COMMISSIONER OF INCOME-TAX Vs. VIDYA SAGAR

JUDGEMENT

(1.) THE assessment year in dispute is 1963-64. Shri Vidya Sagar and Shri Anand Sagar had 50% share each in the firm, M/s. Shazada Hosiery Mills. They filed their returns of income on 21st February, 1964, Anand Sagar declaring his share income to be Rs. 34,779 and Vidya Sagar declaring his share income to be Rs. 34,849. Income from the house property was declared to be the same as for the assessment year 1962-63. Later on, the said partners-assessees furnished revised returns on 26th March, 1968, but the share income from the said firm was not quantified in these returns. In response to the notice from the ITO, the partners-assessees stated on 27th March, 1963, that their share incomes from the firm may be determined in the light of the firm's income to be found on the firm's assessment. During the proceedings for the assessment of the income of the concerned firm, the mistake of Rs. 1,00,000 in a certain totalling had been detected by the ITO before 26th August, 1968, when the partners-assessees filed their revised returns. In the case of Anand Sagar, the ITO held Rs. 91,153 to be his share income and Rs. 94,120 to be his total income. In the case of Vidya Sagar, the ITO held Rs. 91,223 to be his share income and Rs. 94,727 to be his total income.

(2.) THE said assessments, on appeal, were confirmed by the AAC.

(3.) THE ITO being of the view that the two assessees had concealed particulars of their share income, made references to the IAC under Section 274 (2) of the I. T. Act, 1961 (hereinafter referred to as the Act ). The IAC initiated penalty proceedings against both the assessments on the ground of concealment of particulars of income earned by them by way of share income from the aforesaid firm. Separate show-cause notices were served on the two assessees on 31st December, 1969. After hearing the assessees, the IAC imposed, under Section 271 (1) (iii) of the Act, a penalty of Rs. 21,100 on Vidya Sagar and a penalty of Rs. 20,600 on Anand Sagar. These penalties in each case reflected 50% of the tax that would have been avoided if only the incomes declared in the original returns had been taxed.