1. The assessee in this case was an individual deriving income from salary, interest on security, house property, dividend, etc. During the relevant assessment, a sum of Rs. 10,80,000 was included as the assessee's income from undisclosed sources being the amount which was invested by the assessee benami in the name of Shri Kalyan J.B. Rana for the purchase of shares of Rohtas Industries Ltd. and S.K.G. Sugar Ltd., the two companies of the Sahu Jain Group. Since the sources of the purchase could not be explained, it was held that the amount had been invested by the assessee benami in the name of Shri Rana and this view was ultimately upheld by the Hon'ble Supreme Court.
The ITO, therefore, initiated penalty proceedings for concealment of this income under Section 28(1)(c) of the Indian Income-tax Act, 1922 ('the Act,). In response to the show-cause notice, one of the legal representative of the assessee who had died, contended that the question of assessment of the said amount was still in dispute and there was no question of levying penalty even if the Supreme Court had confirmed the addition. In fact, the Patna High Court had held that Shri Rana was not a benamidar for the assessee. The ITO, however, rejected this contention and levied penalty of Rs. 9 lakhs.
2. On appeal, the Commissioner (Appeals) was of the opinion that there was a difference between the relevant provisions of the 1922 Act and the Income-tax Act, 1961 ('the 1961 Act'). Under the 1922 Act, penalty for concealment could not be levied upon the legal representative of a deceased assessee. Moreover, there had been considerable difference of opinion with regard to the ownership of the shares and in view of the decision of the Hon'ble Supreme Court in the famous case of CIT v.Anwar Ali  76 ITR 696, it could not be said that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars thereof. He, therefore, cancelled the penalty.
The revenue has come up in second appeal before us.
3. We have heard the representatives of the parties at length in this appeal. Two or three issues are involved therein. The first dispute relates to the legality of the imposition of penalty on the legal heirs of the deceased assessee. The Commissioner (Appeals) has summarily accepted the assessee's contention by referring to the difference in the relevant provisions of the 1922 Act and the 1961 Act. According to him, the decision of the Madras High Court in CWT v. V. Varadarajan  122 ITR 1014 would lead to the conclusion that penalty could not be levied on the legal representative under the Act. After carefully considering all these relevant authorities on the subject, we are not inclined to agree with the said conclusion. The authority relied upon by him, namely, V. Varadarajan's case (supra) is a decision under the Wealth-tax Act, 1957 ('the 1957 Act'), where there is a specific provision relating to the continuation of proceedings against legal representatives. This provision is contained in Sub-section (3) of Section 19 of the 1957 Act, according to which, when the process if sought to be enforced against the legal representative in respect of an asset inherited from a dead person only the provisions of Sections 14, 15 and 17 of the 1957 Act are to apply qua the legal representatives.
It is because of the absence of Section 18 of the 1957 Act in Sub-section (3) of Section 19 that probably influenced their Lordships to hold that the legal representative of an assessee could not be liable for penalty in respect of a default committed by the deceased.
The said authority, therefore, is not conclusive of the matter.
4. At the time of hearing, the representative of the assessee further sought to support the conclusion of the Commissioner (Appeals) by referring to the decision of the Madhya Pradesh High Court in CWT v.Abdul Mazid Khan  147 ITR 53. This case also proceeds on practically the same reasoning as the decision of the Madras High Court in V. Varadarajan's case (supra) and purports to follow the same.
However, again, it is a case under the 1957 Act. Therefore, both these authorities would not necessarily lead us to endorse the view adopted by the Commissioner (Appeals).
5. Some support was sought to be derived by certain observations by Kanga and Palkhivala in their commentary on The Law and Practice of Income-tax, Seventh edn., vol. 1, p. 45, wherein the learned authors have again given a view in favour of the assessee that under the 1922 Act, penalty proceedings could not be started and continued against the legal representative for any default committed by the deceased. This opinion has been given in the first four lines of para 3. The said opinion is sought to be supported by the authorities referred to in foot-note 23. We, however, do not feel that it in any way helps the assessee. Two authorities are referred to in the foot-note--one is the decision of the Bombay High Court in Ellis C. Reid v. CIT 5 ITC 100.
Now this decision was given by the Bombay High Court before the insertion of Section 24B of the 1922 Act. In this behalf, we may refer to the commentary on the Law of Income-tax of India by V.S. Sunderam, Eighth edn., wherein at page 791, the learned author has traced the history of Section 24B and mentioned that this section was inserted in 1933 to fill the said gap in the Act. Prior to that the Bombay High Court had in the case of Ellis C. Reid (supra) thought that no assessment could be made on a deceased person in the absence of an express provision to that effect. This section had rendered obsolete the old rulings. Therefore, the decision in the case of Ellis C. Reid (supra) would in no way help the assessee. The decision in Attorney General v. Canter 22 TC 422 cannot affect the decision in the present case because this is not a case under the 1961 Act at all.
6. In this behalf, we have tried to go through some of the other relevant authorities on the subject, which in fact, are under the 1961 Act. The first important decision was delivered by the Supreme Court in C.A. Abraham v. ITO  41 ITR 425. The process of assessment was sought to be enforced against a firm which had been discontinued and the question arose as to whether penalties under Section 18A(4), (6), (7), (8) and (9) of the Act, etc., could be levied. It was held that the expression 'assessment' used under Chapter IV of the Act was not used merely in the sense of computation of income and when Section 44 of the Act declared that the partners or members of the firm or association shall be jointly and severally liable to the assessment, it referred to the liability to computation of an income under Section 23 of the Act as well as the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Penalty was considered to be only an additional tax, ultimately, it was held that the imposition of penalty under Section 28 consequent upon the assessment of a firm which consisted of two partners after the death of one of them was valid.
