Law: Income Tax Act, 1922

Section: 28(1)(c)

Law: Income Tax Act, 1922

Section: 28(1)(c)

Section 271(1)(c), read with section 147 of the Income-tax Act, 1961 [Corresponding to section 28(1)(c), read with section 34 of the Indian Income-tax Act, 1922] - Penalty - For concealment of income - Assessment years 1944-45 and 1945-46 - Assessee-company had purchased 'V' Estate with intention to float a separate company - As formation of new company was expected to take time assessee-company in meantime dealt with estate for and on behalf of company to be formed and recorded all receipts and expenses in assessee's books of account under V 'estate' for period 1-10-1942 to 21-4-1944 - Subsequently, ITO after completion of assessment for assessment years 1944-45 and 1945-46, made reassessment treating receipts of V estate as income of assessee and also issued notice under section 28(1)(c) of 1922 Act - Assessee explained that entry under head V 'estate' did not concern with dealings of assessee-company and that it related to new company to be formed and it was treated as distinct and separate from assessees own receipts and that amount was transferred to new company after its formation - However, ITO treated receipts as income of assessee-company and added it to original return and, accordingly, imposed penalty under section 28 of 1922 Act for concealment of income - Whether since assessee had made entry in its books of account under bona fide belief that it was managing estate for and on behalf of a new company to be formed, it could not be said that assessee made entry with conscious and deliberate intention of suppressing income from estate nor could it be said that entry was made with a deceptive intention to mislead revenue - Held, yes - Whether, therefore, levy of penalty under section 28(1)(c) of 1922 Act was not justified - Held, yes FACTS The assessee was public limited company dealing in rubber, tea and radios. The managing director of the assessee-company, negotiated with one 'M' for an assignment of the latter's right to purchase V estate which was not intended to be purchased for and on behalf of the assessee-company but to float a separate company called, V Plantations Ltd. As the formation of the new company would take time, the assessee-company…

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