1942 (1) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Deliberate concealment of income and applicability of Section 28 of the Income-tax Act.
2. Imposition of penalty when returns were filed by deceased ancestors.
3. Correctness of the method of computing profit and its assessability during the year in question.

Detailed Analysis:

1. Deliberate Concealment of Income and Applicability of Section 28 of the Income-tax Act:
The central issue was whether the assessee deliberately concealed income or particulars of such income, thus invoking the provisions of Section 28 of the Income-tax Act. The Income-tax Officer found that the assessee did not disclose income from certain transactions, such as the purchase of village Sahil, Shankerganj property, and a house in Lohar Gali. The Officer determined that there was a profit of Rs. 16,000 from the purchase of village Sahil, Rs. 1,700 from the house in Lohar Gali, and additional profits from Shankerganj property. The assessee's return did not reflect these transactions, leading to a total assessed income of Rs. 62,378, significantly higher than the declared Rs. 35,414. Consequently, a penalty of Rs. 2,500 was imposed for deliberate concealment.

The Assistant Commissioner reduced the assessable income by Rs. 16,000, acknowledging that this profit was realized outside the accounting year. However, he upheld the penalty, albeit reduced to Rs. 2,000, citing deliberate omission of certain items from the books. The Commissioner further reduced the penalty to Rs. 1,200 but maintained that concealment was a factual issue not referable to the Court.

The Court concluded that the materials showed deliberate concealment by the assessee, rejecting the argument that there was a bona fide difference in computation methods. The Court emphasized that the investments and profits were not recorded in the regular account books, affirming the applicability of Section 28.

2. Imposition of Penalty When Returns Were Filed by Deceased Ancestors:
The second issue addressed whether penalties could be imposed when returns were filed by deceased ancestors, particularly given the quasi-criminal nature of such penalties. The Commissioner clarified that the return for the assessment year 1934-35 was signed by Bhoori Singh on behalf of the Hindu undivided family, who was still alive. The Court noted that this question was misconceived, as acknowledged by the assessee's counsel, and thus did not arise.

3. Correctness of the Method of Computing Profit and Its Assessability During the Year in Question:
The third issue examined the correctness of the profit computation method adopted by the income-tax authorities and whether the figure arrived at was assessable during the relevant year. The Court reviewed the contentions and found that the Assistant Commissioner and the Commissioner had provided relief to the fullest extent possible. The Court addressed specific claims, such as the Rs. 4,087-7-6 spent on reconstructing Shankerganj property, and clarified that these expenses were adjusted against rents and not included in the sale price of Rs. 1,200. The Court affirmed that the method of computing profit and the figure arrived at by the income-tax authorities were correct, answering the question in the affirmative.

Conclusion:
The Court upheld the findings of deliberate concealment of income by the assessee, validated the imposition of penalties, and confirmed the correctness of the profit computation method used by the income-tax authorities. The assessee was ordered to pay the costs of the Department, with the Advocate-General's fee fixed at Rs. 200. The reference was answered accordingly, and a copy of the judgment was to be sent to the Commissioner of Income-tax.