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Imposition of penalty under section 28(1)(c) of the Income-tax Act based on concealment of income. Analysis: The case involved a firm of Military Contractors in Tadepalligudem, West Godavari District, which had an income discrepancy for the assessment year 1944-45. The Income-tax Officer found the firm's accounts defective and added a substantial amount to the income returned. The reasons for rejecting the account books included undisclosed sale of coal, irregular maintenance of wage records, and lack of vouchers for certain transactions. The Income-tax Officer imposed a penalty under section 28(1)(c) of the Act, which was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, albeit with a reduced amount. The key question before the court was whether the penalty of Rs. 4,000 was justified based on the circumstances of the case. The court examined section 28(1) of the Income-tax Act, which allows for penalties in cases of non-disclosure or deliberate furnishing of inaccurate particulars of income. The court rejected the assessee's argument that the penalty should only be based on the concealed income amount. The court emphasized that the essential finding for penalty imposition is the concealment of income particulars or deliberate furnishing of inaccurate particulars. Referring to a previous judgment, the court highlighted that the Income-tax Officer cannot make an assessment without any evidence or material and must have more than mere suspicion to support the assessment. The court clarified that the penalty is not limited to the amount of income deliberately suppressed but can be based on additional income estimated from other material reasonably suspected to be suppressed. Ultimately, the court concluded that the finding of concealment regarding the sale of two wagon-loads of coal was sufficient to justify the penalty imposition. The penalty amount was to be computed based on the actual tax paid and the tax that would have been payable if the original return had been accepted as correct. The court answered the question in the affirmative, affirming the justification for the penalty. The assessee was directed to bear the costs of the reference set at Rs. 250.
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