DAHANUKAR D M Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred on this reference under section 66(2) of the Indian Income-tax Act, 1922, is :

(2.) THE assessee is a director of the Belvandi Sugar Farm Ltd. and also the managing director of its managing agents, M. L. Dahanukar & Co. Ltd. THE assessee held 750 ordinary shares and 500 6% preference shares in the Belvandi Sugar Farm Ltd. At the general meeting held on the 24th September, 1953, the Belvandi Sugar Farm Ltd. Declared dividends on the ordinary and preference shares in respect of the accounting year ended on the 30th September, 1952. THE dividends amounts due to the assessee in respect of his ordinary and preference shares came to Rs. 60,000 and Rs. 3,000, respectively. In the financial year 1953-54, which was the accounting year of the assessee, dividends were also declared by certain other companies in which the assessee held shares and thus on the dividends declared by the Scindia Steam Navigation Co. on the 24th February, 1954, a sum of Rs. 675 was due to the assessee in respect of his shares of the said concern; from the New United Construction Co. a sum of Rs. 4,500 was due in respect of the dividend which was declared on the 15th December, 1953, and a sum of Rs. 560 was due to the assessee in respect of the shares of the Belapur Sugar Mills Ltd. In the return, which the assessee filed for the assessment year 1954-55, the assessee did not include the amount of Rs. 63,000 in respect of the dividend declared by the Belvandi Sugar Farm Ltd. and the amount of Rs. 5,735 in respect of the aggregate amount of the dividends of the other three companies referred to above. THE return filed by the assessee was accepted and the assessment completed on the 28th February, 1955. For the next assessment year 1955-56, the assessee filed his return on the 2nd of May, 1956. In this return he include the amount of Rs. 27,000 as divided from the Belvandi Sugar Farm Ltd., which was declared on the 25th September, 1954. THE inclusion of a big amount of dividend from the Belvandi Sugar Farm Ltd. in the assessment year 1955-56 led the Income-tax Officer to make enquiries with the assessee as to why no such dividends were included in the assessment year 1954-55. THEreafter, on the 25th June, 1956, the assessee submitted a voluntary return in respect of his assessment for the assessment year 1954-55, disclosing therein the amount of Rs. 63,000 as divided from the Belvandi Sugar Farm Ltd. in respect of the ordinary and preference shares held by the assessee. Since the assessment for the assessment year 1954-55 was already completed, the Income-tax Officer reopened the same under section 34 and reassessed the income by inclusion of the said amount of Rs. 63,000 as well as the further amount of Rs. 5,735, which also constituted the dividend declared in the previous year corresponding to the said assessment year and liable to be included in the said assessment. THE Income-tax Officer also issued a notice to the assessee under section 28(3) for penalty proceedings and in the said proceedings levied a penalty of Rs. 37,000 under section 28(1) (c) since, in his view, the assessee, by not including the said amounts of dividends in his return, had concealed the particulars of his income or deliberately furnished inaccurate particulars thereof. THE assessee had tried to explain to the Income-tax Officer that there was no deliberate attempt on his part to conceal his income or to furnish inaccurate particulars thereof because all along until the assessment year 1955-56, he had been under the impression that dividends were to be included in the return for the account year in which they were actually received. He had made returns on that basis and the said return had also been accepted by the Income-tax Officer. It was only in the Assessment year 1955-56 that he learnt that his impression was wrong and that the dividends had to be included in the year in which they were declared, although they might not have been actually received, and, therefore, in the return for the assessment year 1955-56, he had himself included the dividends of Rs. 27,000, although it had not been received during that year. THE assessee also pointed out that, having realised his mistake, he had himself made a revised return even with regard to the assessment year 1954-55, which had already been concluded, and urged that this conduct on his part clearly showed that he had no intention either to conceal or to deliberately furnish inaccurate particulars. THE Income-tax Officer, however, was not satisfied with the explanation offered by the assessee because in his opinion the excuse which the assessee had put forward only meant ignorance of law on his part and could not, therefore, be accepted. In the appeal to accepted the Appellate Assistant Commissioner, the Appellate Assistant Commissioner accepted the explanation and the conduct of the assessee, it was not possible to hold that there was any deliberate intention on the part of the appellant to conceal his income or to furnish inaccurate on the part of the appellant to conceal his income or to furnish inaccurate particulars thereof. In that view of the matter he allowed the assessee's appeal and set aside the order of penalty passed by the Income-tax Officer. In the further appeal, which was taken by the department to the Income-tax Appellate Tribunal, it was held by the Tribunal, disagreeing with the Appellate Assistant Commissioner and agreeing with the Income-tax Officer, that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars in order to escape liability for the dividends during the previous year and, therefore, the imposition of the penalty under section 28(1) (c) was justified. THE Tribunal, however, reduced the penalty amount from Rs. 37,000 to Rs. 20,000.

(3.) IN the result, therefore, we answer the question referred to us in the negative. The assessee will get his costs from the Commissioner.