TMI Blog1955 (5) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ed false particulars regarding his income and after making some additions computed his total income for the year 1944-45 as resulting in a profit of ₹ 3,914. The tax payable on this income was ₹ 183-15-0 for, which a demand notice was issued. For the year 1945-46 the Income-tax Officer determined the net assessable income at ₹ 1,28,376. The tax computed on the basis of this figure came to ₹ 67,951-4-0 for which a demand notice was issued under section 29 of the Act. The assessments were completed and these assessment orders were passed on 31st March, 1947., On the previous day, that is on 30th March, 1947, he issued a notice to the petitioner to show cause why a penalty should not be levied for the deliberate concealment of his income and for furnishing false particulars of such income under section 28(1)(c). The assessee took the assessment order in appeal to the Appellate Assistant Commissioner and when that was dismissed, to the Income-tax Appellate Tribunal. This appeal was dismissed on 10th December, 1949. We shall complete the narration of the assessment proceedings for the years 1946-47 and 1947-48 before referring to the penalty proceedings in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the assessee by 1st January, 1950, and this was received on 2nd January, 1950. Meanwhile in respect of the notice issued on 30th March, 1947, in respect of the years 1944-45 and 1945-46 a further communication was sent to the assessee on 6th November, 1951, requiring him to send a detailed reply which was received by the Officer on 22nd November, 1951. The penalty proceedings in respect of the four years were then dealt with together and Sri Sowrirajan, who was then the Income-tax Officer, passed an order on 14th February, 1953, whereby he levied a penalty of ₹ 200 for 1944-45, ₹ 60,000 for 1945-46, ₹ 13,000 for 1946-47 and ₹ 12,000 for 1947-48 the variations being due to the difference in the amounts of the tax said to have been evaded by submitting false returns. It is the validity of these levies of penalties in respect of these four years that is challenged as illegal and ultra vires in these four writ petitions. We might premise by saying that it is not alleged that the quantum of the penalty imposed is in excess of that prescribed by section 28. Three points have been raised by learned counsel for the petitioner in support of his contention th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come and entry 42 of the same list with respect to offences against laws with respect to any of the matters in this list. The expression taxes on income is of the widest import and would obviously include laws in relation to the taxation of evaded income. Such a law may take the form of an appropriation not merely of the income evaded but even more as the tax or as the reparation for damage caused to the State by such attempted evasion. In this connection it should be borne in mind that we are interpreting the words in an organic instrument designed to endow sovereign legislative bodies with legislative power and the words should not be construed in any narrow or pedantic sense. Apart from this, the power to enact laws to prevent evasion and make it unremunerative to the evader could also be viewed as an incidental or ancillary power necessary to render effective the substantive power conferred by entry 54. Lastly it is legitimate and proper in determining the scope of the power to have regard to what is ordinarily embraced in the topic in the legislative practice both of the State which has conferred the power, viz., the United Kingdoril, as well as of the State on whom the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income which he was required to furnish by notice given under sub-section (1) or sub-section (2) of section 22 or section 34 or has with out reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or (b)has without reasonable cause failed to comply with a notice under sub-section (4) of section 22 or sub-section (2) of section 23, or (c)has concealed the particulars of his income or deliberately furnished in accurate particulars of such income, he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and a half-times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income. There are certain provisos to the section which are not relevant to the present case and therefore might be ignored. Under sub-section (3) no orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deliberately furnished inaccurate particulars thereof, he transmits the information to the Inspecting Assistant Commissioner for the purpose of levying a penalty, for under section 28(6) he cannot do this except with the previous approval of this Officer. When the matter is thus before the Inspecting Assistant Commissioner, there are two courses which are open to him. He might in the case of any particular assessee grant the request of the Income-tax Officer and approve his proposal and permit him to levy a penalty on the assessee. In other cases he might make up his mind to prosecute the assessee under section 52. Which course he shall pursue is left to his unfettered discretion. The enactment gives him no guidance and prescribes no standards. It is not indicated how that choice is to be determined or what circumstances he might take into