1963 (11) TMI 5 - SC - Income Tax

Whether the levy of Rs. 68, 501 as penalty for concealment in the original return for the assessment year 1951-52 is legal ? Held that - The first order of penalty passed on January 22 1954 was pursuant to a notice issued on January 31 1962 in respect of which the assessee had offered his explanation on March 11 1952. That notice was not concerned with any concealment that came to light from the production of the books on August 17 1953 and therefore on this concealment the assessee had never been heard. In assessing a penalty on this notice subsequently acquired knowledge would be irrelevant. Appeal dimissed.

Summary

Issues:
1. Whether the levy of penalty for concealment in the original return for the assessment year 1951-52 is legal?
2. Whether two penalties can be imposed for identical concealment?
3. Whether the second order of penalty was legal considering the circumstances?

Analysis:
1. The case involved an appeal against a High Court judgment affirming the levy of a penalty for concealment in the original return for the assessment year 1951-52. The appellant, a firm, failed to disclose profits from its Bangkok branch in its returns for the years 1949-50, 1950-51, and 1951-52. The Income-tax Officer imposed a penalty of Rs. 68,501 for concealing income in the return for 1950. Additionally, a penalty of Rs. 20,000 was earlier imposed but later cancelled. The Tribunal upheld the Rs. 68,501 penalty, stating that the Income-tax Officer had proven concealment based on actual profits of Rs. 1,25,520. The High Court agreed that two penalties could not be levied for identical facts, but found the penalties were based on different assessments - one on estimate and the other on actual profits.

2. The appellant argued in the Supreme Court that the second penalty order was illegal as it was based on the same concealment for which the first penalty was imposed. The Court rejected this argument, stating that the Income-tax Officer had the jurisdiction to impose a higher penalty upon discovering the true facts. The Court emphasized that the penalty amount should correlate with the tax evaded due to concealment. As the first penalty was cancelled, the second penalty of Rs. 68,501 was deemed legal and enforceable.

3. The appellant further contended that the Income-tax Officer, having full knowledge of the true profits, could not impose a lower penalty initially and later increase it. Referring to a previous case, the Court clarified that as long as the penalty relates to the same assessment period, the Officer can levy a penalty based on the actual concealed income. The Court dismissed the argument that the Officer's knowledge of concealment before the first penalty order rendered the second penalty invalid. The Court concluded that the appeal was without merit and upheld the Rs. 68,501 penalty, dismissing the appeal with costs.