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TMI Blog1970 (5) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer noticed cash credit entries totalling up to a figure of Rs. 17,500 in certain accounts and that they were shown to have been squared up. He also noticed an account in the name of karkhana at ledger folio 22 showing a debit of Rs. 36,900. This was stated to be an account of a factory supposedly set up by the assessee. The account showed adjustments to the extent of Rs. 22,800 only. The assessee was asked to adduce evidence to prove the cash credit of Rs. 17,500 and also to explain the investment of the unadjusted balance of Rs. 14,100 in the karkhana account. It failed to do so and surrendered the two amounts which made up a total of Rs. 31,600 for inclusion in its income. As a result, an assessment was made on a total income of Rs. 56 322 which amount included a sum of Rs. 31,600 as the assessee's income from undisclosed sources. The assessment order was passed on March 20, 1965. In the assessment order the Income-tax Officer directed the issue of a penalty notice to the assessee for concealment of particulars of income. In the first instance the Income-tax Officer himself issued the penalty notice on March 20, 1965, directing the assessee to appear before him, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... menced while the assessment proceedings are still on, while in the present case the assessment proceedings came to an end on March 20, 1965, when the assessment order was passed while the notice regarding penalty proceedings was issued by the Income-tax Officer after he had already concluded the assessment. The contention urged by the counsel is that the proceedings for levy of penalty were, therefore, not properly commenced during the course of assessment proceedings. Support for this argument is sought from the observations of the Nagpur Bench of the Bombay High Court in Shakti Offset Works v. Inspecting Assistant Commissioner of Income-tax, where it was said at page 655 of the report : " A perusal of the opening words of section 271(1) and section 275 of the Income-tax Act, 1961, would show that the proceedings for imposition of penalty have to be commenced before the completion of assessment proceedings. Section 275 provides that no order imposing a penalty under this chapter shall be passed after the expiry of two years from the date of completion of proceedings in the course of which proceedings for imposition of penalty have been commenced. Similarly, the opening words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the proceedings for the levy of a penalty must be commenced before the completion of the main proceedings which in the present case would mean assessment proceedings. We are in respectful agreement with what has been said in that case and therefore do not consider it necessary to embark upon a fresh survey of the authorities. It is nobody's case that the proceedings for levy of penalty in the present case could have been commenced after completion of the assessment proceedings. It is common round that they had to be commenced before the completion of the assessment proceedings. The stand taken by the revenue is that they were in fact so commenced when the Income-tax Officer gave a direction in the assessment order itself that a penalty notice should be issued to the assessee for concealment of particulars of its income. The short question therefore is whether such a direction amounts, to commencement of penalty proceedings and those proceedings have therefore been commenced in the course of assessment proceedings. The case which seems nearest to the case before us is a decision of the Madras High Court in Artisan Press Ltd. v. Income-tax Appellate Tribunal. The decision was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here has been concealment of income which calls for imposition of penalty it becomes his duty to refer the case to the Inspecting Assistant Commissioner, who alone shall take all further action in the matter and that all this must be done before the assessment order is passed by the Income-tax Officer. We find it difficult to accept this contention. From the mere fact that in a case to which sub-section (2) of section 274 applies the Income-tax Officer is required to refer the case to the Inspecting Assistant Commissioner, it does not follow that the Income-tax Officer's own powers have been completely taken away. We have already said that the satisfaction that there has been concealment of income, etc., and the conduct of the assessee calls for imposition of penalty is of the Income-tax Officer himself and that satisfaction has to be reached in the course of the assessment proceedings. It is only when the Income-tax Officer finds that the minimum penalty imposable will exceed a sum of Rs. 1,000, that he is required to refer the case to the Inspecting Assistant Commissioner. If he is required to refer the case to the Inspecting Assistant Commissioner so that the latter being a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the circumstances, the department was not called upon to prove by any independent evidence that the assessee had concealed its income. This is a finding of fact which is binding on us in the exercise of our advisory jurisdiction under section 256 of the Act. The argument of the learned counsel for the assessee is that almost all the High Courts are unanimous in holding that assessment proceedings are distinct and separate proceedings and, although the materials disclosed in assessment proceedings can be taken into consideration for the purpose of penalty proceedings, they do not constitute res judicata. Penalty proceedings being in the nature of quasi-criminal proceedings, the onus is upon the department to establish that the assessee is guilty of violation of the provisions contained in section 28 of the Income-tax Act, 1922, the material portion of which is identical with section 271 of the Act of 1961. In such circumstances, it becomes the duty of the department to lead independent evidence to establish these facts and not merely to rest its case on the finding recorded in the assessment proceedings. This view of law is now authoritatively settled by the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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