7. The next important authority in this behalf is the decision of the Supreme Court in CIT v. Bhikaji Dababhai & Co.  42 ITR 123. In this case, the ITO had issued a notice to the assessees under Section 40 of the Hyderabad Income-tax Act, 1357F, requiring them to show cause as to why penalty should not be imposed upon them and later by an order levied a penalty. In the meantime, the State of Hyderabad merged with the Indian Union and the Indian Legislature by the Finance Act, 1950, provided that the law existing in the said State would cease to have effect except for the purposes of levy, assessment and collection of Income-tax and super tax. The question arose whether the penalty levied under the Hyderabad Income-tax Act, could be recovered The Tribunal had held that the order imposing the penalty was not valid as the Hyderabad Income-tax Act had ceased to have effect. Of course, the appeal of the assessee was dismissed on the ground that the appeal to the AAC was not competent. On a reference, the High Court held that the appeal was competent, but the provisions relating to the imposition of penalty were not saved by the Finance Act and, therefore, the order imposing the penalty was bad. On an appeal to the Supreme Court, it was held (reversing the decision of the High Court): That penalty imposed under a taxing statute upon a person in view of his dishonest or contumacious conduct was in the nature of an additional tax and the fact that under the Hyderabad Income-tax Act, distinct provisions were made for recovery of tax due and penalty did not alter the true character of penalty imposed under the Income-tax Acts of India and Hyderabad. The proceedings for imposing penalty initiated under Section 40 of the Hyderabad Income-tax Act could be continued after the enactment of Section 13(1) of the Finance Act, 1950. The order levying penalty was, therefore, valid.
(p. 124) 8. Yet another important Supreme Court decision in this behalf is Addl.
ITO v. E. Alfred  44 ITR 442. In this case, one E had died intestate leaving behind him a son and eight daughters. For the assessment year 1946-47, a notice was issued to the respondent under Section 22 of the Act in regard to E's income and he was assessed under Section 24B(2). After service of the notice of demand, the respondent defaulted in the payment of tax and penalties were imposed upon him under Section 46(1) of the Act. The respondent challenged the levy of penalty and the High Court quashed the orders. On appeal to the Supreme Court, it was held (reversing the decision of the High Court): . . .that the penalties could be imposed on the respondent as an assessee and that the orders levying penalties were valid. He was himself an assessee qua the assets and liability to tax of E; he was, therefore, an assessee in default and liable to the imposition of penalty for this default.
The generality of the definition of 'assessee' in Section 2(2) of the Indian Income-tax Act, 1922, is sufficient to include even a legal representative who is to pay the tax, though out of the assets of the deceased person.
By Section 24B(1) of the Indian Income-tax Act, 1922, a legal representative is made liable to pay the tax which might have been assessed but not paid by the deceased person or which might be assessed after his death. It covers all situations and contingencies, and makes the liability absolute, limited, however, to the extent to which the estate of the deceased is capable of meeting the charge.
The word 'assessment' bears different meanings, and in one sense it comprehends the entire process of computation and levy of tax. It is in this sense that the legal representative becomes an assessee by the fiction, and this fiction has to be fully worked out to its logical conclusion. (p. 442) In this behalf, we may like to point out that there is an essential difference between the provisions of the 1961 Act and the 1957 Act, and the consequences resulting under the two Acts are not exactly identical. For example, if a person dies before the close of the accounting year, he may still be liable to be taxed on the income earned by him during the year, but he could not be liable to pay any wealth-tax if he dies before the relevant valuation date which is at the close of the accounting year. Again, under the 1957 Act, normally the legal representative of a deceased, wealth-tax assessee may not be liable because the term 'assessee' as defined in Section 2(c) of the 1957 Act would not initially include the legal representative except to the limited extent to which the provisions can be made applicable to him under Section 19. It may be pointed out that Section 19 and the other sections following it find place in Chapter V of the 1957 Act which deals with the liability to assessment in special cases. As pointed out above, Section 18 specifically excluded from Sub-section (3) of Section 19 and that was the reason behind the two decisions under the 1957 Act. As against this, Section 24B finds place in Chapter IV of the 1922 Act itself which primarily deals with assessment. The liability in special cases corresponding to Chapter V of the 1957 Act is dealt with in Chapter V of the 1922 Act, which deals with guardians, trustees, agents, etc. These two separate Chapters provide for liability in special cases and, therefore, their scope would be strictly restricted to the provisions providing for such liability whereas Chapter IV of the 1922 Act deals with the case of normal assessments and Section 28 relating to penalty also finds place therein. What we mean to say is that Section 24B of the 1922 Act does not exactly serve the same purpose as Section 19 of the 1957 Act though the language of the two may be similar. There is also a small difference in the language of the two sections. While the language of Section 19(1) and 19(2) of the 1957 Act corresponds with the language of Section 24B(1) and 24B(3) of the 1922 Act, there is Section 24B(2) in the 1922 Act, according to which the representative of the deceased can be treated as the assessee himself but under the corresponding provision in Section 19(3) of the 1957 Act, only the provisions of Sections 14, 15 and 17 are to apply to executor, administrator or other legal representative. Since the connotation of the term 'tax' in the various Supreme Court authorities above referred to is that it also includes penalty, which is only an additional tax under the normal rules of interpretation, the legal representative of the assessee would be liable to pay penalty under the 1922 Act though not under the 1957 Act because of Sub-section (3) of Section 19 in which only Sections 14, 15 and 17 are mentioned and not Section 18.
