Under section 66 (1) of the Indian Income-tax Act, 1922 (Central Act XXI of 1922), the Income-tax Appellate Tribunal, Hyderabad Bench, has referred the following question of law for decision by this court :
'Whether, on the facts and in the circumstances of the case, the levy of penalty on the assessee under section 28 (1) (c) of the Income-tax Act, 1922, was legal ?'
The Tribunal has made this reference on an application made by Messrs. Muppana Somaraju and Veeraraju of Peddapuram.
The relevant facts, as apparent from the agreed statement of the case drawn up by the Tribunal, are as follows :
Muppana Somaraju and Veeraraju, with the status of a Hindu undivided joint family, submitted a return of income as assessee for the assessment year 1948-49 for which the accounting year was the calendar year 1947. In the return, the assessee did not disclose as its income, the income derived from two talkies bearing the names of Sri Ramakrishna Touring Talkies and Sri Seetharama Touring Talkies. On the other hand, the assessee made it appear that those two talkies, which had originally belonged to the assessee, had ceased to belong to it as a result of transfer by sale of Sri Ramakrishna Touring Talkies to Srimathi J. Nagamma, who was a daughter of Veeraraju, and the transfer by sale of Sri Seetharama Touring Talkies to Srimathi A. Chinnabhadramma, sister of Veeraraju and Somaraju. The Income-tax Officer rejected the contention of the assessee about the transfers and passed an order dated January 28, 1950, treating those two talkies as belonging to the assessee and including the income of those talkies in the income of the assessee. The assessee appealed to the Appellate Assistant Commissioner and later to the Appellate Tribunal, but in vain. The Appellate Tribunal passed its order on November 3, 1953. The assessee sought a reference to the High Court under section 66 (1) of the Act from the order of the Tribunal, but without success. The assessee filed an application under section 66 (2) before this court which dismissed that application, observing as follows :
'The Tribunal gave various reasons in support of their finding that the two ladies were benamidars... In the circumstances of the case, we cannot say that the finding of the Tribunal is vitiated by any error of law.'
Subsequently, in due course, the Income-tax Officer, in the view that he took that the assessee had concealed the income from the two talkies business, conducted penalty proceedings regarding return for 1948-49 (assessment year). After hearing the assessee, he imposed a penalty of Rs. 13,675 which is an amount equal to the amount of tax in respect of the talkies and which the Income-tax Officer considered to be the amount of tax sought to be evaded. In passing his order under section 28 (1) (c) of the Income-tax Act, the Income-tax Officer rejected the contention raised by Somaraju and Veeraraju (hereinafter referred to in some places in this judgment for convenience as the applicants) that the penalty could not be sustained as being sought to be levied on a defunct entity. That contention was raised on the ground that the assessee (Hindu undivided family) had become disrupted with effect from November 1, 1948, because of a partition. The Income-tax Officer (Sri V. B. Ananda Sharma, Additional Income-tax Officer, Kakinada) passed his order on May 13, 1958. The applicants filed an appeal before the Appellate Assistant Commissioner. The latter rejected the appeal. The applicant filed an appeal before the Appellate Tribunal. The latter also dismissed the Appeal on the ground that the Hindu undivided family continued to exist for the purpose of the Income-tax Act within the meaning of section 25A (3) of that Act and that, therefore, penalty could be lawfully levied on it.
In the application under section 66 (1) (R. A. No. 625 of 1960-61) praying for a reference being made to this court, three contentions were raised before the Tribunal by the applicants as follows :
(1) The entity on which the penalty was levied having ceased to exist on the date of the levy, the order of penalty was bad in law;
(2) Factually, the assessee had not concealed the particulars of its income or deliberately furnished inaccurate particulars of such income so as to attract the provisions of section 28 (1) (c) of the Act; and
(3) In any event, the penalty levied was excessive.
The Tribunal held against the applicants on all the three points. The Tribunal came to the conclusion that the concerned findings relating to the contentions Nos. 2 and 3 were pure findings of fact. Accordingly, it held that only one question of law arose in its opinion, formulated it and referred it. That point of law is the one already extracted by us earlier in this order.
