Law: Income Tax Act, 1922

Section: 28

Income-tax-Penalty - Concealment - Quantum of penalty Penalty whether should be restricted to tax on amount concealed "Income as returned", meaning of-Indian Income-tax Act, 1922, S. 28. The appellant had returned income amounting to Rs. 45,904. The Income-tax Officer added two items of Rs. 24,000 and Rs. 90,000 as profits and income from undisclosed sources which b concealed by the assessee and levied Rs. 62,000 as penalty under section 28(1)(c) of the Income-tax Act, 1922. On appeal the Appellate Assistant Commissioner held that only the item of Rs. 24,000 could be teated as concealed income and reduced the penalty to Rs. 20,000. On further appeal, the Tribunal agreed with the Appellate Assistant Commissioner that there was no concealment in relation to Rs. 90,000 but restored the penalty of Rs. 62,000, holding that, as there had been concealment of profit, it was wholly immaterial whether one item or more than one item had been concealed and the penalty had to be computed not on the basis of tax on the items proved to have been concealed bat on the difference between the tax on the income as finally assessed and the tax which would have been avoided if the return filed had been accepted as correct. The question was whether maximum penalty could be only one and a half times the tax payable on the concealed income or whether it was one and a half times the difference between the tax on the total income as finally assessed and the tax on the income shown in the assessee's return, irrespec tive of the amount of concealed income: Held, that under section 28(1)(c), where it was discovered that income had been concealed, the Legislature wanted the Income-tax authorities to determine what would have been the amount of tax that would have escaped assessment had the income shown in the return been accepted as correct and one and a half times the said amount would be the maximum limit within which penalty could be imposed. Penalty was not restricted to tax evaded by reason of concealment. "Income as returned" within the meaning of section 28(1)(c) did not include an item which though not actually returned had been added back solely on the ground…