Concealment penalty requires positive material; an unproved explanation alone does not justify penalty or a reference.

Penalty for concealment under section 28(1)(c) of the Income-tax Act, 1922 was treated as unsustainable where the assessee's explanation, though unproved, was not contradicted by positive material showing concealment or deliberate furnishing of inaccurate particulars. The Tribunal's view that a mere failure to establish the explanation does not by itself justify penalty was accepted, because concealment ordinarily depends on factual inference drawn from surrounding circumstances. On that basis, no reference was directed on the alleged concealment issue.

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Issues: Whether the Tribunal was justified in cancelling the penalty under section 28(1)(c) of the Income-tax Act, 1922, and whether the reference sought on the alleged concealment of income and furnishing of inaccurate particulars arose from the Tribunal's order.

Analysis: The application was made under section 256(2) of the Income-tax Act, 1961 read with section 66(2) of the Income-tax Act, 1922. The Tribunal had upheld the addition of the cash credit as income from undisclosed sources but cancelled the penalty because the assessee's explanation, though not proved, was not met by any positive material showing concealment or deliberate furnishing of inaccurate particulars. The Court held that concealment is ordinarily a question of fact and that the revenue had not pointed to any positive circumstance from which such an inference could reasonably be drawn. In those circumstances, the Tribunal was in refusing to apply the penalty provision.

Conclusion: The Tribunal's cancellation of penalty was upheld, and no reference was directed.

Ratio Decidendi: Penalty for concealment under section 28(1)(c) of the Income-tax Act, 1922 cannot be sustained unless there is positive material or reasonable circumstantial basis to infer concealment or deliberate furnishing of inaccurate particulars; a mere failure of the assessee's explanation is not enough.

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