9. The decision of the Supreme Court in Bhikaji Dababhai & Co.'s case (supra) was of cases considered by the Madras High Court in V.Varadarajan's case (supra). But then their Lordships have not dealt with the matter exhaustively and have not followed the conclusion resulting therefrom by referring to the decision of the Supreme Court in Jain Bros. v. Union of India  77 ITR 107, wherein there are some observations that penalty proceedings are not essentially the continuation of proceedings relating to the assessment. Thereafter, their Lordships referred to the two decisions in E. Alfred's case (supra) and First Addl. ITO v. T.M.K. Abdul Kassim  46 ITR 149 (SC) but did not choose to elaborate the issue as they were not concerned with the interpretation of any provision similar to Section 46, which relates to recovery of tax and penalties and according to their Lordships, was not involved therein. In fact, the distinction between the 1922 Act and the 1957 Act has itself been recognised by their Lordships at page 1022 of the report wherein after referring to the decision in A. & F. Harvey Ltd. v. CWT  107 ITR 326 (Mad.), it was pointed out that there was no fiction in Section 19 that the deceased could be deemed to have lived till the valuation date if he actually died earlier. Ultimately, their Lordships held that there cannot be any analogy true or false between the provisions of the 1961 Act and the 1957 Act in view of the basic and fundamental difference existing between the chargeable events themselves and the decision under that Act would have no application to cases falling under the 1957 Act. In the result, we are of the opinion that the conclusion of the Commissioner (Appeals) in this behalf is not sustainable and penalty proceedings could be continued against the present respondents.
10. The next question that arises is as to whether the penalty proceedings can be said to have been taken after unreasonable lapse of time. The argument taken by the assessee before the Commissioner (Appeals) was that there had been inordinate delay in the levy of penalty. The Commissioner (Appeals) has also relied upon this as a ground for his decision. However, taking into consideration the over all facts and circumstances of the case, we are of the opinion that the delay in the present case could not be considered to be fatal. It was conceded on behalf of the assessee that there was no limitation prescribed for penalties under the Act. The addition itself was being agitated by the assessee and it was ultimately confirmed by the Hon'ble Supreme Court by its order dated 19-9-1972 in CIT v. S.P. Jain  87 ITR 370. Earlier the addition itself had been deleted by the Tribunal and by the Patna High Court and as such there was no question of levying penalty. The order passed during that period by the Tribunal consequential to the Supreme Court decision under Section 66(5) of the Act, was as late as 30-11-1976. In pursuance of the order of the Tribunal, the ITO passed an order under Section 33(5) of the Act on 2-9-1981. The present penalty order was passed on 27-11-1981 and, therefore, cannot be said to have been delayed because the delay was due to non-communication of the judgment of the Supreme Court to the Tribunal and of the order of the Tribunal to the ITO. In these circumstances, the ITO had no alternative but to keep the penalty proceedings pending. There may have resulted in some delay in the matter but for all that the revenue is not to be blamed. We would, therefore, disagree with the reasoning of the Commissioner (Appeals) for deleting the penalty on this score also.
11. The third dispute in this matter relates to the merits of the penalty. Unfortunately, none of the authorities below has discussed this matter from a proper angle. The ITO has rejected the assessee's contention on the ground that the Supreme Court had confirmed the addition and, therefore, the decision of the Tribunal and the Patna High Court had become irrelevant. The Commissioner (Appeals) has accepted the said contention relying upon the decision in Anwar Ali's case (supra) and referring to the fact that it could not be said that the disputed amount really represented the income of the assessee. We have, therefore, gone through the entire facts which are best summarised from the headnote of the Supreme Court's decision in S.P.Jain's case (supra) as under: The assessee, who held certain shares in Rohtas Industries Ltd. and S.K.G. Sugars Ltd., sold them in July 1952, to two companies, D.J.C. Ltd. and M.C. Ltd. These two companies sold those shares to a Rana of Nepal in two lots each on May 30, 1953, and August 28, 1953. One Wood, General Manager of the Allahabad Bank, was said to have delivered the shares to the Rana after collecting the sale price of Rs. 10,80,000 in cash on those two days and given the amount to one Durga Prasad on loan against two promissory notes and receipts.
There was no official record of the transaction, no prior correspondence, no broker and no receipt for the cash payment of Rs. 10,80,000. Neither D.J.C. Ltd. nor M.C. Ltd. nor the Rana nor Durga Prasad had any account with the Allahabad Bank in May or August 1953, the shares were not in the bank's custody, the sale transactions were not through the bank and no reason was given for the unusual procedure of routing the money through Wood. The letters of Wood produced by the assessee, confirming the transactions, though written on official note-paper of the bank, gave no reference number of the bank and there were no office copies of the letters with the bank. The Rana never attended any general meeting of the shareholders nor appointed any proxy in his behalf, and did not take any steps till April 1955, to have the shares registered in his name or to collect the dividends amounting to Rs. 2 lakhs. It was only in April 1955, when the price of those shares went up in the market and they had to be sold, that the Rana opened an account with the Allahabad Bank and in that account were credited sums amounting to Rs. 38 lakhs got by the sale of those shares. Practically the entire sum of Rs. 38 lakhs was encashed by nine bearer cheques for large amounts by Das, a peon of Ashoka Marketing Co., a company controlled by the assessee, and Das was said to have handed over the cash to the Rana at the premises of Sahu Jain & Co., a company with which the assessee was closely associated. The Rana had been introduced to Dujari (Accountant of Ashoka Marketing Co.) by the assessee and Dujari had asked Das to render the service to the Rana. The share certificates were found to be in the possession of Ashoka Marketing Co. after their sale to the Rana. Though several opportunities were given, the Rana did not appear before the authorities to explain the circumstances under which he purchased those shares, but only his letter was produced. Wood was not produced and there was nothing to show that the letters were written by him. The Income-tax Officer held that the Rana was merely a name-lender for the assessee, and that the sum of Rs. 10,80,000 belonged to the assessee, and the source of that amount not having been explained by the assessee, assessed the sum as the assessee's income from undisclosed sources.
