V. P. ELHENCE, J. M.: assessee is aggrieved of order dt. 20th April, 1982 of ld. AAC o f IT, Gorakhpur Range, Gorakhpur, by which penalty of Rs. 4,500 was confirmed against assessee under s. 271(1)(c) for asst. yr. 1977-78. For asst. yr. 1977-78 in question, ITO observed two cash credit of Rs. 2,000 each on 7th Aug., 1976 and 9th Aug., 1976 in books of assessee firm in name of one Shri Mohd. Farooq. said creditor was examined by ITO. However, ITO was of view that Shri Mohd. Farooq had given contradictory statements and that was not able to deposit any cash amount with assessee firm. He held that source of money deposited in books of assessee was not genuine and that it was income of assessee. Accordingly, he made addition of Rs. 4,000 as income from other sources. In appeal, said addition was confirmed by AAC and revision filed by assessee against said order of AAC was also rejected by CIT, Allahabad on 3rd Feb., 1982. However, penalty proceedings and already been initiated by ITO against assessee under s. 271(1)(c). assessee d i d not file any reply during penalty proceedings. ITO held that assessee had concealed its income and, therefore, as against minimum and maximum penalties of Rs. 2,368 and Rs. 4,736 respectively, he levied penalty of Rs. 4,500 on assessee under so. 271(1)(c). He held that credit worthiness of Mohd. Farooq was not proved by assessee and that alternatively explanation given by assessee was found by ITO to be not acceptable for lack of documentary evidence. He held that imposition of penalty under s. 271(1)(c) taking advantage of Explanation 1A and 1B to s. 271(1)(c) was justified. assessee, being aggrieved, has come up in appeal before us. Shri Mohd. Hashim, ld. counsel for assessee submitted that case of assessee was covered under proviso to Explanation 1 to s. 271(1)(c). He also submitted that explanation as required by s. 271(1)(c) was duly filed by assessee at time of assessment and, therefore, non-submission of explanation given in compliance to notice under s. 271(1)(c) could not be made ground for rejection of appeal. He submitted that for asst. yr. 1976-77 also similar amount of Rs. 4,000 was deposited by Mohd. Farooq with assessee which was accepted and that, therefore, Mohd. Farooq was credit-worthy person and cash credit in question was genuine. Reliance was also placed by him on decision of Hon ble Patna High Court in case of Sarogi Credit Corporation vs. CIT 1975 CTR (Pat) 1: (1976) 103 ITR 344 (Pat) and CIT vs. Nipani Tabacco Stores (1984) 40 CTR (Pat) 1: (1984) 145 ITR 128 (Pat). In alternative, he submitted that penalty imposed was excessive. On other hand, Shri K. K. Roy, ld. Departmental Representative placed k reliance on orders of Income-tax authorities. He submitted that explanation given by assessee was false and at any rate it could not be said that it was bona fide and that in terms of proviso to Explanation 1 to s. 271(1)(c) all facts relating to cash credit and material to computation of assessee s total income were disclosed by it. Reliance was also placed by him on following decision: CIT vs. Krishna & Co. (1979) 13 CTR (Mad) 24: (1979) 120 ITR 144 (Mad), Durga Dutta Chunnilal vs. CIT (1979) 120 ITR 319 (All) and Mirzapur Construction Company vs. CIT (1980) 122 ITR 828 (All). We have considered rival submissions as also decisions referred to above. In grounds of appeal, it has been mentioned by assessee that affidavit was given to ld. AAC but that he refused to accept same and that remark to contrary (i.e., that no new material had been adduced in course of appellate proceedings) was incorrect. It was also mentioned in grounds of appeal that repayment of Rs. 8,000 was made through Account Payee Cheque to Mohd. Farooq original of which was produced before ld. AAC, but that he refused to accept Photostat copy and thus assessee was denied justice. These grounds of appeal have been referred by us because neither any arguments were addressed to us thereon not it has been established that rejection of aforesaid affidavit and Photostat copy of Account Payee Cheque by ld. AAC was improper. Also no application was moved before us for receiving them in evidence under s. 29 of Income-tax Appellate Rules, 1963. result is that there is no force in these grounds of appeal and matter has to be considered on basis of