The assessee filed in this court I. T. C. M. P. No. 13404 of 1961 under section 66 (2) of the Indian Income-tax Act, praying for a direction by this court to the Appellate Tribunal to state further facts of the case and to refer two other questions of law also to this court for decision. These two other questions of law are substantially identical with the points concerned in contentions Nos. 2 and 3, already referred to by us above, as raised before the Tribunal. A division Bench of this court consisting of one of us (Satyanarayana Raju J.) and Kumaraiah J. disposed of that petition by an order dated June 25, 1962, as follows : 'We are satisfied that the question referred to by the Tribunal is comprehensive. This petition is dismissed.' We proceed to deal with the point of law referred to us by the Tribunal.
In Kambampati Peda Subba Rao v. Commissioner of Income-tax the relevant facts were as follows : A Hindu undivided family was assessed as such on its income from property and business up to 1954-55 assessment. For the assessment year 1955-56, the assessee claimed that there had been a partition on April 3, 1954, of the business in cigarettes, etc., which was taken over by a partnership concern constituted by the erstwhile members of the family. The Income-tax Officer, in the course of the assessment proceedings for 1955-56 (assessment year), accepted the plea of partial partition with respect to the family business with effect from January 10, 1955. The joint family was still in existence inasmuch as the house property was not divided and there was no application or order made under section 25A. During the course of examination of the accounts, the Income-tax Officer found various credits in the names of certain persons. As a result of the enquiry, the Income-tax Officer added a sum of Rs. 70,000 to the income of the assessee as undisclosed profits. In appeal, the Appellate Assistant Commissioner reduced the sum by Rs. 30,000 and his order was maintained by the Appellate Tribunal. The Income-tax Officer gave notice under section 28 on May 31, 1953, and started penalty proceedings. The assessee merely, pleaded that the penalty proceedings should be dropped but he did not let in any fresh evidence or any new facts other than those stated in the assessment proceedings and appellate stages. The Income-tax Officer levied a penalty of Rs. 13,000. In the appeal filed against that order of levying penalty, before the Appellate Assistant Commissioner, a legal objection was raised that the family had got disrupted on April 3, 1954, and the penalty was imposed after the family ceased to exist and that, as such, the penalty was not legal. The Appellate Assistant Commissioner rejected this contention on the ground that there had been no order passed under section 25A and that no application even had been filed or passing an order under section 25A. The Tribunal also rejected that contention of the assessee though it reduce the quantum of penalty. The following question was referred to the High Court under section 66 (1) of the Income-tax Act :
'Whether, on the facts and in circumstances of the case, the levy of penalty on the assessee is valid in law ?'
The learned judges, his Lordship the Chief Justice and Jaganmohan Reddy J., after discussing the law in the matter and referring to various decisions, answered the reference in the affirmative. In the course of the judgment, the learned judges observed as follows :
'It is undisputed that there has been no order under section 25A, nor was an application made under that provision....... The mere recognition of the partial partition in the assessment of 1955-56 does not put an end to the joint family under the Income-tax Act, unless an order is made to that effect under section 25A.'
The learned judges also distinguished the decision in M. Subba Rao and Nageswara Rao v. Commissioner of Income-tax on the ground that, in the latter case an order under section 25A had been recognising the division of the family. Though there were other facts in that case, the learned judges in Kambampati Peda Subba Rao v. Commissioner of Income-tax held that when there was no order under section 25A, levy of penalty on the joint family as assessee was lawful, even if there had been a partition prior to the date of living of penalty. The above decision is a direct decision which is binding on us and is applicable to this case as, beyond doubt or dispute, there was no order passed under section 25A in the present case recognising the partition for the accounting year 1947 (assessment year 1948-49). We respectfully follow the aforementioned decision and hold that the Tribunal was right in finding that contention No. 1 is substantially the point concerned in the question referred to us.
The learned advocate for the applicants has also sought to press before us the contentions which had been raised by the applicants in the application before the Tribunal and had been numbered as Nos. 2 and 3 and rejected by it, i.e., refused to be referred to the High Court. Regarding those two contentions, the Tribunal has observed in its order of reference as follows :
'(8) The contention of the assessee that factually there was no concealment of income was also rejected by the Tribunal, as stated above, on the finding that had become final, that the income from the two businesses belonged to the assessee in the year of assessment. It was argued that subsequently the claim of the assessee had been accepted and, therefore, it should be held that no mens rea could be taken to have been established against the assessee in respect of the present assessment year. That was rejected by the Tribunal on the simple ground that so long as the assessee had wilfully failed to disclose the income in the year of assessment, no matter what had been held in regard to income from these businesses in a later year, the situation for the assessee did not change.
