only contention in this appeal is that CIT (A) has erred in confirming penalty of Rs. 60,000 imposed by ITO under s. 271(1)(c) of IT Act, 1961. facts of case are in very narrow compass. assessee deals in paper. ITO found that while as per is own books of account stock of paper as on 31st March, 1976 was of value of Rs. 1,62,403 its value as per Bank records, with whom it was pledged/hypothecated, amounted, to Rs. 2,42,403. It was submitted by assessee before ITO that it was sister concern of M/s Ganesh School Book Deport Which also had branch called Ganesh Paper Agency, both located in Faizabad. It was explained that goods worth Rs. 80,000 belonging to Ganesh Paper Agency had also been hypothecated with bank. It was stated vide letter 14th Feb., 1979, written by assessee to ITO that that closing stock on relevant date with Ganesh Paper Agency was of Rs. 5,19,426. It was also explained to him that stock has actually hypothecated with bank and lock and key to godown remained either with assessee or Genesh Paper Agency, Bank having no physical control over it. explanation was rejected by ITO as in his opinion there was no positive proof to support it. He, therefore, made addition of Rs. 80,000 to total income of assessee. assessee appealed to CIT (A) Before him, besides relying on explanation dt. 14th Feb., 1979, already referred to above, assessee also produced certificate dt. 20th Dec., 1979 from one of partners of Ganesh School Deport, certifying that they had permitted hypothecation of their stock to extent of Rs. 80,000 by assessee against latter s overdraft with bank. CIT (A) rejected this new evidence on ground that certificate was vague and that no particulars of stock had been furnished before him. assessee appealed to Tribunal. It was submitted before latter that ITO had never asked assessee to furnish particulars of stock belonging to Ganesh School Book Deport and, therefore, they could not be furnished. Tribunal, however, relying on decision of Madras High Court in case of Coimbatore Spinning & Weaving Co. Ltd. vs. CIT (1974) 95 ITR 375 (Mad), confirmed addition. It was submitted before Hon ble Court that Tribunal should have taken judicial notice of practice followed by business houses of declaring larger stock to banks purely for poses of getting higher loans or overdraft facilities. Court did not feel convinced that any such practice was shown to exist or that it had been recognised in commercial circles or by Courts. Court also observed that even assuming that such practice existed, Tribunal was not expected to take judicial notice of such substandard morality on part of assessee so as to enable them to go back on their own sworn statement given to banks as to stocks held and hypothecated by them to banks. ITO also initiated penalty proceedings under s. 271(1)(c) of IT At, 1961. After relying on finding of Tribunal referred, to above, and after referring to Explanation-I to s. 271(1)(c), as substituted by Taxation Laws (Amendment) Act, 1975, w.e.f. 1st April, 1976, he imposed penalty of Rs. 60,00 which was confirmed by CIT (A). assessee is now in appeal before us. We have heard parties. Both sides referred to number of decided authorities having bearing on subject before us. We will first refer to decision of Allahabad High Court in CIT vs. Mohinder Singh (supra). It was held in this case that proceedings for imposition of penalty are of quasi-criminal nature and while deciding whether assessee is guilty of concealment, Tribunal has to examine facts afresh and is not to be guided by findings given in quantum appeal. We have to keep this principle in our mind. It is in light of this principle that we do not agree with finding of CIT (A) that either assessee s further explanation could not be considered at appellate stage or that additional evidence could not be entertained by him. What we find in present case is that there was difference between value of stocks as pledged or hypothecated with banks and that shown in assessee s books of account. assessee offered explanation that extra stock belonged to its sister concern M/s Ganesh School Book Deport. There is five partners besides two minors admitted to benefit of partnership, in Ganesh School Book Deport. There is evidence on record to show that assessee and Ganesh School Book Depot belonged to same set of persons. There are five partners besides two minors admitted to benefit of partnership, in Ganesh School Book Depot. They include Shri R. S. Agarwal and Shri Gopal Agarwal, holding 20% share each. assessee firm, on other hand, consists of two partners, namely Smt. Punam Agarwal and Sri Onkar Agarwal, who are respectively wife and son of Shri Gopal Agarwal and Shri R. S. Agarwal. Each of them holds 50% share. This relationship, therefore, does no rule out possibility of utilising stocks of Ganesh School Book Deport by assessee with view to seek overdraft limit from bank. certificate dt. 20th Dec., 1979 under signature of Shri R. S. Agarwal, issued by Ganesh School Book Depot has not either been proved false or inaccurate in any respect. CIT (A), while dealing with quantum matter, has merely stated that it was vague and that no particular of stock had been furnished. We also do not agree with approach of various authorities that penalty can be confirmed in view of principle contained in judgment of Madras High Court, reported in (1974) 95 ITR 375 (Mad), as it was also followed for confirming addition of R s . 