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TMI Blog1959 (3) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... 455 only consisting of income from property and some business, but did not disclose the amount of ₹ 29,865 received in January, 1947, and which properly ought to be included in the assessment for the year 1947-48, for which the account year ended on March 31, 1947. The Income-tax Officer assessed him on a total income of ₹ 7,078, made up of ₹ 120 from property, and ₹ 6,958 from business, in which the undisclosed dividend was not included. Even for the assessment year 1948-49 in the return filed by him on August 16, 1949, he did not disclose the dividend income of ₹ 35,520, assessable in that year, nor did he disclose the dividend income declared in the previous year. In the course of the assessment proceedings for the assessment year 1948-49, the assessee filed two dividend warrants in regard to the said interim dividend and final dividend out of its profits of 1946. The Income-tax Officer completed the assessment of that year on January 31, 1950, by including the final dividend of ₹ 35,520, and expressed his intention to take action under section 34 for the assessment year 1947-48 with a view to bringing to tax the interim dividend of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 1946-47 he was similarly punished by the income-tax authorities which was confirmed by the Tribunal. While so holding the Tribunal dismissed the appeal of the Department applying the principle in the case of Mayaram Durga Prasad v. Commissioner of Income-tax [1931] 5 I.T.C. 471. It distinguished the case of Govindarajulu Iyer v. Commissioner of Income-tax [1948] 16 I.T.R. 391 on the ground that it was a case of imposition of penalty for default under section 22(1). In the result, it held that for the purposes of section 28(1)(c) no penalty is leviable because there is no difference between the income as returned under section 34 and the income as accepted by the Income-tax Officer. It rejected the contention of the Department that the income returned by the assessee must be taken to be the return made by him originally before the notice under section 34(1) was given. The contention of Mr. Srinivasan for the assessee, to state in his own words, is that "in cases where in section 34 proceedings the return as filed by the assessee in the said proceedings is accepted by the Department, no penalty can be levied and even where the jurisdiction to levy is prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s total income which he was required to furnish by notice given under sub-section (1) or sub-section (2) of section 22 or section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or (b) has without reasonable cause failed to comply with a notice under sub- section (4) of section 22 or sub-section (2) of section 23, or (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and a half times that amount, and him the case referred to in clauses (b) and (c), in addition to any tax payable by him, 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:....." This section empowers the Income-tax Officer to levy penalty in three circumstances, viz., (1) where the assessee fails to make a return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticulars of the income were deliberately furnished, that will vest jurisdiction to impose a penalty and to issue a notice under section 28(1)(c). The initial return and assessment under sections 22 and 23 of the Act as well as the proceedings for the assessment of escaped income under section 34 are proceedings under the Act referred to in sub-section (1) of section 28. If concealment or deliberate omission to furnish true particulars is made in either of the proceedings, it will certainly vest jurisdiction in the income-tax authorities to issue a notice under section 28. The jurisdiction to initiate penalty proceedings arises with respect to the default or contumacious conduct in the initial proceedings or in the subsequent proceedings for escaped income. On a careful examination of the provisions of section 28, in our view, there is no warrant for the contention that if in section 34 proceedings the assessee has returned the true income which has been accepted, the income-tax authorities have no jurisdiction to issue a notice for imposition of penalty with respect to the deliberate omission made at the time of the original assessment proceedings. The use of the words "as ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment, he is functus officio. But in an appeal against this order, the Appellate Assistant Commissioner, or in appeal against the Appellate Assistant Commissioner's order, the Appellate Tribunal, can each exercise the powers under section 28, if there is any omission on the part of the assessee with respect to that assessment. But where none of the authorities initiated any penalty proceedings and the assessment has become conclusive no subsequent penalty proceedings can be taken unless the assessment is reopened. If it is reopened under section 34, then certainly that would also be a proceeding which would entitle the income-tax authorities to exercise powers under section 28(1). The only proceedings under the Act for assessment are those contained in sections 22, 23, 34, 35 as also sections 33A and 33B. The proceedings under section 34, 35, 33A