In regard to the quantum, the Tribunal duly took into consideration the several circumstances of the case and held that there was no warrant for interfering with the quantum.
The findings of the Tribunal as regards whether there was concealment of income and whether the penalty levied is reasonable are pure findings of fact from which no question of law can be spelt. No question of law is accordingly being referred to the High Court from that part of the Tribunals order dealing with these questions.'
We pointed out to the learned advocate for the assessee that contentions Nos. 2 and 3 have not been referred to us by the Tribunal by its order of reference. But, the learned advocate, all the same, urged before us that in the order of this court dated June 25, 1962, dismissing I. T. C. M. P. No. 13404 of 1961, this court did not refuse to direct the Tribunal to refer the two questions or hold that the application was untenable but only held that the question actually referred by the Tribunal was comprehensive. The learned advocate interprets the above order of this court as meaning that the point of law actually referred by the Tribunal comprehends and includes points concerned in contentions Nos. 2 and 3 also.
It has been stated in The Law and Practice of Income-tax by Sir Jamshedji B. Kanga and N. A. Palkhivala (Fourth Edition, 1959) at pate 664 thus : 'The quantum of the penalty within the statutory limit that ought to be imposed in a given case is obviously a matter of fact and not of law and is to be determined by the income-tax authorities and not by the court.' The above commentary is also based on various specified decisions.
In the same commentary, it is also stated at page 664 as follows : 'The question whether there has been a deliberate concealment of income is a question of fact.' This commentary is also based on various specified decisions. We respectfully agree with that view.
We, therefore, hold that, even assuming for arguments sake, without admitting, that this court can go into contentions Nos. 2 and 3 in view of the order of a Bench of this court in I. T. C. M. P. No. 13404 of 1961 dated June 25, 1962, on the ground that they are comprehended in the single question referred to us, those two contentions relate to pure questions of fact and this court cannot go into the correctness of the findings of the Tribunal on those contentions.
The learned advocate for the assessee-applicants urges an argument that there are certain special facts and circumstances in this case which deserve consideration and which are sufficient basis for holding that there is a question of law on the point concerned in contention No. 2. For this purpose, he has referred to certain facts. We are fully alive to the position, that, in answering this reference, this court has to restrict itself to the facts mentioned in the statement of the case of the Tribunal especially as it is an agreed statement of the case. We shall accordingly restrict ourselves to such facts alone. But, for understanding and dealing with the contention of the learned advocate, it is necessary to refer to certain facts as stated by him. They are as follows :
For the assessment year 1949-50 for which the accounting year was the calendar year 1948, the applicants submitted a return which was similar to the return for the previous year 1948-49 (assessment year) as regards the income of the two talkies. They also filed an application under section 25A of the Indian Income-tax Act praying for recognising of the partition. The Income-tax Officer did not recognise the partition and passed an order of assessment for 1949-50 (assessment year) treating the income from the two talkies in the same manner as in his assessment order for 1948-49 (assessment year). The assessee went on appeal to the Appellate Assistant Commissioner. The latter passed an order that there was a real partition with effect from January 1, 1948, and that, consequently, Somaraju should be assessed as a separate individual and that the sons of the late Veeraraju (brother of Somaraju) should be assessed as a unit separate from Somaraju. The Appellate Assistant Commissioner also concluded that it was not possible to hold that, even after January 1, 1948, the two talkies belonged to the assessee undivided family and he gave certain directions regarding assessment. In conformity with the order and directions of the Appellate Assistant Commissioner, the Income-tax Officer made further enquiry and felt satisfied that the sales of the two talkies to the two ladies were real and effective and passed assessment accordingly. But that finding of the Income-tax Officer was not considered or given effect to by the Income-tax Officer in the penalty proceedings.
