Penalty for false explanation fails where concealment of income is not proved under the income-tax penalty provision.

Penalty proceedings under section 28(1)(c) were treated as penal in nature, requiring the revenue to prove concealment of particulars of income or furnishing of inaccurate particulars. A merely false or improbable explanation about the source of investment did not, by itself, establish concealment. On the Tribunal's finding that the assessee had only offered a false explanation about the source of purchases and concealment was not positively proved, the levy of penalty was held to be unjustified in law in favour of the assessee.

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Issues: Whether penalty under section 28(1)(c) of the Income-tax Act, 1922, was justified where the assessee was found to have offered a false explanation for the source of investment, but concealment of income was not positively established.

Analysis: Proceedings for penalty under section 28(1)(c) are penal in nature, and the revenue must prove concealment of particulars of income. A mere false or improbable explanation as to the source of investment does not by itself establish concealment. The finding must show that the assessee furnished inaccurate particulars of income or deliberately concealed income. On the Tribunal's finding, the assessee was only found to have come forward with a false explanation about the source of the purchases, and not to have concealed income.

Conclusion: The levy of penalty was not justified in law and the question was answered in the affirmative in favour of the assessee.

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