SATISH CHANDRA J. - The Inspective Assistant Commissioner, Kanpur, imposed on the assessed a penalty in the sum of Rs. 59,476, being the amount of income concealed, for the assessment year 1968-69. The concealed income consisted of two items. One was dividend income of Rs. 24,750 This amount was declared as dividend by Messrs. Straw products Ltd. Bhopal, the declaration was made on June 29, 1966, and the warrant of dividend that was issued was dated August 8, 1967. The assessee did not maintain regular accounts. He however, maintained a memorandum book in which the interest this dividend income on March 13, 1969. The assessees accounting year for 1968-69 ended on March 28, 1968. It is thus evident that the declaration of dividend was made during the accounting year relevant to the assessment years 1968-69. The warrant was also issued within that year.
The other item related to special remunerations received by the assessee as director of Messrs. J. K. Industries, (Private) Ltd., Kanpur. The company by a resolution dated September 19, 1967, sanctioned a special remuneration of Rs. 34,726 to the assessee. This remuneration was actually paid to the assessee on April 15, 1968.
The assessee filed his return for the year 1968-69 on September 9, 1968. The assessments for this year was completed on February 27, 1969.
The assessee filed his return for, the year 1969-70. On October 4, 1969. These items of income were not shown in either of the two returns. During the course of proceedings for assessment for this year the assessee invited the attention of the Income-tax Officer to the fact that he had received the dividend and remuneration income aforesaid and he may tax it either in the year 1969-70 or 1968-69.
The Income-tax Officer reopened the assessment for the assessment year 1968-69 and brought both these items to tax for that year.
As the minimum penalty imposable was over Rs. 1,000 the income-tax Officer referred the question of initiating penalty proceedings to the Inspecting Assistant Commissioner.
The Inspective Assistant Commissioner held that in the past years as well as in the years 1968-69, and 1969-70, the assessee had been filing his returns on the accrual basis, namely, with reference to the date of declaration and not on the basis of the date of actual receipts of the dividend or the special remuneration income. But, in fact, he did not include either of these two items in his return for the year 1968-69. He also observed that the conduct of the assessee in not including these two items of income even the return filed for the assessment year 1969-70 shows that there was no extenuatring or mitigating circumstances. The two items clearly constituted the income of the assessee. They were not included in the return for the assessment year 1968-69, through they should have been, because the assessee had in fact filed the return for, that year on accrual basis. It was, therefore, a clear case of concealment of income. He imposed the minimum leviable penalty on the sum of the income which was concealed, namely, Rs. 59,476.
The assessee went up in appeal to the Tribunal, but failed. The Tribunal held that it was established that the assessee had been filing his returns on accrual on accrual basis and not on cash basis. It was he se incumbent upon the assessee who was aware of the fact that the dividend income as well as the remuneration had been declared during the currency of the accounting year relevant to the assessment year 1968-69. Not having done so, the case of concealment of income was clearly established. The fact that the assessee had himself pointed out the discrepancy without the income-tax Officer really detecting it, was in the opinion of the Tribunal, not relevant for determining whether there was concealment. It was a circumstances which could be taken into consideration while determining the quantum of penalty. On these findings, the appeal was dismissed.
At the instance of the assessee, the Tribunal has solicited our opinion on the following question of law :
Whether, on the facts and in the circumstances of the case, the imposition of penalty under section 271(1)(c) of the Income-tax Act, 1962, was justified ?'
The findings of fact are that the assessee had been himself filing the return on the accrual basis. The assessee very well knew that the dividend income has been declared during the accounting period relevant to the assessment year 1968-69. He was aware of the declaration of special remuneration to him by the company of which he was himself a director. This event also happened during the accounting period in question. Still, for reasons best known to him, the assessee did not think it fit to include these two items in the return that he filed for the year 1968-69. The items clearly were receipts in the nature of income. There can, hence, be no getting away from the conclusion that the department had clearly established concealment of income on the part of the assessee.
The department representative had, during the hearing before the Tribunal, argued that the Explanation to section 271(1)(c) was attracted but, on behalf of the assessee, it was contended that the said Explanation was not attracted and, in the next place, the Inspecting Assistant Commissioner had not, in fact, invoked the Explanation. It was not hence open to raise that plea at this stage. The Tribunal had not given a finding on this point apparently because it agreed with the contentions of the assessee. Moreover, the facts are not before us, namely, we do not know what was the income returned and what was the assessed income. There is nothing on record before us to show how much expenses were disallowed. Hence, the very factual foundation for the application of the Explanation is missing. On the facts and in circumstances of the case, the imposition of penalty could not be held to be unjustified in law.
In the result, the question referred to us is answered in the affirmative, in favour of the department and against the assessee. The Commissioner will be entitled to costs which are assessed at Rs. 200 (Rupees two hundred only).