The orders passed by the Appellate Assistant Commissioner regarding 1949-50 (assessment year) are not part of the evidence available before us for being acted upon us. But, in the material available before us, there is a reference to that order. The order of the Appellate Assistant Commissioner dated September 7, 1959, which is enclosed with the reference, states as follows :
'The appellants contention that because the income from these two talkies were assessed for subsequent years in the names of Srimathi J. Nagamma and Srimathi Akasapu Chinnabhadramma respectively on the basis of the evidence produced for those years, they should be held to have earned the income from these two talkies even during 1947 carries no force. For, in an appeal filed by the appellant before the appellate Tribunal on the point as to who were the owners of the two businesses during the year 1947, the Tribunal decided the question of fact and held that the appellant was the real owner of the two business and that the names of the two ladies were utilised to circumvent certain rules. The appellant carried the matter to the High Court to get opinion whether, on the materials available, the finding of the Appellate was correct. The High Court held that the finding of the Tribunal was not vitiated by any error of law. On the above mentioned facts, it is clear that the appellant was the person who really earned the income from the two talkies during the year 1947.'
The Tribunals order dated July 13, 1960, in appeal states as follows :
'It was then urged before us that in the subsequent years, the department had itself excluded the said income from the assessment and assessed it separately as that of the two ladies. From the mere fact that the ladies were assessed in respect of this income on the basis of their own returns, it does not follow that the department had accepted the assessees claim. There is no evidence pointed out or led before us to that effect. At any rate, this will not affect the position as finally decided as respects this year.'
In the reference itself, in paragraph 8, the Tribunal has made mention of this aspect. We have already extracted that paragraph 8 in an earlier portion of this judgment.
Beyond doubt or dispute, the assessment proceedings for 1948-49 (assessment year), in which the income of the two talkies was treated as the income of the Hindu undivided joint family and the two ladies, who held sale deeds in their favour, were treated as benamidars, have become final when this court, by its order dated August 22, 1955, declined to interfere with the finding of the Tribunal. Subsequently, on July 3, 1956, the Income-tax Officer issued a memo to the assessee stating as follows :
'The assessee is hereby required to appear before me on July 5, 1956, in connection with the above penalty proceedings stated against him and adduce any further evidence in support of his explanation. If nothing is heard on the above date, the explanation already filed will be taken as final and further proceedings will be taken.'
In response to the above memo, the assessees filed an explanation dated July 19, 1956, in reply as follows :
'With reference to your memo dated July 3, 1956, on this subject we submit that we have already filed our explanation to the notice on February 12, 1950, and we have nothing more to add to whatever we have already submitted.'
The explanation dated February 12, 1950, had been prepared and filed before the Appellate Assistant Commissioner passed his order dated April 2, 1954, and before the Income-tax Officer is said to have made assessment dated June 30, 1954, for the 1949-50 (assessment year) on the basis that the sales were genuine. On this memo dated July 19, 1956, the Income-tax Officer made a note dated July 20, 1956, as follows :
'Heard the party. He only states that penalty may not be levied in view of the facts stated above.'
Thus, when the Income-tax Officer passed is order dated May 13, 1958, levying penalty, the material on record before him in the assessment proceedings was subsequently identical with what it had been on February 12, 1950, and had not become enlarged by any new material put in by the assessee. The latter, for whom a representative appeared, though given an adequate opportunity to bring fresh relevant material on record for being considered in the penalty proceedings, chose to let in no fresh evidence.
The Income-tax Officer proceeded to decide the matter on the material already available on record which was substantially the material available in the assessment proceedings for 1948-49 (assessment year). On the same material, there had been concurrent finding by the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal that the vendees of the talkies under the sale deeds were benamidars and that finding had been left uninterfered with by this court. On that material, the Income-tax officer came to a conclusion consistent with that previous concurrent finding, which had become final, that the assessee had concealed the income from the aforesaid business by showing them as belonging to the two other benamidars ladies under the concerned sale deeds. He did not take into consideration the alleged fact that on June 30, 1954, i.e., even before the notice dated July 2, 1956, was sent by him to the assessee under section 28 (1) (c), the Income-tax Officer had already passed an order in assessment of the assessee of the same family for 1949-50 (assessment year) recognising the sales as genuine. In the penalty order of the Income-tax Officer, there is no reference to the assessment order dated June 30, 1954.
When the Appellate Assistant Commissioner heard the appeal, a contention was raised on behalf of the appellant-applicants, referred to supra, based on the talkies as that of the two ladies from 1949-50 (assessment year) recognising the sales as genuine. But the Appellate Assistant Commissioner rejected that contention on the ground that the order dated June 30, 1954, had been passed on the evidence produced in the proceedings relating to a period for which that order was passed. The same argument was raised before the Tribunal but it rejected it on two main grounds :
(1) There was no evidence pointed out or led before the Tribunal that the department had accepted the assessees claim.
