KHEMRAJ CHAGGAN LAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this case the assessee is a Hindu undivided family. The assessment year is 1947-48 and the accounting year is the Sambat year 2002-2003 Dewali, corresponding to the period from 4-11-1945, to 23-10-1946. In this accounting year there was a credit entry of Rs. 22,940 found in the books of the assessee with regard to the hardware business. When asked to explain the assessee stated that it represented the sale proceeds of gold ornaments of Srimati Purnima Debi, who is the wife of Chagganlal, one of the members of the Hindu undivided family. The explanation was not accepted by the Income-tax Officer, who held that the amount of Rs. 22,940 was the secreted profit of the hardware business. Taking this and other circumstances into account the Income-tax Officer estimated the income to be Rs. 75,000. But on appeal the estimate of profit was reduced to Rs. 50,000 by the Appellate Assistant Commissioner, Both the Income-tax Officer and the Appellate Assistant Commissioner have taken the view that the building constructed at Ranchi and standing in the name of Srimati Purnima Debi really belonged to the Hindu undivided family, and this circumstance should be taken into account in making the estimate of the assessee's income. But the appellate tribunal held that there was nothing to connect the assessee's family with the construction of the building at Ranchi and so that circumstance ought to be ignored in making the estimate of the assessee's income. The appellate tribunal estimated the profits of the assessee from the hardware business to be Rs. 20,000. Thereafter, a proceeding was started by the Income-tax Officer under Section 28 (1) (c) of the Income-tax Act for levying penalty upon the assessee for concealment of income. It was held by the Income-tax Officer that the assessee was liable to pay penalty under Section 28 (1) (c) of the Act, and the amount of penalty imposed was Rs. 4,800. The order of the Income-tax Officer has been upheld by the Appellate Assistant Commissioner and by the Income-tax Appellate Tribunal in appeal.

(2.) Under Section 66 (2) of the Income-tax Act the appellate tribunal has stated a case and referred it to the High Court on the following question of law :

(3.) Section 28 (1) (c) of the Income-tax Act provides as follows :