Kondaiah, J.:— The Income-tax Appellate Tribunal, Hyderabad Bench, has, at the instance of the Commissioner of Income-tax, submitted under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as “the Act”), a statement of case for our opinion on the following question:
“Whether, on the facts, and in the circumstances of the case, the penalty imposed under section 28(1)(c) had been validly cancelled?”
2. In order to appreciate the scope of the question, it is necessary to briefly refer to the material facts found by the Appellate Tribunal. The assessee, an individual doing contract business, had purchased a house in May, 1951, for a sum of Rs. 29,500 in the name of his minor son. For the assessment year 1952-53, the relevant accounting year being the financial year ending with March 31, 1952, one of the questions that fell for consideration before the Income-tax Officer in the assessment of the assessee's income was whether the assessee had explained the source of Rs. 29,500 used for the purchase of the house in May, 1951. The assessee gave three inconsistent explanations. Firstly, it was stated that the amount of Rs. 29,500 represented dowry given at the time of the marriage of his minor son. Coming to know that his son was not married by May, 1951, and finding that the explanation offered by him was patently false, he changed his version and stated that the amount represented savings made by his wife out of the sum of Rs. 1,000 which her parents used to send her annually. That explanation also was not accepted by the Income-tax Officer as no reliable and tangible evidence was adduced in support of the same. Thereupon, the assessee fell back upon a statement of his total wealth wherein it was shown that he had a cash balance of Rs. 50,000 as on March 31, 1951. According to the assessee, the investment of Rs. 29,500 came out of the cash balance indicated in the total wealth statement. The assessing authority, rejecting the different conflicting versions of the assessee relating to the source of the sale consideration of Rs. 29,500 added the same as income from undisclosed sources. The addition was sustained by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.
3. The Income-tax Officer, after issuing notice to the assessee under section 28(3) of the Act and affording a reasonable opportunity to him, levied a penalty of Rs. 15,800. The Appellate Assistant Commissioner dismissed the appeal preferred by the assessee. Aggrieved by the decision of the Appellate Assistant Commissioner, the assessee preferred an appeal to the Appellate Tribunal. The Tribunal agreed with the finding of the assessing authority and the Appellate Assistant Commissioner to the effect that the explanations given by the assessee relating to the source of his investment in the house property were all false. That finding was specifically given even in the assessment proceedings. However, the Tribunal held that that finding was not sufficient to warrant the imposition of penalty, as no additional material had been produced by the department to show that the amount in question was income. The Tribunal, therefore, cancelled the penalty levied by the assessing authorities. Hence this reference.
4. When the reference came up before us on October 8, 1971, Mr. P. Rama Rao, the learned standing counsel for the income-tax department, submitted that there appears to be further material apart from the explanation of the assessee regarding the source of the purchase money of Rs. 29/500 being found false. In support of his plea, he relied upon the following passage in the order of the Income-tax. Officer:
“……….it was found that there was no surplus cash available with him as on March 31, 1951, and the balance shown as per wealth statements was inflated beyond his resources. There was actually a deficiency in cash as on April 1, 1951, and that was the reason why the Tribunal came to the conclusion that the asset in question was acquired from monies earned from sources not disclosed for income-tax purposes. In spite of an opportunity given, the assessee did not appear in person to offer any further explanation regarding the above acquisition.”
5. The Tribunal, as per our direction dated October 8, 1971, has submitted a further and fuller statement of its case. The Tribunal has stated that the deficiency in cash as on April 1, 1951, referred to in the order of the Income-tax Officer was a factor taken into consideration by it in the assessment proceedings to hold that there was no surplus cash available with the assessee as on March 31, 1951, and the balance shown as per wealth statements was inflated. That particular aspect disproved the third explanation of the assessee regarding the source of the purchase money. That is not a new or additional factor or evidence to be taken into consideration. In substance, the Tribunal has categorically stated that except the falsity of the explanation of the assessee relating to the source of Rs. 29,500 utilised for the purchase of the house in May, 1951, there was no other material or evidence to show or prove that the amount of Rs. 29,500 was really the assessee's concealed income.
6. Mr. P. Rama Rao, the learned standing counsel for the income-tax department, contended that the conduct of the assessee in setting up three inconsistent false pleas with regard to the source of the purchase money of Rs. 29,500 is sufficient to infer that the amount of Rs. 29,500 was income of the assessee and he had deliberately concealed the same. This claim of the department was opposed by Mr. Jagannadha Raju, the learned counsel appearing for the assessee, contending, inter alia, that the case on hand is governed by the decision of the Supreme Court in Commissioner Of Income Tax, West Bengal v. Anwar Ali [1970] 76 ITR 696 SC..