(2) At any rate, this fact that the department accepted the assessees claim for assessment in subsequent years, will not affect the position as finally decided as respects this year.
Ground No. 1 is based on the undisputed fact which is conceded before us. The assessee merely raised contentions before the Appellate Assistant Commissioner and the Tribunal without effectively bringing on record additional material, in addition to the evidence on record in the assessment proceedings for 1948-49 (assessment year) for being used as the decision. For this state of affairs, the assessee cannot be absolved of responsibility and blame. But, all the same, the learned advocate for the assessee contends that the material which was recorded in the proceedings of assessment for 1949-50 (assessment year) were available in the records of the department and the Income-tax Officer and that these records, including the order dated on June 30, 1954, should have been treated as a relevant material which the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal could and should have taken cognizance of and acted upon. It is not contended us that even at least the assessment order dated June 30, 1954, was tendered before the Appellate Assistant Commissioner or Tribunal for being taken cognizance of. So the order of the Tribunal rejecting the contention of the assessee cannot be said to be wrong if the Tribunal had to pass an order on the basis of only the material which was on record in the penalty proceedings for 1948-49 (assessment year).
Sri C. Kondaiah on behalf of the department strongly relied on the decision in Kishinchand Chellaram v. Commissioner of Income-tax. In that case the relevant facts were as follows : For the financial year 1944-45, a company passed a resolution declaring a dividend at 60 per cent. and the assessee, who was a shareholder in that company, received a sum of Rs. 30,000 on September 29, 1944. He accordingly showed that amount as dividend income in his assessment for the year 1945-46 (assessment year). Later at an extraordinary general meeting held on December 4, 1947, the shareholders passed a resolution that the company had discovered that the dividends were paid not only for the year 1943-44 but also for the years 1941-42 and 1942-43, and that the dividends were inadvertently paid without providing for the payment of tax and that, therefore (the resolutions directed), the necessary adjustments have to be made in the books of the company on April 6, 1947. At that time, the assessment of the assessee for 1945-46 (assessment year) was under appeal to the Appellate Assistant Commissioner. At that stage, the assessee contended that, inasmuch as he was compelled to refund the dividend he had received, that amount did not represent dividend income and that it should be excluded from his assessment. The learned judge observed as follows at pages 999-1000 :
'We are prepared to accept all the propositions put forward by Sir Jamshedji as sound and correct propositions of law, but the insuperable difficulty in the way of Sir Jamshedji is this that we must look upon every assessment as a self-contained assessment. That is an elementary principle of taxation law. The dividend was paid to Kishinchand in the assessment year 1945-46, relevant to his year of account 1944-45. At that date, there is no suggestion that that dividend was not properly paid or that Kishinchand was liable to refund that dividend. It constituted his dividend income and he properly showed it in his assessment. What Sir Jamshedji wants to rely on is the fact that came to light on the 4th of December, 1947, long after the year of account of the assessee.
It is a pure accident that the assessment was not finalised but that the appeal from the assessment was pending before the Appellate Assistant Commissioner... Whatever rights the assessee may be entitled to by reason of the fact that subsequently he became liable to refund the dividend, those rights are outside the ambit of the particular assessment with which we are concerned. He may have relief under the Income-tax Act or he may not, but we are not concerned with the position that arose on the 4th December, 1947, which would correspond with the assessment year 1948-49. We are only concerned with the assessment year 1945-46, and as far as that assessment is concerned the assessee had no answer to the contention of the department that the sum of Rs. 30,000 represented his dividend income.'
The learned advocate for the assessee (applicants), Sri W. V. V. Sundara Row, relies on the following decisions :
In Sankaralinga Nadar v. Commissioner of Income-tax various questions numbered therein as (a) to (g) were referred to the High Court. Of them, question (a) was as follows :
Page 210 :
'(a) Whether when in a previous year of the assessment a decision was arrived at after investigation and enquiry that certain amounts standing in the name of certain ladies in the petitioners account were the stridhanam amounts belonging to them and as such the interest paid in respect of the said amounts was held to be a valid deduction, it is open to the income-tax authorities to reopen the question of the ownership of the amounts in a subsequent year of assessment and whether the authorities are not barred by principle of res judicata or otherwise from reopening the said question.'
