Penalty for concealment requires positive material; a false explanation alone is not enough to sustain cancellation under income-tax law.

Penalty proceedings under the Income-tax Act are penal in character, so the department must establish from the totality of circumstances that the disputed amount was income and that the assessee concealed particulars or furnished inaccurate particulars. A false or inconsistent explanation about the source of an investment is not, by itself, positive evidence of concealment, and assessment findings are relevant but not conclusive in penalty proceedings. On that footing, cancellation of the penalty under section 28(1)(c) was justified.

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Issues: Whether the penalty imposed under section 28(1)(c) of the Indian Income-tax Act, 1922 was validly cancelled when the assessee's explanations for the source of the investment were found false but no other positive material showed concealed income.

Analysis: Penalty proceedings under the Income-tax Act are penal in character, and the burden lies on the department to establish, on the cumulative effect of all relevant circumstances, that the disputed amount represents income and that the assessee concealed particulars of income or furnished inaccurate particulars. A false explanation by itself does not amount to positive evidence of concealment. Findings recorded in assessment proceedings may be relevant, but they are not conclusive for penalty. Even where an assessee gives successive inconsistent explanations, the legal position does not change unless there is additional material beyond the falsity of the explanations to support the inference of concealed income.

Conclusion: The cancellation of penalty was justified, and the question was answered in the affirmative in favour of the assessee.

Ratio Decidendi: Penalty under section 28(1)(c) cannot be sustained merely because the assessee's explanation is false; the revenue must prove by positive material that the amount was concealed income and that inaccurate particulars were deliberately furnished.

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