TMI Blog1985 (4) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment was completed on June 13, 1966, on an income of Rs. 49,710. Annexure "A" is the copy of this order of assessment. Investigations made by the ITO subsequently revealed that certain credits aggregating to Rs. 58,000 in the books of account of the assessee-firm represented the income of the assessee-firm itself. The ITO, therefore, on September 10, 1969, initiated reassessment proceedings under s. 147 of the Act against the assessee-firm. In compliance with the notice issued for reassessment, the assessee-firm filed a return on January 5, 1970, showing an income of Rs. 49,710 which was the total income assessed originally by the ITO for the assessment year 1965-66. When the matter was taken up for assessment, the assessee-firm submitted a petition to the Commissioner of Income-tax requesting for a settlement of the whole matter, offering sum of Rs. 1,67,500 to be distributed over the accounting years 1963-64 to 1965-66. For the assessment year 1965-66, the amount came to Rs. 40,000. The Commissioner, however, rejected the assessee-firm's request for waiver or reduction of penalty, and by order dated March 15, 1971, confirmed these assessment proceedings. Thereafter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his assessment for that year or income chargeable to tax has escaped assessment for the year, subject to the provisions of ss. 148 to 153 of the Act, assess or reassess such income under s. 147(a) of the Act, for the assessment year concerned. Before making the assessment, reassessment or recomputation, under s. 147, the ITO is bound to serve a notice under s. 148 on the assessee and the provisions of the Act shall, so far as may be, apply accordingly, as if the notice were a notice issued under sub-s. (2) of s. 139. If the ITO is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may, under s. 271(1)(c) of the Act, impose penalty as provided under that section. Under the provision that existed prior to April 1, 1968, penalty for concealment of income or for furnishing of inaccurate particulars of income has to be not less than 20 per cent. of the tax payable, however, so that it is not to exceed one and half times the amount of tax, if any, which would have been avoided, if the income as returned by such person had been accepted as the correct income. Under the amended provisions of s. 271(1), as it stood on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of the enquiry under s. 147 of the Act is to determine the concealed or the escaped income. Where a return under s. 139 has been filed, it may have reference to that. In the instant case, the Tribunal has taken the correct view when it held that penalty proceedings have to be completed in accordance with the provisions of s. 271 as it stood at the time when the assessee filed the return under s. 139 on December 31, 1965. Sri P. K. Ravindranatha Menon, counsel for the Central Government (Taxes), referred to the decision of the Supreme Court in Malbary Bros. v. CIT [1964] 51 ITR 295. The Supreme Court had to consider in that case the scope of s. 28(1)(c) and 28(3) of the Indian I.T. Act, 1922 (corresponding to s. 271(1)(c) of the 1961 Act). The facts of the case, shortly stated, were as follows: For the assessment year 1951-52, in respect of which the accounting year was the calendar year 1950, the assessee submitted return. The assessee was carrying on his business at Surat. It had branch at Bangkok to which it exported cloth from India. The branch also made purchases locally and sold them. In the return furnished by the assessee, for the year 1951-52, there was no referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal. It was contended before the Supreme Court that there was only one concealment and the second order for penalty was illegal in that there had been only one concealment and in respect of that an order for penalty of Rs. 20,000 had already been passed; and the ITO had no jurisdiction to make a second order of penalty while the first order stood and for that reason the second order must be treated as a nullity. Rejecting this contention, Sarkar J., who spoke for the Bench, stated as follows at page 298 of the report : " We are unable to accept this argument. It may be that in respect of the same concealment, two orders of penalty would not stand but it is not a question of jurisdiction. The penalty under the section has to be correlated to the amount of tax which would have been evaded if the assessee had got away with the concealment. In this case, having assessed the income by an estimate, the Income-tax Officer levied a penalty on the basis of that estimate. Later when he ascertained the true facts and realised that a much higher penalty could have been imposed, he was entitled to recall the earlier order and pass another order imposing the higher penalty. If he had omitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Supreme Court in CST v. H. M. Esufali H. Abdulali [1973] 90 ITR 271, wherein at page 280 it is observed : " What is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under s. 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer, the assessing authority does, not merely assess him on the escaped turnover but it assesses him on his total estimated turnover." The importance of this decision is that it asserts that what is true of assessment must be true of reassessment also. This, however, could not be understood to imply that if a penalty could be imposed after the assessment, another penalty also could be imposed after reassessment while the penalty earlier imposed remains without being recalled. In fact, as already noticed, what is relevant for the purpose of imposing penalty is the amount of tax attempted to be avoided or the income sought to be concealed and that could be arrived at by the process of deducting from the income found to be chargeable to tax ultimately, the income returned by the assessee when h ..... 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