Penalty under income-tax law is penal in nature; revenue must prove concealment of income, not rely on a false explanation alone.

Penalty proceedings under section 28(1)(c) of the Income-tax Act, 1922 were treated as penal, not merely administrative, because the provision punishes concealment of income or deliberate furnishing of inaccurate particulars. Assessment proceedings and penalty proceedings were held to be distinct, so assessment material could operate only as evidence and not as conclusive proof. The department had to establish both concealment or deliberate inaccuracy and that the matter concealed or misstated was income. A false explanation by the assessee in assessment proceedings, by itself, was insufficient to justify penalty. On the stated facts, the revenue failed to discharge the burden and the penalty was not justified.

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Issues: Whether proceedings for penalty under section 28(1)(c) of the Income-tax Act, 1922 are penal or quasi-criminal in character, and whether the burden of proving concealment of income or deliberate furnishing of inaccurate particulars lies on the revenue; whether, on the facts, the penalty imposed on the assessee was justified.

Analysis: Section 28(1)(c) authorises the imposition of a monetary penalty for concealment of income or deliberate furnishing of inaccurate particulars. The provision was construed as imposing punishment for a statutory offence, notwithstanding that the amount is recovered in the course of income-tax administration. Assessment proceedings and penalty proceedings were treated as distinct, and the materials from assessment could be relevant only as evidence, not as conclusive proof. The essential ingredients of the offence were held to be, first, concealment or deliberate inaccuracy, and secondly, that the subject matter concealed or inaccurately stated was income; both ingredients had to be established by the department. Mere falsity of the assessee's explanation in assessment proceedings was held insufficient by itself to sustain penalty.

Conclusion: The proceeding under section 28(1)(c) was penal in nature and the onus lay on the revenue. The revenue failed to discharge that burden on the facts, and the penalty was not justified.

Final Conclusion: The reference was answered against the revenue, with costs awarded to the assessee.

Ratio Decidendi: Penalty under section 28(1)(c) can be imposed only when the revenue proves both concealment or deliberate furnishing of inaccurate particulars and that the concealed or inaccurately stated matter was income; a false explanation alone does not establish the statutory offence.

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