TMI Blog1965 (2) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,00,000. Though this amount was only the estimated omitted turnover, the Income-tax Officer added this amount as escaped income. This point is immaterial at this stage, for in all the proceedings relevant to the quantum appeals, it was taken that this sum of ₹ 1,00,000 was in fact added as escaped income. The addition of any amount as escaped income and the assessment thereon is not in dispute at this stage as it has become final. In the course of these reassessment proceedings, notices were issued under section 28(3) of the Income-tax Act and section 16 of the Excess Profits Tax Act. The assessee's replies to these notices were considered. The Income-tax Officer finally concluded that action was justified under section 28(1)(c) of the Act and the corresponding provision of the Excess Profits Tax Act. He, accordingly, imposed penalties of ₹ 25,000 under the former and ₹ 45,000 under the latter. Against these orders imposing penalties, appeals were taken to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner thought that the levy of penalties of this volume was unjustified. Though the quantum added as escaped income had become final i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee, does not dispute the proposition that in so far as the assessment to tax is concerned, he can no longer dispute the quantum added, as that matter has become final. But he insists, rightly in our opinion, that in so far as the imposition of a penalty for concealment of income was concerned, the decision with regard to the quantum added in the assessment proceedings is not conclusive and it is open to the Income-tax Officer to examine the matter afresh and to determine the liability of the assessee to any penalty under the relevant provision. Such liability being related to the quantum of tax sought to be avoided, the estimated addition in the assessment proceedings could not by itself form the real basis for the determination of the quantum of the penalty. He argues that in so far as the Appellate Tribunal thought that the Appellate Assistant Commissioner's jurisdiction to deal with the matter was circumscribed in the manner indicated by the observations of the Tribunal, the Tribunal misdirected itself on the true legal position. The effect of section 28 in so far as it applies to the present case may be briefly stated thus. Where an assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ascertaining the quantum of the penalty to be imposed. Where it is shown that the assessee has deliberrately concealed particulars of his income and has pursued a policy of concealment, it may well be that the Income-tax Officer may not stop to consider whether any items omitted were explainable on the basis of inadvertent mistakes or the like, for the overall activity of the assessee may colour the entire transaction. We are only indicating the possibility that it is not always the estimated addition made to the income in the course of the assessment or reassessment that would indicate the extent of deliberate concealment; and if that should be so, the provision authorising the levy of penalty for deliberate concealment must necessarily confer the power of determining the quantum of such deliberate concealment. It is no doubt true that on a consideration of the facts, the Income-tax Officer may well reach the conclusion that even the amount as added in the assessment proceedings represented the amount of income deliberately concealed. But that is as a result of an examination of the position afresh in the proceedings under section 28. What we are endeavouring to emphasise is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of this court, to which one of us was a party, P.K. Kalasami Nadar v. Commissioner of Income-tax [1962] 46 I.T.R. 1056 it was again laid down that the finding against the assessee in the assessment proceedings did not conclude the question whether the amounts constituted the income or not, and that it was open to the assessee to establish in the penalty proceedings that notwithstanding the inclusion of the amount in his income in the assessment proceedings, the sums did not represent his income. This decision also establishes that a finding recorded in the assessment proceedings is not conclusive against the assessee for the purpose of the penalty proceedings. Mr. Balasubrahmanyan, learned counsel for the department, has referred to Kalidindi Subbaraju Gopalaraju v. Commissioner of Income-tax [1955] 28 I.T.R. 162. In that case, it appears to have been contended before the learned judges of the Andhra High Court that the penalty imposed under section 28(1)(c) should be computed only on the basis of proved suppression. In that case, the income of the assessee was determined by estimation at twenty per cent. of the receipts. The rejection of his accounts showing a lower i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurately furnished. The distinction between the two proceedings really underlies the passage which we have quoted above. Turning now to the order of the Appellate Tribunal, the Tribunal appears to be in two minds about the jurisdiction of the Appellate Assistant Commissioner to canvass the question of the quantum of suppression. While it observes in one part of its appellate order that it is open to the Appellate Assistant Commissioner to consider whether the assessee concealed particulars of its income or whether it deliberately furnished inaccurate particulars and also to judge the quantum of penalty, it goes on to say that it is not within the competence of the Appellate Assistant Commissioner to sit in judgment in a matter that had already been concluded. That this view is erroneous is quite clear, for what was concluded on the earlier occasion was only the quantum of income to be added. There had been no finding recorded in the earlier proceedings that the omission was deliberate within the meaning of section 28(1)(c) of the Act. We have already pointed out that in adding the sum of ₹ 1,00,000 as income, there was undoubtedly a grave error, for what was determine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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