Law:

Section:

Section 271(1)(c) , read with section 153 of the Income-tax Act, 1961 [corresponding to section 28(1)(c), read with section 5(7C) of the Indian Income-tax Act, 1922] - Penalty for concealment of income - Assessment year 1948-49 - Whether in view of provisions of section 28(3) and section 5(7C) of 1922 Act, succeeding ITO had authority to pass an order of penalty upon explanation of assessee produced before his predecessor-in-office, if assessee fails to exercise his right under section 5(7C) of 1922 Act, demanding that proceeding should be reopened - Held, yes FACTS The ITO having rejected the claim of assessee that the amount found credited in his books of account represented cash deposit of his wife out of her stridhan property, added the said amount in total income of assessee. The said amount was, however, reduced by the Tribunal after taking into consideration certain withdrawals in the same account. Thereafter, a notice was issued under section 28(3) of 1922 Act, calling upon the assessee to explain as to why a penalty should not be imposed upon him for wilful concealment. The assessee submitted a written explanation, however, same was rejected by the ITO as unsatisfactory and penalty was imposed under section 28(1) of 1922 Act. On appeal AAC as well as Tribunal upheld the ITO's order. On reference, assessee contended that the notice under section 28(3) of 1922 Act was issued by the ITO for which he submitted a written explanation before the same officer. However, the final order imposing penalty was passed by another ITO who was successor-in-office, and had no authority to impose the penalty unless a fresh notice was issued by him and a fresh explanation was called for from the assessee. HELD It was manifest from section 28(3), read with section 5(7C) of 1922 Act, that 'V' successor-in-office of 'K' had authority to continue the proceeding started against the assessee under section 28(1) of 1922 Act and to impose proper penalty under that section. Section 28(3) of 1922 Act requires that there should be a hearing of the assessee, or in the alternative, the assessee should be given a reasonable opportunity of being heard. After receiving the notice under…

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