The learned judges held on this question as follows (page 213) :
'We are of opinion that an Income-tax Officer proceeding to assess an assessee after making an enquiry as contemplated by the Income-tax Act is not a court and that it cannot be said that the doctrine of res judicata applicable to the decisions of civil courts applies.'
They also observed as follows (page 214) :
'It seems to us that where income-tax officials have after enquiry proceeded to assess the assessee on a certain basis, though they may be entitled to reopen the enquiry, they cannot arbitrarily change the assessment simply on the ground that the succeeding officer does not agree with the preceding officers finding... If fresh facts come to light which on an investigation would entitle the Income-tax Officer to come to a different conclusion from that of his predecessor, we think he is entitled to reopen the question. But if there are no facts, it is difficult to see how he can arbitrarily go behind the finding of his predecessor.'
The above decision is binding on this court. In H. A. Shah & Co. v. Commissioner of Income-tax a Division of the Full Bench of the Bombay High Court referred to the above decision of the Full Bench of the Madras High Court and observed as follows :
'Therefore, what is emphasised in this statement of the law is that the Full Bench of the Madras High Court limited the power of the income-tax authorities to reopen a settled question only if there were fresh facts which would justify a different conclusion. With respect to the Full Bench, we are not prepared to accept that that is the only ground on which an income-tax authority would be entitled to reopen a settled matter, and really when one carefully studies this passage the emphasis is upon the second Tribunal acting arbitrarily or capriciously and we with respect are in agreement to that extent that the second Tribunal would certainly not be justified in reopening a matter arbitrarily or capriciously.'
The learned judges held to the following effect :
'The principle of res judicata or estoppel by record does not strictly apply to the income-tax authorities in relation to the proceedings before them. The very basis of an assessment is that it is self-contained and the decision given by the income-tax authorities is a decision relating to that particular assessment and binding upon the parties to the extent of that assessment. When these authorities consider the case of the assessee with regard to a different assessment year they are dealing with an entirely new case and the decision given in the earlier assessment has no binding force upon either the assessee or the income-tax authorities in the next assessment....
This does not mean that it is open to a Tribunal to come to a different conclusion to the one arrived at by that very Tribunal earlier without any limitation whatsoever. The mere fact that the second Tribunal may look upon the decision of the first Tribunal as erroneous in law would not justify it in coming to a contrary conclusion or reversing the finding of the first Tribunal.
Nor is it correct to say that, in order to enable the second Tribunal to depart from the finding of the first Tribunal, it is essential that there must be some fresh facts which must be placed before the second Tribunal which were not placed before the first Tribunal. If the first Tribunal failed to take into consideration material facts, facts which had a considerable bearing upon the ultimate decision, and if the second Tribunal was satisfied that the decision was arrived at because of the failure to take into consideration those material facts and if these material facts had been taken into consideration the decision would have been different, then the second Tribunal would be in the same position to revise the earlier decision as if fresh facts had been placed before it....
There is also further, limitation upon the power of the Tribunal to revise the decision given earlier by that very Tribunal. The effect of revising his decision should not lead to injustice and the court must always be anxious to avoid injustice being done to the assessee.
If the court is satisfied that by depriving the assessee of his rights under the later decision in an earlier year the assessee lost an important advantage or lost some benefit which he could have got under the Income-tax Act, then the court may take the view that departing from the earlier decision leads to injustice or denial of justice and the court may prevent an income-tax authority from doing something which would be unjust and inequitable.'
In that case, the question referred to the Bombay High Court was as follows :
'Whether in the circumstances of the case the Tribunal was justified in law in departing from its previous finding that Hiralal was a trustee for the minor, Vasantlal ?'
The learned judges answered the question in the affirmative and also added as follows (page 381) :
'We would like to emphasise the fact that we are answering this question on the specific facts and circumstances set out in the statement of the case.'