account in arriving at his conclusion. The assessee is left to the mercy of the Inspecting Assistant Commissioner who might pursue one of two alternative courses. It is stated that this would naturally result in some assessees being dealt with under section 28 by the Inspecting Assistant Commissioner according approval to the levy of a penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act had prescribed that the returns or statements referred to in section 52 of the Income-tax Act should be on oath or affirmation before an officer competent to administer such oath or affirmation there could have been a prosecution without any provision therefor in the Income-tax Act. On the other hand, the object and purpose of section 28 is wholly different. It is enacted for the purpose of rendering evasion unprofitable and of securing to the State compensation for damages caused by attempted evasion. Nor is it correct to regard the ingredients of the misconduct under the two provisions as identical. The falsity of a declaration wilfully made is enough to satisfy the requirements of section 52 ; whether that declaration results in concealment is not material for the purpose of that section. On the other hand, section 28(1)(c) is concerned with the effect of the inaccurate particulars deliberately furnished , that is, concealment and unless this result was achieved, no penalty can be imposed. Undoubtedly there may be overlapping in some concrete instance but every case that falls within section 52 need not necessarily also be within the scope of section 28(1)(c). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil one, This sanction, and other additions to the tax are set forth in supplement entitled 'Interest and additions to the tax.' In a later decision in Spies v. United States 317 US 492; 87 L. Ed. 418 the same question was involved and Helvering's case (supra) was followed. Jackson, J., said: The penalties imposed by Congress to enforce the tax laws embrace both civil and criminal sanctions. The former consist of additions to the tax upon determinations of fact made by an administrative agency and with no burden on the Government to prove its case beyond a reasonable doubt. The latter consist of penal offences enforced by the criminal process in the familiar manner. Invocation of one does not exclude resort to the other. If in their nature the two remedies are not mutually exclusive and are concurrent, does the grant of a concession to the assessee in the form of a provision in section 28(4) alter the situation and make the two provisions mutually exclusive for the purpose of attracting the vice of unequal protection of the laws forbidden by article 14. In our opinion it does not. There is also one other matter which has to be noted. Though in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars of his income or deliberately furnished inaccurate particulars of such income before he or they may levy the penalty. This satisfaction must be in the course of any proceedings under this section. Under sub-section (3) the assessee should be heard or should be given a reasonable opportunity of being heard before a penalty is imposed. The points made in regard to these provisions are: The penalty proceedings should be in the course of any proceeding under the Act. In the context, therefore, the proceedings referred to in section 28(1) are proceedings other than penaly proceedings, that is, assessment, reassessment or refund proceedings. As the penalty proceedings must be completed in the course of any proceeding under this Act the latter proceeding must be pending at the time when the penalty is levied. The attack on the penalty proceedings against the petitioner is grounded upon the assessment proceedings having been completed before the penalty was actually levied by the order of the Income-tax Officer, the contention being (a) that there was no other proceeding under the Act pending before the Income-tax Officer on the date when he levied the penalty and (b) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s practice appears to us to be fair to the assessee and not contrary to the language of the enactment. If the construction sought to be put forward on behalf of the assessee were accepted, it might result in the penalty provision being wholly unworkable. The Income-tax Officer has to compute the penalty on the basis of the difference in the tax that would have been payable if the original return had been accepted and that which he has been called on to pay by the additions effected. The latter could be known only when the assessment is completed. If by that date the proceedings before him are held to have come to an end, he would have no jurisdiction to issue a notice to hear the party or to levy the penalty. To get over this difficulty learned counsel for the petitioner suggested that the Income-tax Officer might issue a notice even while he was making the assessment and that he might provisionally determine the tax payable and then hear the parties under section 28(3) and levy the penalty. We are unable to see how this would be in compliance with the requirement that the penalty which he could levy should be based upon the difference between the tax as levied and that which would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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