Law:

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Section 256(2), read with section 271(1)(c), of the income-tax act, 1961-Reference-Question of law-For assessment year 1967-68, disbelieving assessee's explanation, ITO added certain cash credit found in his books to his income and imposed penalty-Tribunal deleted penalty holding that merely disbelieving assessee's explanation was not enough-Whether in view of change of law after 1-4-1964, a question of law arose from tribunal's order deleting penalty-Held, yes Facts During the assessment proceedings for the assessment year 1967-68, the ITO noticed that the assessee had shown a certain cash credit in his account books in the name of one S. On examination, S stated that he had mortgaged his land in January 1967, in order to raise funds for the construction of a house, but later on he changed his mind and advanced the impugned sum to the assessee in February 1967. S also stated that later on he received this amount back in two instalments. The ITO concluded that S had a very meagre amount of income and he could not have got land redeemed after one year, without getting this amount from the assessee, whereas the books of the assessee showed that this amount was returned to S much later. The ITO disbelieved the version of the assessee and imposed penalty. However, the Tribunal allowed the assessee's appeal on the ground that, merely because the explanation given by the assessee had been disbelieved, penalty could not have been imposed. The revenue's application for making a reference to the High Court under section 256(1) was also rejected by the Tribunal. On application by the revenue under section 256(2): Held Although in CIT v. Anwar Ali [1970] 76 ITR 696 (SC), it had been held that before penalty could be imposed, the entirety of circumstances had to 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, however, after 1-4-1964, the situation has been amended and the word 'deliberately' has been deleted from section 271(1)( c). In view of the, aforesaid position, a question of law arose from the Tribunal's…

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