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TMI Blog1967 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 28(1)(a) of the Income-tax Act. In that proceeding, after considering his reply to the show cause notice, the Income-tax Officer levied a penalty of Rs. 2,250. The assessment itself was subjected to an appeal. The Appellate Assistant Commissioner estimated the profits at 20%. The Commissioner of Income-tax, however, on revision reduced it to 15%. Against the levy of penalty also, the assessee filed an appeal and, ultimately, the Tribunal reduced the penalty to Rs. 1,700. It is contended by Mr. Dasaratharama Reddy that neither the Income-tax Officer nor the Tribunal was justified in levying the penalty under section 28(1)(a) when, in fact, they rejected his return and assessed him on an estimate of a higher percentage of gross profits. What they should have done, according to the learned counsel, was to take proceedings under section 28(1)(c), on the basis of the income assessed by them as if it was suppressed income. The learned advocate also contends that proceedings under sections 28(1)(a), 28(1)(b) and 28(1)(c) are mutually exclusive and if an assessment has been made and there is a suppression, it is a case under section 28(1)(c), and if section 28(1)(c) is app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents as the Income-tax Officer may require, or to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including with the previous approval of the Commissioner, a statement of all assets and liabilities not included in the accounts) as the Income-tax Officer may require for the purposes of this section : . . ." "28. (1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied, that any person-- (a) has without reasonable cause failed to furnish the return of his 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 penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting of Rajamannar C. J. and Yahya Ali J. was considering a case where it was contended that it was not competent for the Income-tax Officer to levy a penalty in the course of a proceeding under section 34 of the Act for a default not committed in the course of that proceeding. In that case the assessee failed to furnish a return of his total income as required by a notice under section 22(1) of the Income-tax Act but no notice under section 22(2) was issued by the department within the year of assessment. It was held that the Income-tax Officer was competent, in the course of the proceedings taken by him under section 34 read with section 22(2), to assess such income, and to levy a penalty under section 28(1)(a) for failure without reasonable cause to furnish a return pursuant to the notice under section 22(1). It was there observed at page 396 : ". . . so long as the proceedings under section 34 relate to the assessment 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 ". It was further observed that once assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 22(2), there is no reason to think that a return of a similar kind in answer to a public notice is no return at all. The conclusion does not follow from the words of section 22(1)." At page 576, Hidayatullah J. expressed the dissent in these words : "We are unable (and we say this with due respect) to accept the view adumbrated in the Calcutta cases. The contrary view is expressed by the Bombay High Court in the earlier case of Harakchand Makanji Co. v. Commissioner of Income-tax and in the judgment under appeal. That view was accepted by the Madras High Court in P. S. Rama Iyer v. Commissioner of Income-tax and also, in our opinion, is the sounder view of the two." In this view, it is idle to contend that proceedings under section 22(1) are not initiated by publication of notice under that section. If proceedings are initiated, as was held already, then non-compliance with that provision has been made a specific ground for levying of penalty under section 28(1)(a). It does not make any difference whether no return has been filed at all which gave rise to a notice under section 22(2) and or proceedings under section 34, or where a return has been filed beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be filed and since the return has been treated as non est, there can be no question of concealment of particulars of income or deliberately furnishing inacurate particulars, and that the case should have been dealt with under section 28(1)(a). At page 416, he said : ". . . I am unable to see how section 28(1)(c) can at all come into play. The Bench has definitely come to the conclusion that a return filed beyond the period of four years from the close of the assessment year is non est in law, as that cannot form the basis of a lawful assessment. The only manner in which the assessment in such a case can be made is by resort to section 34(1) initiated by the issue of a notice. If a return filed beyond a period of four years cannot form the basis of a valid assessment without the aid of section 34(1), I am unable to accept the contention that it can yet be a valid return for the purpose of the application of section 28(1)(c)." This was the ratio decided in that case. But after stating thus, Srinivasan J. added : "The conclusion that I reach accordingly is that section 28(1)(a) and section 28(1)(c) are mutually exclusive." What he meant by "mutually exclusive" in the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acceptance of the revised return does not impose a liability on the assessee for the acts of default committed by him already, it would be tantamount to saying that the legislature intended to condone all deliberate defaults specified in clauses (a), (b) and (c) of sub-section (1) of section 28. That could not have been the intention, because sub-section (3) of section 22 which provides for the furnishing of a revised return, does nothing more than to permit an assessee where he makes a genuine default, omission or wrong statement to file a revised return in time before the assessment is made. This could only mean that the omission or wrong statement was inadvertent or accidental and not deliberate." After referring to Commissioner of Income-tax v. Badridas Ramrai Shop, Arunachalam Chettiar v. Commissioner of Income-tax, and Vadilal Ichachand v. Commissioner of Income-tax, where both the Madras and Bombay High Courts have held that penalty may be imposed under section 28 in respect of the previous false return notwithstanding the filing of a revised return, it was observed at page 239 : "Therefore, by the same parity of reasoning, once proceedings under section 34 are reope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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