The Appellate Assistant Commissioner upheld the order of the Income-tax Officer, but on further appeal, the Tribunal held that the purchase by the Rana was not a benami transaction and directed the deletion of the sum of Rs. 10,80,000 from the total income. In arriving at its conclusion, the Tribunal, inter alia, treated the transactions of sale by the vendor companies to the Rana as having been established by the letters of Wood, and as not having been challenged by the department, and speculated as to the manner in which the Rana came to make a definite offer for the purchase of the shares and actually purchased the shares across the counter of the bank.... (p. 370) The ultimate conclusion of their Lordships of the Supreme Court was that though the questions referred to the High Court did not challenge the validity of the findings given by the Tribunal, in fact, the Tribunal had failed to take into account the relevant material on record in arriving at its findings and had further acted on inadmissible evidence and misread the same, the Court could ignore the findings and re-examine the issues arisen for decision on the facts and material on record. On the facts, the only reasonable inference that could be drawn from the circumstances was that the Rana was a mere name-lender and the Income-tax authorities were fully justified in drawing that inference. Now, if the Rana was a mere name-lender, it follows that the amount invested for purchase of these shares was obviously the income of the assessee. Therefore, it can be concluded without any fear of contradiction that the assessee not having disclosed the purchase of these shares or the source thereof concealed the particulars of his income or deliberately furnished inaccurate particulars thereof and was liable to penalty within the meaning of Section 28(1)(c). The conclusion arrived at by the Commissioner (Appeals) on this behalf cannot be supported in view of the observations of the Supreme Court and the assessee was clearly liable to penalty as levied by the ITO.12. In the result, the appeal is accepted. The order of the Commissioner (Appeals) is set aside and the order of the ITO is restored.
1. I have had the privilege of going through the order of my learned brother, the Hon'ble Judicial Member. I entirely agree with his reasoning and conclusions. Yet I will like to make certain observations of my own as follows: 2. The learned Commissioner (Appeals) has deleted the penalty on three grounds: (iii) that penalty under Section 28(1)(c) cannot be imposed on the legal heir of the deceased, the penalty proceedings having been initiated against the deceased himself.
3. My learned brother has well brought out that the finding of the learned Commissioner (Appeals) with regard to the first point referred to above is not factually correct and, therefore, quashing of the penalty proceedings on that basis was not justified. I agree with this finding and have nothing more to add to what my learned brother has already stated. There has been no inordinate delay in the passing of the penalty order in the present case.
4. The addition of Rs. 10,80,000 was made by the ITO to the assessee's total income of the accounting period beginning on 1-11-1952 and ending on 31-10-1953, corresponding to the assessment year 1954-55 on the ground that the assessee had made investment of the aforesaid sum in the shares in the name of Shri Rana on 30-5-1953 and 28-8-1953 as follows:Date Investment in shares of Rs.30-5-1953 40,000 shares of S.K. Sugar Mills Ltd. 3,20,000 35,000 shares of S.K. Sugar Mills Ltd. 2,80,000 50,000 shares of Rohtas Industries Ltd. 4,00,00028-8-1953 10,000 shares of Rohtas Industries Ltd. 80,000 _______ 5. The facts on the basis of which the addition in question came to be made by the ITO have been brought out by my learned brother from the headnote of the Supreme Court decision in S.P. Jain's case (supra). It is true that on the basis of these facts, the Tribunal had negated the finding of the ITO, and the Hon'ble Patna High Court had confirmed the finding of the Tribunal. But on reference to the Hon'ble Supreme Court, the order of the Tribunal and the decisions of the Hon'ble High Court were reversed and their Lordships summarized the facts and circumstances which according to their Lordships go to establish that the Rana was a mere name-lender as follows: 1. There is no evidence to show that the Rana's financial position was such that he was in a position to purchase the shares in question. It is not shown that he had any bank balance either in this country or in any other country.
2. The Rana has not cared to appear before the authorities under the Act though several opportunities were afforded to him to do so for explaining the circumstances under which he purchased those shares.
3. The purchase price of the shares amounting to several lakhs of rupees was not paid by cheque or cheques. The same is said to have been paid in cash. This is wholly improbable circumstance.
4. The Rana had not entered into any correspondence with the companies concerned for the purchase of the shares. He had not engaged the services of any brokers for making purchases. It is not shown how the Rana came to know that the companies in question were wanting to sell the shares.
5. It is not shown why the transactions in the said shares should have taken place in the presence of Wood. Wood had nothing to do with the transactions. Neither the Rana nor the companies which sold the shares had any dealings with the Allahabad Bank at the relevant time. The share scrips were not in the possession of the Allahabad Bank. The money was not paid through the Allahabad Bank. The letters of Wood on which considerable reliance was placed did not bear any office serial number. No copies of those letters were available in the Allahabad Bank. It is not explained how Wood came into the picture.
6. If the Rana was the purchaser of the shares, he should have been in possession of the share scrips. They were his documents of title.
We have earlier pointed out that the share scrips were in the possession of Ashoka Marketing Co. It is not explained how those scrips happened to be in the possession of the Ashoka Marketing Co.
7. Even after the alleged sale of the shares in favour of the Rana, the Rana did not take any steps to have the shares registered in his name for nearly one and a half years. This circumstance again is not explained.
