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TMI Blog1960 (11) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... lure to produce the accounts as required by the notice issued under section 22(4) of the Act. After hearing the assessee, the Income-tax Officer imposed penalties under both these clauses of sub-section (1) of section 28 of the Act, amounting in the aggregate to a sum of ₹ 15,278. The Income-tax Officer did not however quantify the penalties imposed under those two clauses separately. In respect of the default relating to the year 1951-52, as against the maximum penalty of ₹ 4,315 which according to the Income-tax Officer could have been imposed on the assessee, a penalty of ₹ 1,438 was imposed. Similarly for the assessment years 1952-53, 1953-54 and 1954-55, as against the maximum penalties of ₹ 11,171, ₹ 13,813 and ₹ 33,080 which according to the Income- tax Officer could have been respectively imposed upon the assessee, he imposed penalties of ₹ 3,723, ₹ 4,604 and ₹ 5,513. From those orders the assessee appealed to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal. Both those sets of appeals were dismissed. The assessee applied for a reference to be made to this court of two questions of law which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct income........... It would not be necessary for me to set out the other parts of this section. Now in this case, the Income-tax Officer imposed a penalty on the assessee under clause (a) of sub-section (1) for failure on the part of the assessee to furnish its return in compliance with the notice given to it under sub-section (2) of section 22. The maximum penalty which he could have imposed under the provisions of this sub-section as provided by that sub-section is a sum equivalent to one and a half times the tax determined as payable by the assessee. Under clause (b) of this sub- section, the Income-tax Officer imposed a penalty for failure to produce the accounts though called upon to do so under sub-section (4) of section 22. The maximum penalty which he could have imposed as provided by sub-section (1) of section 28 is a sum equivalent to one and a half times the amount of income-tax and super-tax which would have been avoided if the tax had been determined on the basis of the return furnished by the assessee. It is not Mr. Srinivasan's contention that the assessee in this case did not fail to furnish its return in compliance with the notice issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds a sum not exceeding one and a half times the amount of the Income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income occur. The words the income as returned by such person are unambiguous and make it clear that for the imposition of penalty under section 28(1)(b) the indispensable condition precedent is that before the assessee commits the default referred to in section 28(1)(b) such default must have been preceded by the production of a return under section 22(2). If the assessee has not furnished any such return, it would not be possible for the Income-tax Officer to measure the penalty with reference to any maximum, the determination of the maximum itself being one which he would not find it possible to do. But the learned Government Pleader at one stage urged before us that the mere fact that an assessee has not produced a return before the Income-tax Officer in a case like the one which is before us, would not necessarily make it incompetent for the Income-tax Officer to impose a penalty under section 28(1)(b). What was urged before us was that in a case where an assessee has furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, be avoided. At one stage it appeared to me that if we should accept the construction suggested by Mr. Srinivasan appearing on behalf of the assessee it would lead to the result that an assessee who furnished a return, though late, would be in a somewhat more disadvantageous position than one who had furnished no return at all. An assessee who furnished a return though not within the period allowed by the Act, incurs the risk of a penalty under section 28(1)(b) although an assessee, who committed contumacious default in furnishing his return and produced none, was not in any such jeopardy. But on further reflection it appears that this seeming incongruity is capable of the explanation that the Legislature intended that a more serious view should be taken of the conduct of a person who makes a false and inaccurate return than that of one who furnishes no return at all. In the view that I have taken it is clear that the Income-tax Officer, in this case, in which the assessee produced no return at all, though called upon to do so under section 22(2) of the Act, had no power to impose any penalty on the assessee under section 28(1)(b) for failure on his part to produce his ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts by not filing a return at all though required to do so under section 22(2) of the Act and by further not complying with the notice under section 22(4) of the Act. In a case like that the only penalty which can be imposed upon an assessee is one under section 28(1)(a) of the Act. Our answer to this question makes it unnecessary for us to answer the second question referred to us which has become purely academic. As already pointed out by me, the omission on the part of the Income- tax Officer in this case to separate the two sets of penalties has made it impossible for any one to identify the penalty imposed under section 28(1)(a). The question as to whether it is incumbent on the Income-tax Officer in all cases where he imposes penalties both under clauses (a) and (b) of section 28(1) to separately quantify the penalties imposed under each of these clauses is one which does not arise for consideration and we should not, in my opinion, express any opinion on it. In the circumstances of this case it does not appear to me that we should direct the Commissioner of Income-tax to pay the costs of the assessee. HEGDE, J.--I agree. Reference answered accordingly. - - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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