TMI Blog1970 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ise to this reference are : To the income disclosed by the assessee-firm for the assessment year 1954-55, the Income-tax Officer made an addition of Rs. 4,25,800 as estimated income for low gross profits and for business income kept outside the account books. The assessment was completed on February 19, 1959. Two days prior to the completion of the assessment, i.e., on February 17, 1959, the Income-tax Officer issued a notice under section 28 of the Act, calling upon the assessee to show cause as to why penalty should not be imposed upon it, for concealment of income and deliberate furnishing of inaccurate particulars of income. The assessee filed an appeal to the Appellate Assistant Commissioner against the assessment challenging the quantum of addition made by the Income-tax Officer. After due consideration of the appeal the Appellate Assistant Commissioner passed an order dated February 3,1960, reducing the addition by rupees one lakh. On further appeal, by its order dated November 22, 1960, the Appellate Tribunal sustained an addition of rupees one lakh. On September 11, 1961, the Income-tax Officer pursued the penalty proceedings initiated by him on February 17, 1959, and le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate Assistant Commissioner before the Tribunal under section 33, the Appellate Assistant Commissioner ceases to have jurisdiction to impose a penalty upon an assessee under the powers vested in him under section 28 of the Act. The learned counsel, in favour of the above construction, contended that, under the scheme of the Act as shown above, there can be no room for doubt, that if section 28 is so construed, the assessee would escape penalty, because the Income-tax Officer is also a party in the appeals before the Appellate Assistant Commissioner and the Tribunal and it is always open to him to bring to the notice of the appellate authorities in an appropriate case that there exist circumstances in the case which attract the penal provisions of the Act and that they should impose penalty upon the assessee before them. It was further submitted that when these authorities, one above the other in the heirarchy, are empowered to impose penalty upon the assessee for the same offence, nothing, in law, can prevent each one of those authorities from invoking its power and imposing a penalty upon an assessee for the same offence. In order to prevent such an anomalous situation, it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the tax determined as payable by the assessee. Penalty, in our opinion cannot be taken as additional tax for all purposes. No doubt in C. A. Abraham v. Income-tax Officer and Commissioner of Income-tax v. Bhikaji Dadabhai Co., the Supreme Court has held that under section 28 of the Act liability to pay additional tax, which is designated penalty, is imposed in view of the dishonest and contumacious conduct of the assessee. The observations made by the Supreme Court in the above cases should be considered in the context in which they were made. In C. A. Abraham v. Income-tax Officer the Supreme Court was construing the expression " assessment " occurring in section 44 of the Act, in order to find out whether the word " assessment " included procedure for the imposition of penalty on a dissolved firm. The context in which those observations were made by the Supreme Court is clear from the following passage occurring in that case : " The expression 'assessment', used in the sections of Chapter IV of the Income-tax Act, is not used merely in the sense of computation of income and when section 44 declares that the partners or members of a firm or association shall be jointly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are wide enough, that every aspect of the assessment can be gone into by the Appellate Assistant Commissioner, that the penalty depends upon the quantum of total income determined by the Assistant Commissioner in appeal, that an appeal filed by the assessee before the Appellate Assistant Commissioner cannot be withdrawn so as to prejudice the department's right of levying penalty in proper cases, it would follow that the Appellate Assistant Commissioner would be in a better and more advantageous position to impose penalty upon an assessee for concealment of income. In support of the above argument the learned counsel relied upon the observations made by the Supreme Court in Commissioner of Income-tax v. Rai Bahadur Hardutroy Motilal Chamaria which are as follows : " It is impossible to talk of a court of appeal when only one party to the original decision is entitled to appeal and not the other party, and in view of this peculiar position the statute has conferred very wide powers upon the Appellate Assistant Commissioner once an appeal is preferred to him by the assessee. It is necessary also to emphasize that the statute provides that, once an assessment comes before the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e satisfied that the assessee has concealed such income. Even in matters which are processed by the Income-tax Officer, the assessee might not place all the materials before the Income-tax Officer, with the result he might not be able to detect or find out concealment of income. The Appellate Assistant Commissioner, during his enquiry, may come to know additional facts,which are either not disclosed to the Income-tax Officer, or which escape the attention of the Income-tax Officer, and those facts might reasonably lead the Appellate Assistant Commissioner to a finding that the assessee had concealed income. In such a case, if the Appellate Assistant Commissioner has no powers to impose a penalty, the assessee would altogether escape penalty. Therefore, the law has wisely given powers to the Appellate Assistant Commissioner and also the Tribunal to impose penalty on the assessee. When the law empowers more than one authority to impose penalty, it would be unreasonable to expect that each one of them would, in his own turn, invoke and impose penalty. At any rate, the assessee can be punished only once in respect of concealment of income and not by all the three authorities simultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of any proceedings under this Act, is satisfied that the profits of a registered firm have been distributed otherwise than in accordance with the shares of the partners as shown in the instrument of partnership registered under this Act governing such distribution, and that any partner has thereby returned his income below its real amount, he or it may direct that such partner shall, in addition to the income-tax and super-tax, if any, payable by him, pay by way of penalty a sum not exceeding 1 1/2 times the amount of income-tax and super-tax which has been avoided, or would have been avoided if the income returned by such partner had been accepted as his correct income ; and no refund or other adjustment shall be claimable by any other partner by reason of such direction .... (5) An Appellate Assistant Commissioner or the Appellate Tribunal on making an order under sub-section (1) or sub-section (2), shall forthwith send a copy of the same to the Income-tax Officer ...... " On a plain reading of the above section, we find that the language used in section 28 is clear and unambiguous. The section does not under any circumstances oust the jurisdiction of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before him that the penalty imposed was illegal as the return was not a return furnished in accordance with the provisions of the Act. The Appellate Assistant Commissioner accepted that contention of the assessee, but issued a notice to him under section 28(3) and by the same order by which he disposed of the appeal, he imposed a penalty of Rs. 3,000 under section 28(1)(a), for failure to furnish return as required by notice under section 22. On those facts, the Allahabad High Court held that the Appellate Assistant Commissioner was entitled while dealing with the appeal pending before him to pass an order under section 28(1)(a) imposing a penalty. " We are unable to understand how this case helps the department or throws any light on the point involved in this reference. We are, therefore, of the opinion that the contention raised by the assessee before the Appellate Assistant Commissioner or the Tribunal was without force and untenable. We, therefore, answer the question referred to us, in the negative, i.e., the Income-tax Officer does not cease to have power to impose a penalty when an appeal against an assessment is filed before the Appellate Assistant Commissioner. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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