1968 (9) TMI 11 - SC - Income Tax

Concealment of income - penalties which have been provided by section 28(1) are meant for the acts of omission or commission which are set out therein and once an assessee is proved to have been guilty of them the penal provisions are attracted and with reference to clause (c) irrespective of the amount concealed - Assessee appeal dismissed

Issues Involved:

1. Interpretation of Section 28(1)(c) of the Income Tax Act, 1922.
2. Calculation of penalty under Section 28(1)(c) based on the difference between the returned income and assessed income.
3. Whether the penalty should be proportionate to the concealed income or the total difference between returned and assessed income.
4. The meaning of "income as returned" and "avoided" in the context of Section 28(1)(c).

Detailed Analysis:

1. Interpretation of Section 28(1)(c) of the Income Tax Act, 1922:

The primary issue is the interpretation of Section 28(1)(c) of the Income Tax Act, 1922, which deals with the imposition of penalties for concealment of income. The section states that if an assessee has concealed income or deliberately furnished inaccurate particulars, a penalty not exceeding 1.5 times the amount of tax avoided can be imposed. The court had to determine whether the penalty should be based on the tax avoided due to the concealed income alone or the total difference between the returned income and the assessed income.

2. Calculation of Penalty under Section 28(1)(c):

The assessee returned an income of Rs. 45,904, but the Income-tax Officer added Rs. 24,000 and Rs. 90,000 as concealed income. The penalty imposed was Rs. 62,000. The Appellate Assistant Commissioner reduced this, considering only Rs. 24,000 as concealed income, and imposed a penalty of Rs. 20,000. However, the Tribunal restored the original penalty of Rs. 62,000, asserting that the penalty should be based on the difference between the returned income and the assessed income, not just the concealed amount.

3. Proportionate Penalty:

The High Court and the Supreme Court had to consider whether the penalty should be proportionate to the concealed income or the total difference between the returned and assessed income. The High Court held that the penalty should be based on the total difference, not just the concealed amount. The Supreme Court affirmed this, stating that the penalty is meant to be a deterrent against tax evasion and should be based on the total tax avoided if the returned income had been accepted.

4. Meaning of "Income as Returned" and "Avoided":

The court examined the terms "income as returned" and "avoided" in the context of Section 28(1)(c). The High Court interpreted "income as returned" to mean the income disclosed by the assessee in the return, not the income assessed by the authorities. The word "avoided" was interpreted to mean "escaped," indicating the tax that would have been avoided if the returned income had been accepted. The Supreme Court agreed with this interpretation, stating that the penalty should be based on the tax that would have escaped assessment if the returned income had been accepted as correct.

Conclusion:

The Supreme Court upheld the High Court's decision, affirming that the penalty under Section 28(1)(c) should be based on the total difference between the returned and assessed income, not just the concealed amount. The court emphasized that the penalty provisions are intended to be a deterrent against tax evasion and should be interpreted accordingly. The appeal was dismissed, and the parties were left to bear their own costs.

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