In the present case, we have to answer the question referred to us on the specific facts and circumstances set out in the statement of this case. The facts and circumstances so set out are based on the material on record in the penalty proceedings which were substantially identical with the material on record in the assessment proceedings for 1948-49 (assessment year). In particular, the material on record in the penalty proceedings did not include the alleged order passed by the Income-tax Officer dated June 30, 1954, on which the learned advocate for the applicants seeks to rely. The earlier decision in the assessment proceedings, on the very same material, was to the effect that the two ladies were mere benamidars and that the income from the cinema was includible in the income of the Hindu joint family and that assessment had become final. There is no authority for the proposition put forward by the learned advocate for the applicants that the order passed by the Income-tax Officer dated June 30, 1954, in assessment proceedings for another year should be treated as part of the material on record in the penalty proceedings, in spite of the fact that no one, including the assessee, had brought that order on record. So, as there were no additional facts or circumstance available before the Income-tax Officer when he passed the order in the penalty proceedings as compared to the material on which assessment order had been passed for the same year, i.e., 1948-49 (assessment year), it cannot be said that the order passed by the Income-tax Officer or by the Tribunal in conformity with the assessment order for that same year is wrong or untenable. We, therefore, find that this argument of the learned advocate for the assessee (applicants) is untenable. We also find that there were no special facts and circumstances which would go to show that contention No. 2, which was made before the Tribunal, was a question of law. Contentions Nos. 2 and 3, as already mentioned by us, were questions of fact and cannot be treated as questions referred to this court. Consequently, we find that the grounds given by the Tribunal relating to Nos. 2 and 3 are tenable and that the rejection by it of the arguments raised before it was also correct.
We would however like to place on record some aspects of the case. The enquiry held by the Income-tax Officer was of a quasi-judicial nature. In holding penalty proceedings, he was not acting as a court. It was observed in Lal Mohan Poddar v. Emperor that for the purpose of punishing offences under section 193 and 228, Indian Penal Code (and under no others), the legislature converted proceedings before the officers mentioned therein (section 37 of the Income-tax Act) which are not judicial proceedings ordinarily into judicial proceedings. As regards the manner in which an Income-tax Officer was to conduct an enquiry, it was observed in In re Harmukhrai Dulichand as follows (page 590) :
'Fundamentally no doubt the Income-tax Officer must proceed in a judicial spirit and come to a judicial conclusion upon properly ascertained facts; though I would point out that the Income-tax Officer is not a court, he has not the procedure of a court, and he is to some extent a party and judge in his own case.'
The Income-tax Officer was himself representing the department when holding the enquiry in the penalty proceedings. It was open to him to bring on record any material which was relevant and which threw light on the questions concerned in the proceedings. If the Income-tax Officer was aware that a competent officer of the department - whether it be himself or another Income-tax Officer - had already passed an order of assessment for the year 1949-50 (assessment year) on the materials available in the assessment proceedings relating to that year, that the sales to the ladies were genuine and effective and were not mere benami transactions and had been effective even from the respective dates of sales so as to materially affect the position of the assessee in the penalty proceedings for the year 1948-49 which he was holding, it would have been highly proper on his part, in the interests of justice, to take cognizance of that order and the additional materials on which such order was passed, after duly bringing them on record with a view to do substantial justice. For, it is presumed that when he held the enquiry, he did so in the judicial spirit with a desire to find out the truth, even if that truth were favourable to the assessee and for that purpose to gather and bring on record but still the Income-tax Officer knew that it existed. The learned judges of the Bombay High Court have extracted with approval the following passage from the decision in Commissioners of Inland Revenue v. Sneath as follows :
'... the assessment is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made. No doubt, a decision reached in one year would be a cogent factor in the determination of a similar point in a following year, but I cannot think that it is to be treated as an estoppel binding upon the same party for all years.'
We have already referred to the observations of the learned judges of the Bombay High Court that the effect of revision by the Tribunal of its earlier order for another year should not lead to injustice. The learned judges also observed as follows (page 378) :
'We may state that when Mr. Palkhivala was contending that the result of reopening the decision of the first Tribunal was to cause injustice to the assessee, the Advocate-General very fairly agreed that the department will see that no injustice is caused to Hiralal by the erroneous view, as it now turns out, taken by the Tribunal in 1941-42 that Hiralal was a trustee of Vasantlal and not a partner in his own right.'
We hope that, in this case also, the department will take steps (if it has not already done so) to see that no injustice is caused to the applicants simply because of their failure to bring on record in the penalty proceedings, an order of assessment which had been passed by the department itself on a later date for the assessment of 1949-50 and the relevant materials which had already been placed before the department were available to the department on which that assessment order had been passed.
In the result, we answer the question referred to us in the affirmative as follows :
'The levy of penalty on the assessee under section 28 (1) (c) of the Indian Income-tax Act, 1922, was legal.'
We award costs to the department. Advocates fee Rs. 250.