8. The Rana did not care to collect the huge dividends that were declared in respect of those shares totalling about Rs. 2 lakhs for a year and a half.
9. The Rana never cared to attend any general meeting of the company nor did he appoint any proxy on his behalf.
10. It was only when the price of those shares went up in the market and that when they had to be sold the Rana is said to have opened an account in the Allahabad Bank in which were credited sums of about Rs. 38 lakhs got by the sale of those shares. Practically all these amounts were said to have been realised by the Rana by issuing bearer cheques in favour of a peon of Ashoka Marketing Co. who had been casually introduced to him. The Rana could not have been too big to go to the bank to collect these huge amounts if he was the real owner of the money. He is said to have waited in the premises belonging to Sahu Jain Co. and sent these bearer cheques through the said peon. It is further said that with a view to see that the peon did not misappropriate the money, the Rana used to send his own driver with him. If that was so it is not explained why the Rana did not give the bearer cheques to his driver himself if the driver was so trustworthy and it is not explained what the Rana did with the money so collected.
The above enumerated circumstances are tell tale. The only reasonable inference that can be drawn from those circumstances is that the Rana was a mere name-lender. The conclusion reached by the Income-tax Officer and the Appellate Assistant Commissioner that the Rana was a mere name-lender is a reasonable conclusion. Neither the Tribunal nor the High Court has given any good reasons for rejecting those conclusions. The next question if whether the department has established that the Rana was a benamidar for the assessee. As mentioned earlier, it is not sufficient if the department establishes that the Rana was the benamidar for somebody. It must go further and establish that Rana was the benamidar of the assessee.
There are good reasons to come to a conclusion that the Rana was the benamidar of the assessee. These are, as have been noted already: 1. The close association of the assessee with the Rana, which is evident from the record. It was the assessee who introduced the Rana to Nandlal, who was a close associate of the assessee and it was Nandlal, who introduced the Rana to the Allahabad Bank. Rana did not go to collect the money from the Allahabad Bank, but is said to have stayed in the premises of Sahu Jain & Co. a company with which the assessee was closely associated and further a peon who got the money from the bank was residing in the house of Sahu Jain, 11, Clive Row, when the notice under Section 37 of the Act was served on him.
According to this peon, A.C. Das, it was Dujaria who asked him to render that service to the Rana. According to Dujaria, it was the assessee Jain, who introduced him to the Rana and asked him to assist the Rana. It also appears from the evidence adduced on behalf of the assessee that the huge amount of about Rs. 38 lakhs collected by the Allahabad Bank was realised by the Rana by issuing bearer cheques to the abovementioned peon of Ashoka Marketing Co., an assessee's concern. Further, it was the assessee who produced the so-called affidavit of the Rana at the same time would not produce the Rana for examination for obvious reasons.
2. The D.J.C. Ltd. and M.C. Ltd. would not have sold suddenly the shares without any previous correspondence or without even informing the company's secretary or director, unless, of course, there was intercession by some one who had influence over those companies.
3. There is no admissible evidence to establish that the Rana brought a bagful of currency notes and gave it to the companies.
Even if the Rana had paid the price in cash to the companies, the companies would have deposited those amounts in some bank. On the other hand, those companies are said to have given the entire price realised by the sale of the shares immediately as a loan to one Durga Prasad on the basis of the two promissory notes. In discussing this aspect, we had pointed out the incongruity in the first and the second statements of Durga Prasad to show that the loan of Rs. 10,80,000 was said to have been given to him by the vendor companies in one lump sum that he carried this huge amount from Calcutta to Nagpur and gave it to his munim and that he never deposited that amount in any bank. There is also a total absence of any material to show how Durga Prasad had spent these amounts. All these circumstances would clearely indicate that the story is a fictitious one and that the alleged loan to Durga Prasad is a pure fabrication.
It is, therefore, clear that Durga Prasad is no other than a mere puppet of the assessee.
4. The shares alleged to have been purchased by the Rana were found to be in possession of Ashoka Marketing Co. a concern practically owned by the assessee. Unless the assessee was the purchaser of those shares, the shares could not have been in the possession of the Ashoka Marketing Co. It is reasonable to assume that after the alleged sale, the assessee was in possession of the shares through Ashoka Marketing Co.
5. After the shares were sold the money was collected and brought from the bank as pointed out above by the peon, A.C. Das, of the Ashoka Marketing Co. on nine bearer cheques and according to A.C. Das he paid those amounts to the Rana in the premises of the assessee, Sahu Jain at 11, Clive Row.
From the circumstances above enumerated the Income-tax Officer and the Appellate Assistant Commissioner were fully justified in drawing an inference that the Rana was a name-lender for the assessee.
Neither the Tribunal nor the High Court has given good reasons for displacing the conclusions reached by the Income-tax Officer and Appellate Assistant Commissioner. They had a duty to examine the reasons given by those authorities before rejecting them." (p. 392) 6. In view of the aforesaid observations of their Lordships of the Hon'ble Supreme Court, it is not possible to hold that the deceased assessee had not withheld the truth from the department. Rana was the assessee's as such (sic), the assessee knew this fact, and yet he did not disclose it. Rather he did his level best to confuse and camouflage the facts as becomes clear from the reading of the Hon'ble Supreme Court's decision. The design and deliberateness of the assessee's action is, thus, too patent to be missed. It is in fact writ large throughout the text of the decision of the Hon'ble Supreme Court.