7. It is well-settled that the penalty proceeding is penal in character and the onus is on the department to show that a particular receipt or amount is of revenue nature. In order to determine whether any particular receipt or amount represented income and whether the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars thereof warranting the imposition of penalty, the entirety or totality of facts and circumstances, but not each or some of the factors, should be taken into consideration. In other words, the income-tax authorities must be satisfied, on examination of the cumulative effect or the entirety of circumstances, that the only reasonable inference from such factors or material that could be drawn was that the amount in question represented income and that the assessee had concealed particulars of his income or had deliberately furnished inaccurate particulars thereof. Where there is no positive evidence warranting the inference that the disputed amount was concealed income of the assessee or that he had deliberately furnished inaccurate particulars of his income, no penalty is exigible. Where the explanation offered by the assessee has been found to be false and there is no other material or evidence except the conduct of the assessee in giving false explanation regarding the source of the amount in dispute, no penalty can be levied as it cannot be said that the only inference that can be reasonably and safely drawn on such facts is that the receipt constituted the taxable income of the assessee. The findings arrived at by the income-tax authorities in the assessment proceedings for the determination or computation of tax are not conclusive for the purposes of levying penalty although they may be good evidence. However, penalty cannot be levied solely on the basis of reasons or findings given in the assessment proceedings. See Commissioner Of Income Tax, West Bengal v. Anwar Ali and Commissioner of Income-tax v. Khoday Eswarsa and Sons [1972] 83 ITR 369 SC..
8. In the light of the foregoing discussion, we shall examine the facts and circumstances found by the Appellate Tribunal, the final fact-finding authority. The original statement of case and the fuller statement of case submitted by the Tribunal disclose that except the explanations offered by the assessee regarding the source of his investment in the property being found false, there is no other material on record from which it can be inferred that the disputed amount of Rs. 29,500 was concealed income of the assessee or that the assessee had deliberately furnished inaccurate particulars of his income. Whether there is additional evidence or material apart from the material and the finding in the assessment proceedings that the disputed amount was income, is a question of fact. In view of the specific finding given by the Tribunal that except the falsity of the explanations offered by the assessee, there is no other positive evidence so as to reasonably infer that the amount of Rs. 29,500 was the income of the assessee in the relevant accounting year or that he had deliberately furnished inaccurate particulars of his income, it must be held that the penal provisions of section 28(1)(c) are not attracted.
9. The only difference in the case on hand and that decided by the Supreme Court in Anwar Ali's case is that the assessee herein had offered three explanations one after the other and each one of them was found to be false; whereas in the case decided by the Supreme Court, the only explanation given by the assessee was found to be false. It, therefore, falls for determination whether the successive false explanations offered by the assessee would be sufficient to warrant the penal proceedings. Whether the assessee gives one, two or three explanations, be they alternative or successive, it does not materially alter the legal position. In each one of such cases, it must be found that the explanation offered by the assessee was false. Giving more than one false explanation would only indicate the conduct of the assessee who failed to give the true and satisfactory version, but none the less, the result is one and the same. The assessee was unable to satisfactorily explain the source of the disputed amount and such conduct would justify or warrant the addition of such amount to the admitted income of the assessee. Hence, in our considered opinion, the mere fact that the assessee has given two or three false explanations with regard to the source of the same disputed amount, in the absence of any further positive material, would not justify the imposition of penalty under section 28(1)(c) of the Act; as the repeated falsity of the explanation more than once would not change the legal position in this regard. The heart of the matter is that, before levying penalty under section 28(1)(c), the income-tax department must satisfactorily and reasonably prove by any positive evidence, that the disputed amount represented the income of the assessee and that he had concealed the particulars of his income or deliberately furnished inaccurate particulars thereof. We are of the firm view that the falsity of the explanations offered by an assessee more than once or setting up of inconsistent pleas in that regard would not amount to any additional or positive material justifying the imposition of penalty. Such conduct of the assessee in giving inconsistent and false explanations may be taken into consideration in fixing the quantum of penalty if the provisions of section 28(1)(c) are attracted.
10. The decision of the Madras High Court in Abu Bucker Sait v. Commissioner Of Income-Tax, Madras* relied upon by the learned counsel for the revenue undoubtedly supports his contention. Therein, it was held that the sum of Rs. 66,640 utilised by the assessee to purchase an evacuee property in the name of his wife should be deemed to be income from undisclosed sources and that the assessee having concealed his income and taken untenable stands, the provisions of section 28(1)(c) of the Act were satisfied and the levy of penalty was justified. In my view, this decision is no longer good law in view of the decisions of the Supreme Court in Commissioner Of Income Tax, West Bengal v. Anwar Ali and Commissioner of Income-tax v. Khoday Eswarsa and Sons [1972] 83 ITR 369 SC..
11. The decision of our High Court in R.C No. 4 of 1970 (Commissioner of Income-tax v. Anantharam Veerasinghaiah & Co. [1975] 99 ITR 544 AP.) dated November 9, 1971, on which reliance has been placed by the learned counsel for the revenue, is distinguishable on facts. Therein it was found that the explanation of the assessee in respect of a number of cash credits was false and that he had adopted a pattern or design to bring income receipts into the books in the guise of cash credits. The income returned by the assessee was Rs. 7,700 whereas the income determined by the Tribunal was Rs. 1,30,000. The books of the assessee were found to be unreliable. The learned judges, on the facts, taking into consideration the entirety of the circumstances came to the conclusion that the cash credits and the cash deposits represented concealed income of the assessee.
12. On a consideration of the entire facts and circumstances, we have no hesitation to hold that there is no justification for the imposition of penalty under section 28(1)(c) of the Act.
13. Mr. Rama Rao complained that the Tribunal overstepped its limits in making an observation in its further statement that he has not made a correct presentation of, facts before the hon'ble High Court. This observation of the Tribunal is unwarranted.
14. For all the reasons stated, we answer the question in the affirmative and in favour of the assessee. But, in the circumstances, there shall be no order as to costs. Advocate's fee is fixed at Rs. 250.
15. Question answered in the affirmative.