Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 [Corresponding to section 28(1)(c) of Indian Income-tax Act, 1922] - Penalty - For concealment of income - Assessment years 1944-45 to 1946-47 & 1948-49 - Though penalty notices were issued between year 1949 and 1961, penalty proceedings were kept pending till year 1963 - Whether in absence of department's explanation in regard to non-completion of proceedings during interval of 14 years, said proceedings were vexatious and amounted to an abuse of power conferred on ITO under section 28(1)(c) of 1922 Act - Held, yes - Whether, therefore, impugned notices had to be quashed - Held, yes FACTS Between years 1949 and 1961, the ITO, issued a series of notices to the firm calling upon it to show cause why penalty should not be imposed on the assessee-firm under section 28(1)(c) of the 1922 Act on the ground that the firm concealed its income relevant to the four assessment years 1944-45 to 1946-47 and 1948-49. The firm sent several replies to the effect that there was no concealment of income on the part of the firm. Ultimately instant writ petition was filed in year 1963, wherein the petitioner sought for quashing of the penalty proceedings because of inordinate delay. HELD In the instant case, there was no clear indication on the record about the alleged concealment of income. The assessee had succeeded in persuading the AAC and the Tribunal to reduce the quantum of assessment. Thus, it was all a question of making an estimate about the income of the assessee for the four assessment years. The penalty proceedings dragged on for a period of 14 years upto April 1963. The department did not explain why proceedings under section 28(1)(c) of 1922 Act could not be completed during this interval of 14 years from 1949 to 1963. The instant penalty proceedings were vexatious, and amounted to an abuse of the power conferred on the ITO under section 28(1)(c) of 1922 Act. The respondent should not be permitted to continue with these penalty proceedings. Therefore, the instant petition was allowed, and the impugned notices were quashed. Note : Decision was in favour of petitioner/assessee. CASES REFERRED TO CIT v. Khemchand Ramdas…

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