7. It is no doubt true that the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented the assessee's income before penalty under Section 28(1)(c) can be imposed on the assessee--Anwar Ali's case (supra). But on the facts of the present case, it has, in my opinion, been reasonably established that the assessee had made the aforementioned investments in the shares on 30-5-1953 and 28-8-1953 and that the investments were camouflaged by him in the benami of Rana and that the source of the investment in question was the concealed income of the assessee earned by him during the previous year. No other inference appears possible from the facts found by their Lordships of the Hon'ble Supreme Court in the present case. It is not merely a case where the assessee's explanation has been disbelieved. It is one of those cases where elaborate stratagem has been adopted by the assessee to camouflage the real facts. Penalty for concealment in such a case will be justified as has been held by their Lordships of the Hon'ble Supreme Court in DM. Manasvi v. CIT  86 ITR 557, wherein their Lordships observed, inter alia, as follows: ... The present is not a case of inference from mere falsity of explanation given by the assessee, but a case wherein there are definite findings that a device had been deliberately created by the assessee for the purpose of concealing his income. The assessee as such can derive no assistance from Anwar Ali's case  76 ITR 696 (SC). (p. 565) These observations aptly cover the facts of the present case also. In view of this, the imposition of penalty for concealment of income under Section 28(1)(c) was, in my opinion, justified on merits.
8. The third ground for cancellation of penalty, as given by the learned Commissioner (Appeals), is purely legal and is based on the presumption that penalty under Section 28(1)(c) could not be imposed on the legal heirs of the deceased, for the default committed by the deceased.
9. On the death of a person, his proprietary rights in his estate vest in his representative. The following discussion in Salmond on Jurisprudence, (Twelfth edn.) on this subject is illuminating: The rights which a dead man thus leaves behind him vest in his representative. They pass to some person whom the dead man, or the law on his behalf, has appointed to represent him in the world of the living. This representative bears the person of the deceased, and, therefore, has vested in him all the inheritable rights, and has imposed upon him all the inheritable liabilities of the deceased. Inheritance is in some sort a legal and fictitious continuation of the personality of the dead man, for the representative is in some sort identified by the law with him whom he represents. The rights which the dead man can no longer own or exercise in propria persona, and the obligations which he can no longer in propria persona fulfil, he owns, exercises, and fulfils in the person of a living substitute. To this extent, and in this fashion it may be said that the legal personality of a man survives his natural personality, until, his obligations being duly performed, and his property duly disposed of, his representation among the living is no longer called for (b).
The representative of a dead man, though the property of the deceased is vested in him, is not necessarily the beneficial owner of it. He holds it on behalf of two classes of persons, among whom he himself may or may not be numbered. These are the creditors and the beneficiaries of the estate. Just as many of a man's rights survive him so also do many of his liabilities; and these inheritable obligations pass to his representative, and must be satisfied by him. Being, however, merely the representative of another, he is not liable in propria persona, and his responsibility is limited by the amount of the property which he has acquired from the deceased (c). He possesses a double capacity, and that which is due from him in right of his executorship cannot be recovered from him in his own right. (p. 482) The above juridical position is given effect to under the Act through Section 24. The assessment under that section is no doubt on the legal representative but it is in respect of the income of the deceased person. The legal representative's liability under this section is limited 'to the extent to which the estate is capable of meeting the charge'. The charge that has to be met is with regard to 'the tax assessed as payable by such person, or any tax which would have been payable by him under this Act if he had not died'.
10. Now, what is the meaning of the term 'tax assessed' or 'tax which would have been payable by him under this Act if he had not died' the 1922 Act does not define these terms, nor even the term 'tax' (unlike the 1961 Act, which defines the term 'tax'). Its meaning will, therefore, have to be inferred from the setting of the section. It appears may it be noted, under Chapter IV of the said Act, which deals, inter alia, with 'deductions and assessment'. Sections 18 to 21 deal with deductions, and Sections 22 to 39 deal with 'assessment'. Sections dealing with 'assessment' include sections dealing with procedure of assessment (sections 22, 23 and 29), power to make provisional asssessment (section 23B), power to make accelerated assessments (section 24A, Section 25), procedure to make assessments in the case of a deceased person (section 24B), and of the HUF after partition (section 25A), assessment to super tax of certain companies (section 23A), registration of firms and change in the constitution of a firm (sections 26 and 26A), penalties for various defaults (section 28), reopening of an ex parte assessment (section 27), reopening of assessment in case of escaped income (section 34), appeal, revision and rectification of assessment (sections 30, 31, 33, 33A, 33B, 35) etc.
11. The scope of 'assessment' under Chapter IV is, thus, very wide. It may amply computation of total income, computation of tax, imposition of penalty, procedure of assessment, the entire appellate, revisional and rectificatory process, depending on the context in which the said term is used. What is the true scope and connotation of 'assessment under Chapter IV, was considered by their Lordships of the Hon'ble Supreme Court in C.A. Abraham's case (supra). This is what their Lordships observed: ... the expression 'assessment' used therein [i.e., Chapter IV] does not merely mean computation of income. The expression 'assessment' as has often been said, is used in the Income-tax Act with different connotations....
A review of the provisions of Chapter IV of the Act sufficiently discloses that the word 'assessment' has been used in its widest connotation in that Chapter. The title of the Chapter is 'Deductions and Assessment'. The section which deals with assessment merely as computation of income is Section 23; but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf.
Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions therein. Section 23A deals with power to assess individual members of certain companies on the income deemed to have been distributed as dividend, Section 23B deals with assessment in case of departure from taxable territories, Section 24B deals with collection of tax out of the estate of deceased persons, Section 25 deals with assessment in case of discontinued business, Section 25A with assessment after partition of Hindu undivided families and Sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and Section 34 deals with assessment of incomes which have escaped assessment. The expression 'assessment' used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding that when by Section 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to computation of income under Section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression 'all the provisions of Chapter IV shall so far as may be apply to such assessment' a restricted content: in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business. By Section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income-tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities; but it is imposed as a part of the machinery for assessment of tax liability.