material on record of the matter has to be considered on basis of material on record of income-tax authorities. In this case, Explanation to s. 271(1)(c) as applicable after 1st April, 1976 which is extracted in penalty order by ITO, was applicable. assessee had given its explanation for cash credit in question. Therefore, first question which falls for consideration is whether in terms of Explanation 1(A) to said section, explanation offered by assessee could be said to have been found by ITO or by AAC to be false or if assessee were held to have failed to substantiate is explanation, whether in terms of proviso to Explanation 1(B) said explanation could be said to be bona fide and it could be further said that assessee had disclosed all facts relating to same and material to computation of its total income. There is no doubt that for asst. yr. 1976-77 there was similar cash credit of Rs. 4,000 in name of Mohd. Farooq and that addition made by ITO for that year had been deleted by ld. AAC in that case that comfirmatory letter was filed from Mohd. Farooq and addition was deleted on ground that ITO did not choose to examine creditor and, therefore, deposit could not be treated as unexplained. However, so far as cash credit for assessment year in question is concerned, assessee cannot drawn upon aforesaid circumstance and we have to examine matter on basis of material on record for assessment in question. For assessment year in question Mohd. Farooq was examined by ITO. He deposed that he had been earning his living from Hakimi (medical profession) and that his daily income therefrom was only Rs. 2 to Rs. 4. He claimed to have accumulated Rs. 8,000 from his past savings out of Hakimi income for four to five years earlier. He did not know name of firm of assessee or names of any of its partners. In assessment order ITO has recorded fact that in letter dt. 25th Feb., 1977 signed by this creditor it was stated that sum of Rs. 4,000 deposited with assessee in financial year 1975-76 out of sale proceeds of house which was sold by him. However, this assertion does not tally with statement made by aforesaid creditor before ITO on 24th Dec., 1977 wherein he categorically stated that he accumulated Rs. 8,000 from his past savings out of his income from Hakimi. This was very material contradiction. daily income of Mohd. Frooq was also very meagre and even if he was living alone, it would hardly account for any savings because he had admitted that his sons were not giving any help to him in meeting his expenses. assessment order also records fact that in letter dt. 25th Feb., 1977 aforesaid, Farooq had stated that sale proceeds of house had been deposited with his relative Shri Mushtaq Ahmed one of partners of assessee firm) but in his statement dt. 24th Dec., 1977 before ITO Mohd. Farooq stated that money raised out of his past savings was kept with himself and was handed-over to Shri Mohd. Saleh who has since died. This is again very material contradiction. Mohd. Farooq had stated before ITO that money had been sent by him forthe purposes of going to Haj and that keeping of same in his house would not have been safe as his house was kachha, its walls were low and that on 2 or 3 occasions theft had been committed at said house. He claimed to have given money to assessee for safe keeping. He also stated that Mustak Ahmed was son-in-law of his cousin brother Hafiz Faizure Rahman. Thus, Mohd. Farooq was relative of Mushtak Ahmed. careful perusal of evidence on record, therefore, shows that explanation given by assessee in support of cash credit in question was false. At any rate, having regard to material contradictions, referred to above, and statement of Mohd. Farooq taken as whole, explanation given by assessee could not be said to be Bona fide. In totality of all facts of circumstances, we are of view of ld. AAC was quite justified in taking view that penalty was leviable on assessee under s. 271(1)(c). Lastly, we come to question of quantum of penalty. Here, in our view assessee needs relief because penalty imposed near he maximum imposable penalty is excessive. Considering facts, in our view minimum penalty of Rs. 2,370 (in round figures) would meet ends of justice. We hold accordingly. In result, appeal is partly allowed. *** INDIA COTTON CO. v. INCOME TAX OFFICER