1933 (1) TMI 24 - HC - Income Tax

Summary

Issues: Interpretation of Section 28 of the Income Tax Act, 1922 regarding imposition of penalty for false income declaration.

Analysis:
The judgment by the High Court of Rangoon involved a reference under Section 66(2) of the Income Tax Act, 1922, concerning the computation of tax avoidance based on the correctness of income declared by the assessee. The key question referred was whether the tax amount avoided due to incorrect income declaration was calculated in accordance with Section 28 of the Income Tax Act, 1922. Section 28 allows for the imposition of a penalty if it is found that the assessee concealed income particulars or furnished inaccurate details, resulting in a lower income declaration. The maximum penalty under Section 28(1) is determined by the difference between the tax on the declared income and the tax on the actual income as per the Income Tax Act. The judgment emphasized that the penalty under Section 28 is distinct from the income tax assessment process and is solely for false income declaration. The Income Tax Officer's discretion in imposing a penalty and the assessee's right to be heard, as per Section 28(3), were highlighted. The court ruled that evidence presented by the assessee to reveal the actual income should be considered in determining whether a penalty should be imposed and its amount, even though it does not impact the income tax assessment. The court held that the Income Tax Officer erred in rejecting such evidence, leading to a negative answer to the referred question.

Judges' Opinions:
- PAGE, C.J.: PAGE, C.J., emphasized the distinction between income tax assessment and penalty imposition under Section 28. He highlighted that the assessee's right to present evidence of actual income is crucial in determining the penalty amount and whether it should be imposed. The Income Tax Officer's refusal to consider such evidence was deemed unjustified.
- BAGULEY, J. & MACKNEY, J.: Both judges, BAGULEY and MACKNEY, concurred with PAGE, C.J.'s opinion, leading to the unanimous agreement that the Income Tax Officer erred in disregarding the relevance of evidence presented by the assessee in the penalty imposition proceedings.

The High Court of Rangoon ultimately answered the reference in the negative, indicating that the Income Tax Officer's refusal to admit evidence of the actual income accrued by the assessee was unjustified and that such evidence should be considered in determining the imposition of a penalty under Section 28 of the Income Tax Act, 1922.