12. We have to assign meaning to the terms 'tax assessed' etc., in Section 24B(1) in the setting of Chapter IV, as explained above by their Lordships. Thus, understood it would mean not only the Income-tax and super tax, but also the additional tax by way of penalty. This would also be clear from the scheme of Chapter VI. This Chapter deals with 'liability in special cases'. There are, in all, five sections under this Chapter. Section 40 deals with assessment of 'guardians, trustees and agents", Section 41 with 'Court of Wards etc.', Sections 42 and 43 with the agent of a non-resident and Section 44 with 'liability in case of firm or association discontinued or dissolved'.
Section 40 and 41 spell out the liability by using, inter alia, the following phraseology: Section 44 also used similar language in C.A. Abraham's case (supra) "... a partner of such firm,...shall in respect of the income, profits and gains of the firm...be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable....
In none of the above sections the word 'penalty' has been separately used and yet the charging of penalty is justified for the reasons explained by their Lordships in C. A. Abraham's case (supra).
Charging of penalty is part of 'assessment' and is covered by the term 'tax' for penalty for the purpose of effectuating these sections is additional tax.
13. The above view of the scheme of the Act was again reiterated by their Lordships of the Hon'ble Supreme Court in Bhikaji Dababhai's case (supra). Their Lordships were interpreting in that case Sub-section (1) of Section 13 of the Finance Act, 1950 which saved the law relating to Income-tax or super tax, which was in force in any Part B State before 1-4-1950 for the purposes of the levy, assessment and collection of Income-tax and super tax [Emphasis supplied]. There was no reference to 'penalty' in the aforesaid sub-section. Interpreting the above sub-section, the Hon'ble Andhra Pradesh High Court expressed the view: ...that the word 'assessment' in Section 13(1) included the whole procedure for imposing liability upon the taxpayer but not to the procedure for imposing a penalty. They thought that the Hyderabad Income-tax Act dealt with liability to pay Income-tax and penalty in distinct provisions, both relating to imposition and recovery and that if the Legislature had intended to keep alive the Hyderabad Income-tax Act for all purposes including the levy of penalty with respect to any particular year or years of assessment, it could have said so in terms clear and unambiguous instead of limiting the operation only to 'levy, assessment and collection' [of Income-tax and super tax]. In the view of the High Court, imposition of penalty was not a necessary concomitant or incident of the process of assessment, levy and collection of tax.
The High Court proceeded upon the view that by saving the Hyderabad Income-tax Act for the purposes of levy, assessment and collection of income-tax, the entire procedure for imposing liability to pay tax and for collection of tax was saved, but penalty not being tax, provisions relating to imposition of and collection of penalty did not survive the repeal of the Hyderabad Income-tax Act.
14. The above view was in terms negatived by their Lordships when they explained the correct position in law as follows: This Court regarded penalty as an additional tax imposed upon a person in view of his dishonest or contumacious conduct. It is true that under the Hyderabad Income-tax Act, distinct provisions are made for recovery of tax due and penalty, but that in our judgment does not alter the true character of penalty imposed under the two Acts....We are of the view the High Court erred in holding that the proceedings for imposing the penalty could not be continued after the enactment of Section 13(1) of the Finance Act, 1950.
15. In this view of the law, and taking into account the scheme of the 1922 Act, it has to be held that the procedure of assessment of tax in the case of a deceased person would include the imposition of penalty also, for penalty, as their Lordships have explained, is additional tax for the purpose of 'assessment' under Chapter IV of the Act.
16. The scheme of Section 24B(1) was considered by their Lordships of the Hon'ble Supreme Court in E. Alfred's case (supra). This is what their Lordships said: . . .Sub-section (1) of Section 24B makes, inter alia, the legal representative liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge, the tax assessed as payable by such person or any tax which would have been payable by him under the Act, if he had not died. By this sub-section, a legal representative as made liable to pay the tax which might have been assessed after his death. It covers all situations and contingencies, and makes the liability absolute, limited, however, to the extent to which the estate of the deceased is capable of meeting the charge. The sub-section does not provide for issue of notices, assessment, collection or anything connected with the imposition, levy and collection of the tax....
It is clear from the above enunciation of law that the two terms used in Section 24B(1), namely, (i) 'tax assessed' and (ii) 'tax which would have been payable by him, if he had not died' cover two different situations. The first term, prima facie, means 'tax' (including penalty) already assessed before death. The second term takes into account the liability to tax in respect of the income of the deceased, which could not be determined during his lifetime, but which was payable by him and would have been pressed against him if he had not died. The liability in this regard has to be ascertained by proceeding against the legal heir and the procedure for doing so is given in Sub-sections (2) and (3) of Section 24B. The word 'tax' in the second term would also include 'penalty' for the reasons given above, and as such what can be levied upon and recovered from the legal representative is not only Income-tax and super tax, but also penalty which would have been payable by the deceased, if he had not died. Due to the absence of the definition of 'tax' in the Act and the definition of the said terms through case law referred to above, the term 'tax' includes 'penalty' as seen above.