or 33B, are proceedings for reopening a previous assessment and do not relate to a de novo assessment for the same period with respect to the same assessee. It is not good sense to interpret the words "any proceedings" to correlate with the proceedings of some other assessee or with respect to a different period, beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to both the original as well as the subsequent proceedings. If in reference to clauses (a) and (b) the present perfect tense has been used by the Legislature in its context to both the original as well as the re-assessment proceedings, there is no justification for concluding that it intended the present perfect tense in reference to clause (c) to indicate the subsequent proceedings alone. Applying the rules of grammar, the tense of a verb shows not only the time of action, but also the state of action referred to. The use of the present perfect tense, though it denotes an action that has just been completed, does not necessarily exclude its use in place of the past tense. The construction of the sentence, the context and the sequence of tenses have to be taken into consideration in order to determine whether the tenses refer cumulatively to past action or present action or to past action as continuing up to the present. Ordinarily, the past tense in the principal clause must be followed by past tense in the subordinate clause. But a past tense in the principal clause may be followed by a present tense in the subordinate clause where it states some universal truth. Present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn as furnished by the assessee has concealed any particulars of the income or furnished inaccurate particulars thereof. We are further fortified in this view by the provisions of sub-section (3) of section 34, which prescribed a period of limitation of eight years before the amendment in 1956 for reopening assessments in cases to which the provisions of section 28(1)(c) apply. Where, therefore, the assessee has concealed or deliberately furnished inaccurate particulars of his income at the time of filing the original return, the penalty proceedings under section 28(1)(c) would become applicable. If they are applicable, proceedings for reassessment under section 34 can be initiated at any time. The period of limitation is thus made dependent on the provisions of section 28(1)(c) being applicable to the original proceedings. In other words, the provisions of section 28(1)(c) cannot be confined to the return filed in section 34 proceedings alone. That is, where a return is filed in section 34 proceedings, it cannot be said that it is only with reference to that return the question of concealment or deliberate furnishing of inaccurate particulars would be considered for the applicabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same period as the original assessment the Income-tax Officer will be competent to levy a penalty on any ground open to him under section 28(1), even though it relates to the prior proceeding. There may be one possible qualification of his power, and that is when the default or the Act which is the basis of the imposition of the penalty was within the knowledge of the officer who passed the final order in the prior proceeding and if that officer had failed to exercise his power under section 28 during the course of the proceeding before him. Possibly in that case he would have no power. But it appears to us that there is nothing in the language of section 28 which prevents an Income-tax Officer if he is satisfied in the course of a proceeding under section 34 relating to a particular period of assessment that a default has occurred under section 22(1), from levying a penalty. With due respect to the learned Judges of the Allahabad High Court we do not agree that for the purpose of section 28, the proceedings are separate and distinct. It is true that it has been pointed out that once an assessment is made or an order is passed by the Income-tax Officer that no assessment c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of filing the first return and in view of the assessment having been made under the proviso to section 13 of the Indian Income-tax Act the assessee is not liable to be penalised under the provisions of section 28(1)(c) of the Indian Income-tax Act. It was argued that every assessee has a right to file a revised return under sub-section (3) of section 22, and if that return is in effect accepted, the earlier return must be treated as canceled for all purposes and no penalty can be imposed in respect of any concealment in the earlier return. The argument follows much the same line as in this case, namely, the original proceedings having been closed, the Income-tax Officer becomes functus officio and the return filed under section 34 disclosing the correct income cannot furnish a ground for vesting jurisdiction under section 28(1)(c). Tendolkar, J., dealing with this argument, observed at page 680: "Now, it is perfectly true that every assessee has the right under section 22, sub-section (3), to submit a revised return if he discovers any omission or wrong statement in his original return before the assessment is made. But the omission or wrong statement may be accidental ..... X X X X Extracts X X X X X X X X Extracts X X X X
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