M. S. MENON, J. - The prayer in the petition is that this court should issue :
'a writ of prohibition prohibiting the respondent from collecting the penalty of Rs. 650 levied by the First Additional Income-tax Officer, Kozhikode, by his order dated November 30, 1953, in F. No. 83 V (Exhibit B), as modified by the Appellate Assistant Commissioner of Income-tax, Khozikode Range, Kozhikode, in I.T.A. No. 2465 of 1953-54 dated February 16, 1955, (Exhibit C) and upheld by the Commissioner of Income-tax, Madras, in I.T.R. No. 327/55 dated October, 10, 1955, (Exhibit D).'
The first respondent is the Commissioner of Income-tax, Madras, and the second, the First Additional Income-tax Officer, Kozhikode.
2. In Exhibit B, an order under section 28(1)(a) and (b) of the Indian Income-tax Act, 1922, the second respondent said :
'A clear case of deliberate default exists in this case. With the previous approval of the Inspecting Assistant Commissioner of Income-tax, Coimbatore, I levy a penalty of Rs. 1,300. This should be paid on or before December 30, 1953.'
3. The petitioner appealed to the Appellate Assistant Commissioner of Income-tax, Kozhikode Range, Kozhikode, and succeeded in getting the penalty reduced to Rs. 650. He said :
'After carefully going through the records, I am quite convinced that the default committed under section 22(2) was not a deliberate one...... Hence, in my opinion, no penalty is called for so far as the default under section 22(2) is concerned.'
'The default under section 22(4) does not however stand on the same footing..... I am therefore quite satisfied that the failure to comply with the provisions of the notice issued under section 22(4) was without reasonable cause. I would therefore uphold the action of the Income-tax Officer in resorting to the penal provisions of the Act so far as the default under section 22(4) is concerned. The Income-tax Officer has imposed a penalty of Rs. 1,300 which works out to roughly 2/3rds of the maximum penalty. Since I have held that no penalty is leviable in respect of the default committed under section 22(2), I would reduce the penalty imposed in this case by half. The result is that the appeal is partly allowed. The penalty is reduced to Rs. 650. Any amount paid in excess should be refunded.' (Exhibit C).
4. The petitioner then moved the first respondent for a revision of the order under section 33A(2) of the Indian Income-tax Act, 1922. He said :
'This petition for revision is against the order of the Appellate Assistant Commissioner sustaining the penalty imposed under section 28(1)(b) on November 30, 1953, for the assessment year 1951-52. There are no fresh facts for me to interfere in revision. The petition fails.' (Exhibit D).
5. Section 28 of the Indian Income-tax Act, 1922, makes provision, in the words of Kanga, for the imposition of a penalty on contumacious or fraudulent assessee. Sub-section (1) of that section (omitting the proviso thereto) is in the following terms :
'If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the court of any proceedings under this Act, is satisfied that any person -
(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under sub-section (1) or sub-section (2) of section 22 or section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or
(b) has without reasonable clause failed to comply with a notice under sub-section (4) of section 22 or sub-section (2) of section 23, or
(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 case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and a half times that amount, and in the case referred to in clause (b) and (c) in addition to any tax payable by him, a sum not exceedings 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.'
6. The first contention before me is that the Income-tax Officer (Second respondent) was not 'satisfied' that the petitioner had without reasonable cause failed to comply with the notice under sub-section (4) of the section 22 in the course of any proceedings under the Act and that Exhibit B is bad on that account. This contention is without substance.
7. The assessment order (Exhibit A) was passed on December 31, 1951, and the entry in the order sheet for December 31, 1951, reads as follows :
'Now there is clear default again. The assessee has neither filed a valid return nor has he respondent to notice under section 22(4). He is liable to penalty. Issue notice under section 28(1)(a). Issued order under section 23(4).'
This shows that the Income-tax Officer was satisfied in the course of proceedings and not subsequent thereto. The fact that Exhibit B is of November 30, 1953, is immaterial and cannot affect the question.
