K C MUKHERJEE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this case the two assessees were equal partners in the firm of K.C. and P.C. Mukherjee of ijua. Assessments were originally made for the years 1945-46, 1946-47 and 1947-48 on the share income return of the two assessees. Later on it transpired that the two assessees had made substantial investments in two private limited companies. Mohalbanj Collieries Limited and Central Kankanee Collieries Limited, the amounts involved being Rs. 25,000/- for the calendar year 1944, Rs. 55,348/-for the calendar year 1945 and Rs. 55,000/- for the calendar year 1946, in each case. After having satisfied himself that income had escaped assessment the Income-tax Officer issued notices under Section 34 on the 8th September, 1949, to both the assessees in respect of the three assessment years. The assessees made returns under Section 34 and declared the following amounts of income each: <FRM>JUDGEMENT_529_AIR(PAT)_1959Html1.htm</FRM> The Income-tax Officer levied penalties on the basis of escaped tax as against both the assessees. The assessees preferred appeals to the Appellate Assistant Commissioner, but the appeals were dismissed. The matter was taken by the assessees on further appeals to the Income-tax Appellate Tribunal. It was contended on their behalf that Section 34-proceedings were separate and distinct from the original assessment proceedings, and as there had been no concealment in Section 34-proceedings there could be no legal imposition of penalty under Section 28 of the Income-tax Act. The contention was rejected by the Income-tax Appellate Tribunal and it was held that the penalties were validly imposed upon the two assessees.

(2.) Under Section 66(1) of the Income-tax Act the Income-tax Appellate Tribunal has submitted the following question of law for the determination of the High Court:

(3.) The answer to this question depends upon the proper interpretation of Section 28 of the Income-tar Act, which runs as follows: