ITALIA D D Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) -

(2.) THE assessee in the present case is a non-resident. In the previous years relevant to the assessment years 1942-43, 1945-46 and 1946-47, he was a permanent resident of the former Hyderabad State. He was in receipt of income from the taxable territories and it is common ground that this income was being duly assessed. It would appear that the assessee was carrying on a business in abkari contracts, oil mills, etc., in the Hyderabad State. THE original assessment for the year 1942-43 was completed on March 29, 1943, on a total income of Rs. 43,454 and the total world income of Rs. 1,18,286. THE exact figures of the original assessments in respect of the other two assessment years are not on record, but, as stated already, that he was assessed on the basis of the income derived from the taxable territories at the rate applicable to him total world income as disclosed is not denied. It would appear that, subsequently, examination of his account books, which, it may be mentioned, had been submitted in connection with the original assessments, resulted in the disclosure that ècertain items of income, to which reference will presently be made, had been omitted to be shown and included. THEse incomes were incomes derived outside the taxable territories and their inclusion has relevance only for the purpose of fixing the rate of tax. Accordingly notice was issued to the assessee section 28(3) of the Act calling upon him to show cause why penalty proceedings under section 28(1)(c) of the Act should not be taken. THE assessee submitted his explanation and his principal contention was that in respect of these sources of income, he did not actually receive those incomes in the relevant years of account but only long afterwards. He pointed out that the existence of these sources of income was apparent from the accounts that he submitted and that in fact he had returned such of those incomes as arose outside the taxable territories for the purpose of fixing the rate of tax. He claimed that there was no concealment of the particulars of his income or deliberate furnishing of inaccurate particulars of his income which would justify action under section 28(1)(c). THE Income-tax Officer however took the view that the assessee could and should have disclosed his income from the sources in question. THE explanation for failure to furnish particulars of those incomes was not accepted. THE result was that the Income-tax Officer imposed penalties of Rs. 600, Rs. 4,000 Rs. 8,000 for the three assessment years in question.

(3.) THE assessee was carrying on abkari contracts in the Hyderabad State. He held certain Government promissory notes. THEse promissory notes had been furnished as security to the abkari department for the due and proper compliance with the terms of the contract. THE income in question was received by the assessee only in 1947, and this interest was the accumulated interest for the several preceding years. In his explanation the assessee stated that he was asked about his income from outside British India for being included in the world income for determining the rate of tax and that he gave particulars of income which the actually received. He was maintaining the accounts in the accustomed manner of crediting or debiting when sums are received from parties and when accounts are settled in partnership. In the case of the interest on securities, he stated that the securities had been given over to the Excise Commissioner and were duly endorsed in his favour as security for due performance of the abkari contracts. THE interest that he actually received was Rs. 1,717-9-6 in Fasli 1347. This was included in the 1939-40 assessment. In the subsequent years, on interest was paid to him. He was not even aware whether the Excise Commissioner had collected the interest at the end of each year. It was only in Fasli 1356 that the Excise Commissioner informed him that he had collected interest. Such interest as was paid to him was accordingly brought to account only on the date of receipt, that is, in the year 1947. He stated also that this amount is included in his return of income submitted for 1947-48, even on the a date before the notice under section 28 was issued to the assessee.