COMMISSIONER OF INCOME TAX HYDERABAD Vs. ANGARU SATYAM

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal at Bombay has stated a case on the following question:-- "Whether on the facts and in the circumstances Of the case and on a proper construction of the provisions of Section 28(1) (c) of Indian Income-tax Act, the penalty of Rs. 4,760.00 is leviable."2. THE assessee is the Managing Director of Sitaramanjaneya Transport Co. Ltd., which company declared an interim dividend on the 31/12/1946 out of the profits of the account year 1946. THE assessee as a shareholder of that company received Rs. 29,965.00 in January, 1947. THE final dividend of the company in respect of the profits of 1946 was declared on the 30/06/1947. On the 11th of September, 1947, the assessee filed a return of his income for the assessment year 1947-48 declaring a total income oE Rs. 455.00 only consisting of income from property and some business, but did not disclose the amount of Rs. 29,865.00 received in January, 19-47 and which properly ought to be included in the assessment for the year 1947-48 for which the account year ended on the 31/03/1947.THE Income-tax Officer assessed him on a total income of Rs. 7,708.00 made up of Rs. 120.00from property and Rs. 6,958.00 from business, in which the undisclosed dividend was not included. Even for the assessment year 1948-49 in the return filed by him on 16-8-1949 he did not dis-close the dividend income of Rs. 35,520.00 assessable in that year, nor did he disclose the dividend income declared in the previous year. In the course of the assessment proceedings for the assessment year 1948-49, the assessee filed two dividend war, rants in regard to the said interim dividend and final dividend out of its profits of 1946.THE Income-tax Officer completed the assessment of that year on 31-1-1950 by including the final dividend of Rs. 35,520.00 and expressed his intention to take action under Section 34 for the Assessment year 1947-48 with a view to bringing to tax the interim dividend of Rs. 29,865.00. It may be stated that on 4-3-1949, the assessee filed a refund application for the year 1947-48 accompanied by a return wherein he showed the income from property and business as assessed by the Income-tax Officer and the net dividend income of Rs. 29,865.00.This action of the assessee is somewhat start-ting, having regard to the fact that in no circumstances he would be entitled to a refund as his income exceeded Rs, 25,000/-. As a consequence of this application, the Income-tax Officer took action by giving the assessee a notice under Section 34 on 6-11-1950 for re-assessing the escaped income for the assessment year !947-48. In response to this notice a return was filed on 21-12-1950 declaring Income from property and business as originally assessed plus the net dividend income of Rs. 28,865.00 grossed up to Rs. 43,440.00.During the course of the re-assessment he also issued a notice under Section 28(3) on 11-1-1951. THE assessment was completed on 15-1-1951 where-under the assessee had to pay Rs. 4,759-8-0. In response to the notice under Section 28(3) the assesses urged both in writing and orally that on account of his illness and the non-receipt of the dividend warrants from the company, he did not disclose that income. He explained that the dividend warrants were credited to his account in the company and that is why he did not know about it, which explanation was properly rejected by the Tribunal, because the assessee himself was the Managing Director of the Company and was fully aware of the declaration of the dividend.A further legal contention was also urged, namely, that penal action cannot be taken in supplementary assessment proceedings under Section 34 when the assessee admits that the income as originally returned was incorrect and files a correct return which is accepted by the Income-tax authorities. THE Income-tax Officer rejected this contention and levied a penalty as aforesaid. THE Appellate Assistant Commissioner on appeal cancelled the penalty holding that there was no deliberate attempt to evade tax; but with this view the Tribunal disagreed.It observed, that, as far as the facts of the case were concerned, they had absolutely no doubt in their mind that the assessee deserved, and richly deserved to be punished under Sec, 28(1)(c), that his past record was not good and that for the assessment year 1946-47 he was similarly punished by the Income-tax authorities which was confirmed by the Tribunal. While so holding the Tribunal dismissed the appeal of the department applying the principle in the case of Mayaram Durga Prasad v. Commissioner of Income-Tax U, P., 5 ITC 471 (All).It distinguished the case of C. V. Govinda Rajulu Iyer v. Commissioner of Income-Tax, Madras, 16 ITR 391: (AIR 1949 Mad 399), On the ground that it was case of imposition of penalty for default under Section 22(1). In the result, it held that for the purposes of Section 28(1) (c) no penalty is leviable because there is no difference between the income as returned under Section 34 and the income as accepted by the Income-tax Officer. It rejected the contention of the department that the income returned by the assessee must be taken to be the return made by him originally before the notice under Section 34(1) was given.3. THE contention of Mr. Srinivasan for the assessee, to state in his own words, is that in cases where in Section 34 proceedings the return as filed by the assessee in the said proceedings is accepted by the department, no penalty can be levied and even where the jurisdiction to levy is properly exercised, the amount leviable is Only nil, as there is no avoidance of any income.