credits in the names of different persons. The explanation of the assessee in respect of each of the cash credits was found to be false. The existence of several unexplained cash credits suggests a pattern or a design to bring income receipts into the books in the guise of cash credits. The pattern emerging from the several cash credits can itself be treated as a circumstance sufficient to conclude that the cash credits represented income receipts. But, here, we have in addition other circumstances also. There are two unexplained items of cash deficit on December 12, 1957, and January 16, 1958. The explanation of the assessee for these two cash deficits was also found to be false. The income returned by the assessee, namely, Rs. 7,700 was a gross under-estimate when compared with the actual income as finally determined by the Income-tax Appellate Tribunal, namely, Rs. 1,30,000. The books of the assessee were also found to be unreliable. Taking the entirety of these circumstances into consideration, the only legitimate inference which could be drawn was that the cash credits and the cash deficits represented concealed income. Regarding the cash deposits the Income-tax Appellate Tribunal misdirected itself. The Tribunal, instead of considering the entirety of the circumstances, held that there was no positive material to warrant a presumption that the cash deposits were “lateral” to the excess yield of sendhi. The Tribunal did not advert to the circumstances mentioned by us above including the pattern emerging from several unexplained cash credits. We have earlier pointed out how the entirety of the circumstances should be taken into consideration and what, other circumstances may lead to the inference that unexplained cash credit is an income receipt. Regarding cash deficits also the Tribunal misdirected itself. The express explanation of the assessee regarding the cash deficits on the two dates both in the assessment proceedings and in the penalty proceedings was that the expenditure which had been incurred earlier and was not then brought into account was brought into account on those dates. That explanation was found to be false. The explanation that the cash deficits appearing in the accounts might represent intangible additions of the previous years appears to have been an argument advanced at the stage of the appeal before the Income-tax Appellate Tribunal. Merely because there were certain intangible additions in the previous years of assessment the Tribunal appears to have thought that there was a burden on the department to prove that the intangible additions were either wiped out or extinguished. There was no such burden on the department. In fact, we think that in stating that the department did not prove that the intangible additions in the past were not wiped out, the Tribunal was placing an impossible burden on the department. As we said, the entirety of the circumstances must be taken into consideration to arrive at a conclusion and not the mere existence of cash deposits in the current year or intangible additions in previous years. The question whether the department has discharged its burden must be decided on a consideration of the entirety of the circumstances. We hold that the Tribunal was not justified in holding that no penalty was leviable.

6. We may mention that the law relating to the burden of proof in penalty proceedings has been changed substantially by the amendments to the Income-tax Act of 1961 introduced in 1964. The word “deliberately” occurring in section 271(1)(c) has been omitted and the following Explanation has been added:

“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 143 or section 144 or section 147 (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 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.”

7. We have, however, not relied on the Explanation notwithstanding the provisions of section 297(2)(g), as the Explanation came into force on April 1, 1964, whereas the assessment had been completed on March 20, 1964. Section 297(2)(g) enables the initiation of penalty proceedings under the Income-tax Act of 1961, even in respect of assessments for earlier years if the assessments are completed on or after April 1, 1962. The provisions of the Income-tax Act of 1961 were, therefore, properly applied to the present penalty proceedings. But the Explanation to section 271(1) was added by the Finance Act of 1964 with effect from April 1, 1964. The assessment having been completed on March 20, 1964, the Explanation would govern the penalty proceedings only if it is treated as a procedural provision. No doubt, a provision dealing with burden of proof has been considered to be a procedural provision, but, in the present case, the Explanation is apparently linked up with the amendment to the substantive provision contained in section 271(1)(c). In the view that we have taken it is not necessary for us to decide the question whether, in these circumstances, the Explanation governed the present penalty proceedings also.

8. For the reasons mentioned by us we answer the question in favour of the department. It will now be open to the Tribunal to consider the question of quantum of penalty. The department is entitled to its costs which we fix at Rs. 250.