GAJANAND SUTWALA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question for our opinion :

(2.) THE assessee is an HUF and derives income from various sources including share income from firms. In the assessment year 1964-65 with which we are concerned in the present reference, it filed a return in which it disclosed the extent of its interest in two firms, M/s. Hanuman Dass Kasari Prasad, Kanpur, and M/s. Mahabir Yarn and Co., Kanpur. THEre was a note in the relevant column of the return to the effect that the accounts of these firms were not finalized. It appears that as the accounts of these firms were not ready, and the assessee did not know the extent of the profit that it would receive in respect of its share in these firms, it did not include any specified amount as income from these firms. During the course of assess-merit, the ITO was apprised of the income that the assessee received from these two firms. It also came to his knowledge that the assessee was also a partner in another firm, viz., M/s. Anand Yarn and Co., and that its income from that firm had been determined at Rs. 2,130. A notice under Section 271(1)(c) was issued to the assessee for showing cause as to why penalty should not be imposed for concealing its income. THE IAC, New Delhi, after examining the matter, imposed a penalty of Rs. 17,000. THE said amount being calculated at fifty per cent. of that tax, which in his view the assessee had avoided. THE tax avoided was worked out by the IAC by taking into account the assessed income of the assessee and deducting therefrom the income returned. THE matter was then taken up on appeal to the Tribunal. THE Tribunal reduced the percentage of penalty from fifty per cent. to twenty per cent. but upheld the method of calculation thereof.

(3.) ON a reading of Clause (iii) of this section it appears that in cases of concealment, the assessee becomes liable to penalty to the extent of an amount between twenty per cent. to one and a half times the amount of tax which would be avoided by him in case the income as returned by him had been accepted as the correct income. Now it cannot be disputed that the words " income as returned " means the income as disclosed by an assessee or shown in the return filed by him. This position has been put beyond the pale of controversy by the decision of the Supreme Court in the case of Mansukhlal and Brothers v. CIT [1969] 73 ITR 546 to which counsel for the department drew our attention. We may also point out at this stage that where the accounts of a firm in which an assessee is a partner have not been made up by the time the assessee files a return, he may in the return stop short of disclosing the specific amount of profit from the firm, and disclose only the extent of his share in the firms : See Bibi Gurdarshan Kaur v. CIT [1964] 51 ITR 1 (Punj).