17. It would, in my opinion, be wrong to refer to the scheme of Income-tax Act, 1961, and say on the basis thereof that penalty on the legal representative could not be imposed under Section 24B of the 1922 Act, because the scheme of the 1922 Act is not the same as that of the 1961 Act. The scheme of the two Acts and the arrangement of the sections therein are different and so different interpretations arising from the difference in arrangement are bound to arise. The provisions relating to assessment of a legal representative appear under the new Act under Chapter IV dealing with liability in special cases. This Chapter is similar to Chapter V of the 1922 Act. Under the 1922 Act also, in each of the sections appearing under Chapter V, the Legislature had used the following terminology: ...and all the provisions of this Act shall apply, accordingly. (See Sections 40 and 41) 'All the provisions of Chapter IV shall, so far as may be, apply to any such assessment.' (See Section 44) But for the use of the above phraseology, the provisions of the Act dealing with assessment, collection, etc., would not be imported into the appearing under Chapter V. Similar scheme had to be followed in respect of Section 159 of the 1961 Act, once it was kept in Chapter XV rather than in Chapter XIV. Then, under the 1961 Act, provisions pertaining to penalty also do not appear under Chapter XIV. They appear in Chapter XXI. Once the scheme of the 1961 Act makes above departures from that of the 1922 Act, it would not at all be correct to interpret the scheme of the 1922 Act in the light of the 1961 Act. On account of the placement of Section 159 in Chapter XV, it had to be provided that all the provisions of this Act shall apply, accordingly. Similar phraseology was used under the 1922 Act in respect of sections similarly placed in Chapter V of the said Act as seen above. The absence of such phraseology in Section 24B would not give rise to the inference that may be permissible to draw under the 1961 Act. Section 24B under the 1922 Act was part of Chapter IV and its scope has to be interpreted as per the decision of their Lordships of the Hon'ble Supreme Court in C.A. Abraham's case (supra) as discussed above.
18. Under the Wealth-tax Act also, Section 19 appears under Chapter V dealing with 'liability to assessment in special cases'. Its placement, therefore, necessitated the importing into Section 19 of the relevant provisions of Chapter IV dealing with assessment. It was done through Sub-section (3) of Section 19. While importing the relevant sections of Chapter IV into section 19, the Legislature decided in its wisdom to import Sections 14, 15 and 17 of the said Chapter only and not Section 18. When this was so, Section 18 could not be made applicable while making assessment under Section 19. The case law on wealth-tax provisions cannot, therefore, be of any help in interpreting Section 24B of the 1922 Act for the arrangement and scheme of the said Act is different from that of the 1922 Act.
19. In view of this, it was wrong on the part of the learned Commissioner (Appeals) to hold, on the basis of the case law based on Section 19 of the 1957 Act that penalty could not be imposed on the legal representative under the 1922 Act. No case law under the 1922 Act has been brought to our attention where such statement of law might have been upheld. If at all, there are decisions, though on different facts, which hold that penalty can be imposed on the legal representative in E. Alfred's case (supra) and Sukumar Mukherjee v. CIT  33 ITR 231 (Cal.) under the 1922 Act. In fact, in Sukumar Mukherjee's case (supra), the plea was taken before their Lordships of the Hon'ble Calcutta High Court that Section 24B only provided that the ITO may assess the total income of the deceased person and that the above power of the ITO was limited to making assessment only and did not extend to the imposition of penalty. The above contention was negatived by their Lordships by pointing out, inter alia, as follows: ...in my view, the argument is misconceived Whether or not the Income-tax Officer would have jurisdiction to institute proceedings for the imposition of a penalty on an assessee in a particular case, is not to be found in the sections which provide for the making of assessments. No provision for imposing a penalty occurs in Section 24B(2), because it is not the concern of the section to make any provision in that behalf. I have only to call attention to the provisions of Section 23 which deals with assessment in a normal case. No one will contend that if a person is called upon to make a return in respect of what is indisputably his income and he commits one of the faults or defaults mentioned in Section 28, proceedings for the imposition of a penalty cannot be instituted against him.
But it will be found that neither Section 23(1) nor Section 23(3) nor Section 23(4) all of which say that the Income-tax Officer shall assess the total income of the assessee or shall make the assessment, says anything at all with regard to the imposition of a penalty. Section 24B(2) also is concerned only with providing for the making of an assessment in cases where the assessee concerned is no longer available for being proceeded against, being dead. It is no more the concern of Section 24B(2) to provide for the imposition of a penalty than it is the concern of Section 23(1) or 23(3) or 23(4). Whether or not proceedings for imposition of a penalty can be instituted in a given case must be ascertained from the terms of Section 28 itself. They are not to be sought in the sections providing for the making of assessments and, therefore, not to be sought either in Section 23(1) or in Section 23(3) or in Section 23(4) or Section 24B(2). The argument, that since Section 24B(2) says only that the Income-tax Officer may proceed to assess the total income of the deceased assessee, therefore, the power to institute proceedings under Section 28 and to impose a penalty is excluded is not, in my view, a tenable argument at all. (p. 242) 20. Taking into account the above discussion, I am of the opinion that there is nothing in the scheme of 1922 Act, which may be read to bar the imposition of penalty on the legal representative of a deceased representative in respect of the default committed by the deceased person. One, who is being penalised is not the legal representative but the deceased, whose representative is assessed qua him. As has been explained above by Salmond on Jurisprudence (referred to above). "This representative bears the person of the deceased...Inheritance is in some short a legal and fictitious continuation of the personality of the dead man...The rights which the dead man can no longer own or exercise in propria persona and the obligations which he can no longer in propria persona fulfil, he owns exercises and fulfils in the person of a living substitute". The imposition of penalty on the legal representative is, in fact, on the dead person through him and his liability to pay, it is to the extent of the estate of the deceased and no more. There is, therefore, no personal loss to the legal representative on account of determination of tax (including penalty), 'which would have been payable by him under this Act if he had not died', and asking him to pay it to the extent of his estate.
21. In view of what I have said above, I reverse the order of the learned Commissioner (Appeals) and restore that of the ITO.