80,000. We have carefully perused said decision. In that case, assessee had not furnished any explanation regarding extra stock pledged with bank. only submission was that Tribunal should have taken judicial notice of practice followed by business houses of declaring larger stock to banks purely for purpose of getting higher loans or overdraft facilities. This argument was rejected by Hon ble High Court. In present case, fact entirely different. Here it is nobody s case that assessee had given any false weight or value of goods hypothecated with bank. On other hand, case of assessee was that part of goods belonging to sister concern had also been utilised for above purpose. only thing that assessee did was to declare entire goods as its own property. In this connection, ld. counsel for assessee submitted before us that even beneficial ownership was sufficient for above purpose and in this connection he relied on decision of Supreme Court in case of R. B. Jodhamal Kuthiala vs. CIT (1971) 82 ITR 570 (SC). In view of this legal position, we cannot attribute any sub-standard morality on part of assessee so as to take support from decision of Madras High Court reported in (1974) 95 ITR 375 (Mad). addition has obviously been made under s. 69A or s. 69B Act. To apply these sections, it is necessary that assessee should be found either owner of stock or should have been found having made investments in extra stocks. burden of proving ownership or making of investment by assessee rests on Department. This principle is now well settled by Bombay High Court in case of J. S. Parkar vs. V. B. Palekar & Ors. (1974) 94 ITR 616 (Bom). It was held in this case that burden of proving that investment had, in fact, been made (and not recorded in books) and/or that assessee was owner of bullion, etc., was clearly on Department. This burden, in our opinion, has not been discharged. Except rejecting assessee s explanation on ground that certificate obtained from Ganesh School Book Depot was vague and details of stocks had not been furnished, Department has not done anything to show that assessee was owner of entire stock or that it had made its own investment in that stock which was pledged/hypothecated with bank. We do not even find that any of authorities below had taken precaution to examine Shri R. S. Agarwal partner of Ganesh School Book Depot, who had issued certificate on 20th Dec., 1979 even though that certificate has admitted by CIT (A) at appellate stage. It was also pointed out to us that assessee did not deal in "capital copies" while stock pledged with bank appearing at p. 23 of assessee s paper book include two such items of value of Rs. 9,510 and Rs. 18,800. This also goes to show that some of stocks belonging to Shri Ganesh School Book Depot who was dealing in such copies, was also pledged with bank. In view of this factual position and legal principles referred to by us above, we do not think that any case of concealment has been made out against assessee. ITO has also relied on Explanation-I to s. 271(1)(c). It is cl. (B) of this Explanation which applied to case. assessee has offered explanation which, according to Department, it is not able to substantiate. proviso to above Explanation states that nothing contained in Explanation shall apply to case referred to in cl. (B) in respect of any amount added or disallowed as result of rejection of any explanation offered by added or disallowed as result of rejection of any explanation offered by such person, if such explanation if bona fide all facts relating to same and material to computation of his total income had been furnished by him. In present case, we do not find anything on record to doubt bona fide of assessee is stating that goods worth Rs. 80,000 belonging to its sister concern had also been pledged with bank. Similarly, we do not find that any fact or material to computation of assessee s total income has not been disclosed by him. Explanation will, therefore, not apply to case of assessee in view of exception contained in proviso there of. We, therefore, cancel penalty as sustained by CIT (A). In result, appeal is allowed. *** AGARWAL TRADING CO. v. INCOME TAX OFFICER