1. The Income-tax Appellate Tribunal has referred the following question for the opinion of this court:
' Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 10,000 under Section 28(1)(c) had been validly cancelled ?'
2. In assessment proceeding for the year 1954-55 the Income-tax Officer discovered cash credits amounting to Rs. 1,13,450 in the account books of the assessee. The assessee was able to explain the nature and source of a total sum of Rs. 51,500, but for the balance his explanation was not accepted by the Income-tax Officer. Subsequently, the assessee surrendered the balance of Rs. 61,915 for taxation in a revised return filed by it. When the Income-tax Officer took up the assessment proceedings again he found still further cash credits over and above those which he had already discovered. The total of the further cash credits now detected by him amounted to Rs. 9,250. The assessee attempted to explain the nature and source of these cash credits, but his explanation was found unsatisfactory and the Income-tax Officer added a further sum of Rs. 9,250 to the assessee's income. The assessee proceeded in appeal to the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner, in turn, detected further cash credits in the assessee's account books and after issuing a notice of enhancement he included a sum of Rs. 46,601 as income from undisclosed sources. In the order-sheet of the quantum appeal dated August 12, 1958, he recorded the following order:
' Orders passed. Inform. Penalty notice already issued by the Income-tax Officer.'
3. It appears that the Income-tax Officer had already issued a notice under Section 28 in respect of the cash credits discovered by him during the assessment proceedings, and on January 31, 1964, he made an order imposing a penalty of Rs. 10,000 under Section 28(1)(c), Indian Income-tax Act, 1922, taking into account not only the income found by him to have been concealed by the assessee but also the income discovered subsequently by the Appellate Assistant Commissioner in appeal. The assessee appealed against the penalty order and the appeal was dismissed by the Appellate Assistant Commissioner. Thereafter, upon second appeal, the Income-tax Appellate Tribunal held that the Income-tax Officer did not enjoy any jurisdiction to impose a penalty in respect of the amount discovered by the Appellate Assistant Commissioner. It observed further that as the Income-tax Officer had taken into account the income discovered not only during the assessment proceeding before him but also during the appellate proceeding before the Appellate Assistant Commissioner for the purpose of levying the penalty, the entire penalty order was liable to be quashed. The Tribunal was of the view that it was not possible to treat the penalty order as severable.
4. At the instance of the Commissioner of Income-tax the Tribunal has now referred this case.
5. An application was made on behalf of the assessee before this court under Section 66(4) of the Act, and we have by our order of date dismissed that application.
6. The only question before us, therefore, is whether having regard to the grounds upon which the Tribunal proceeded it was justified in law in cancelling the levy of penalty imposed by the Income-tax Officer.
7. Section 28(1), so far as it is material, provides:
'28. (1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person...
(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,
he or it may direct that such person shall pay by way of penalty,... in the cases referred to in Clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income: . ..
(3) No order shall be made under Sub-section (1).....unless the assessee....... has been heard, or has been given a reasonable opportunity of being heard.'
8. It seems to us clear that the provision contemplates distinct jurisdictions in the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal in relation to the proceedings pending before those respective authorities so far as the imposition of penalty is concerned. It will be apparent from the language employed in the sub-section that the authority imposing the penalty can do so only upon being satisfied that a person has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, and that satisfaction must be in the course of proceedings under the Act. Those proceedings must be proceedings before that authority, and they must be proceedings necessarily under some provision of the Act other than Section 28. In the instant case, the Appellate Assistant Commissioner found cash credits in the amount of Rs. 46,601 to represent income from undisclosed sources. If a penalty could be imposed in respect of that amount, it lay within the jurisdiction of the Appellate Assistant Commissioner. The amounts were discovered in the course of the appellate proceeding before him. They were discovered by him. It was for him then to impose the penalty if he was satisfied that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars of it. The Income-tax Officer was seized of the assessment proceeding, and it was not during the assessment proceeding that the sum of Rs. 46,601 was discovered. We are satisfied that the Tribunal is right in holding that the penalty order was bad in law.
9. The Tribunal has observed that the penalty order made by the Income-tax Officer was not severable. In this also the Tribunal is right. The order was made by the Income-tax Officer after taking into account the several items of income found to have been concealed by the assessee. The amount of Rs. 10,000 levied as penalty is a single indivisible sum. It cannot be related in any specific part to the concealed income concerning which the Income-tax Officer had jurisdiction to impose a penalty and the balance to the amount concerning which he had no jurisdiction.
10. We answer the question referred in the affirmative, and in favour of the assessee. Inasmuch as we have dismissed the assessee's application under Section 66(4) of the Act, we make no order as to costs. Counsel's fee is assessed at Rs. 200.