1960 (4) TMI 94 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the penalty for concealment in the original return for the assessment year 1951-52.
2. Justification for the imposition of two penalties under section 28(1)(c).
3. The validity of the penalty imposed based on estimated income versus actual income.

Issue-wise Detailed Analysis:

1. Legality of the penalty for concealment in the original return for the assessment year 1951-52:

The primary question for determination was whether the levy of Rs. 68,501 as a penalty for concealment in the original return for the assessment year 1951-52 was legal. The assessee firm, engaged in the cloth business and exporting to its branch in Bangkok, did not include any profit from the Bangkok branch in its returns for the assessment years 1949-50, 1950-51, and 1951-52. The Income-tax Officer estimated the profits of the Bangkok branch at 5% of the export value due to the non-availability of the books of account. The Tribunal upheld the penalty of Rs. 68,501, noting that the Income-tax Officer had definite knowledge of the concealment when the second penalty notice was issued, as the correct profits were later disclosed in the section 34 proceedings.

2. Justification for the imposition of two penalties under section 28(1)(c):

The Tribunal found that the imposition of two penalties was not justified on identical facts. The first penalty of Rs. 20,000 was based on the original assessment, which was solely on the basis of an estimate due to the non-production of the Bangkok branch's books. The second penalty of Rs. 68,501 was imposed after the actual profits were disclosed, showing a clear concealment of income. The Tribunal noted that the first penalty was remitted because the department had not succeeded in establishing any guilt at the time of the original assessment. However, the second penalty was justified as it was based on the definite knowledge of the actual profits, proving the concealment.

3. The validity of the penalty imposed based on estimated income versus actual income:

The Tribunal differentiated between the penalties based on estimated income and actual income. The original assessment, which led to the first penalty, was based on an estimate due to the non-availability of the Bangkok branch's books. The second penalty was imposed after the actual profits were disclosed, showing a clear concealment. The Tribunal emphasized that the crucial date was the date of the original assessment and the first penalty notice, not the date when the first penalty was imposed. The second penalty was based on new facts and data gathered from the books of the Bangkok branch, which were produced later. The Tribunal concluded that the basis for the two notices was not the same, justifying the imposition of the second penalty.

Conclusion:

The High Court affirmed the Tribunal's decision, holding that the levy of Rs. 68,501 as a penalty for concealment in the original return for the assessment year 1951-52 was legal. The Court agreed that the imposition of two penalties on the same facts was not justified, but in this case, the penalties were based on different facts. The first penalty was based on an estimate, while the second penalty was based on actual profits, proving concealment. The Court concluded that the second penalty was justified and upheld the Tribunal's decision. The assessee was ordered to pay the costs.