8. In Guru Prosad Shaw v. Commissioner of Income-tax, Gentle, J., said :
'All that section 28 requires is that there should be a discovery and the person discovering it is satisfied that an assessee had concealed particulars of his income or deliberately furnished inaccurate particulars, in the course of any proceedings under the Income-tax Act. There is nothing in section 28 from which it can be said that the notice under sub-section (3) must be given before the conclusion of the assessment, and attention had not been drawn to any other section in the Act by which such requirement is necessary';
and McNair, J. :
'I agree. Section 28(1) provides that the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal must be satisfied in the course of the proceedings that, so far as we are concerned in this case, a person has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. Any of those three authorities may then under section 28(1)(c) direct that such person shall pay a penalty. As my learned brother has pointed out, any of those three persons has to be satisfied during the course of proceedings under the Act. It is sufficient under the provisions of the section 28 that he be satisfied during the course of the proceedings, and if he is satisfied during the course of such proceedings he may direct the notice to issue upon the assessee to show cause why a penalty should not be imposed. There is nothing within the provisions of the Act to which my attention has been directed which makes it imperative upon the Income-tax authorities to serve the notice for showing cause why a penalty should not be imposed during the course of any proceedings under the Act.'
I am in agreement with this view.
9. Kanga deals with the decision as follows :
'The Calcutta High Court has held that even the notice under sub-section (3) may be issued and the penalty proceedings may be started by the Income-tax Officer after the assessment is completed, and that it is not necessary that the penalty proceedings should be started during the pendency of those proceedings in the course of which the default of the assessee is discovered. The contrary view taken by the Lahore High Court in Banarsi Das v. Commissioner of Income-tax is, it is submitted, incorrect.'
10. Sub-section (3) of section 28 provides :
'No order shall be made under sub-section (1) or sub-section (2) unless the assessee or partner, as the case may be, has been heard, or has been given a reasonable opportunity of being heard.'
The second contention urged before me is that no notice was issued to the petitioner, that as a result he had been denied 'a reasonable opportunity of being heard' and Exhibit B is unsustainable for lack of compliance with sub-section (3) of section 28.
11. In the petitioners affidavit dated October, 3, 1956, he stated :
'At the time when the writ petition came up for orders as to admission, this honble court directed the petitioner to produce the notice received by the petitioner under section 28 of the Act. As my contention is that I was not served with any notice under section 28 of the Act, I applied to the Income-tax Officer, Kozhikode, to furnish me a copy of the notice alleged to have been served on the petitioner',
and in further affidavit dated September 15, 1957 :
'The most important averment in my affidavit is that no notice was served on the petitioner of the proposed levy of penalty under section 28, and no opportunity at all given of being heard, as is imperatively required under section 28(3). I applied to the Income-tax Officer, Kozhikode, to grant me a certified copy of the notice alleged to have been served on the petitioner under section 28(2), as I was directed to produce it in the High Court of Madras at the admission stage of this writ petition. A written communication was sent to me dated September 13, 1956, which is signed by the deponent to the counter affidavit himself that he is unable to give me a copy of the penalty notice as a copy is not available on file.' (Exhibit C).
The reply of the Income-tax Officer is Exhibit G dated September 13, 1956 :
'With reference to your above letter I am to inform you that I am unable to give a copy of the penalty notice, as a copy is not available on file.'
12. That the petitioner did receive notice under section 28(3) will be clear from Exhibit I dated January 18, 1952, and Exhibit II dated February 6, 1952, letters of the petitioner to the First Additional Income-tax Officer, Kozhikode. Exhibit I reads as follows :
'Your notice under section 28(3) for imposing penalty.
I was shocked to get a notice under the above section, which was redirected to me by my brother two days back. I am here for the last one fortnight under treatment by undergoing injections to my filarial complaint in the right leg. I expect a delay of one week more to return; and hence I beg your pardon not to impose any penalty on me till I forward a written explanation for my default committed, immediately after my return. I am grieved to get the assessment order, and I will see in person to assess properly by going through the same books of accounts, which were produced the other day. Excuse trouble. With my great respects, I am quite unwell here to walk with my leg.'
And the opening portion of Exhibit II is :
'Ref : Your notice under section 28(3), and my letter of 18th from Madras.
With further reference to my above letter, I submit with great sorrow the following details of facts for your valuable attention on my behalf for the above notice under section 28(3), so as to relieve me from the assessment and oblige.'
13. It follows that both the contentions are untenable and that this petition fails. It is hereby dismissed with costs, advocates fee Rs. 150.
14. In the view I have taken it is unnecessary to consider the submission of the advocate for the Department that the two contentions I have dealt with above have not been raised in Exhibit E, the memorandum of appeal filed before the Appellate Assistant Commissioner, and that the petitioner is not as a result entitled to raise them in this court.