1. The question referred to this Court under Section 66 (1) of the Income-tax Act arose out of the assessment proceedings for the assessment year 1944-45. The assessee was the Hindu undivided family, which consisted of Subbarayulu Chettiar and his sons. After the death of Subbarayulu Cheltiar on. 18-2-1944, that undivided family, of which he had been the karta, consisted of his two minor sons with their mother Radha Rukmani Animal as their guardian. The account year ended only on 13-4-1944, that is, after the death of Subbarayulu Chettiar. For the assessment year 1944-45, notice under Section 22 (2) of the Act was issued to the assessee, at that stage represented by Radha Rukmani Animal as the guardian of the minor co-parceners. It was she who submitted the return on behalf of the assessee on 11-12-1944. That return was based on the accounts maintained during most of the year of account by Subbarayulu Chettiar. That return was accepted as substantially correct, and the assessment was completed on 31-12-1944.
2. Subsequently the Income-tax Officer came to know that some of the entries in the account books were fictitious and that some deposits in the Mannargudi Urban Bank were not shown in the ac-counts of the family, that is, the accounts maintained by Subbarayulu Chettiar. A notice under Section 34 was issued on 14-12-1949, and Radha Rukmani Ammal again filed a return, in which she repeated the entries she had made in the return filed earlier on 11-12-1944. On 31-10-1949, the assessment was revised by the Income-tax Officer, but the enhancement of the assessable income was reduced to some extent on appeal by the Appellate Assistant Commissioner.
3. In the course of the re-assessment, a notice under Section 28 (1) (c) was issued to the assessee represented by Radha Rukmani Animal, and the assessee was asked to show cause why a penalty should not be imposed. Eventually the Income-tax Officer levied a penalty of Rs. 5,000, which was confirmed on appeal, by the Tribunal. It was with reference to these proceedings under Section 28 of the Act that the Tribunal referred the following question to this Court under Section 66 (1) of the Act:
'Whether on the facts and in the circumstances of the case, the penalty under Section 28 (1) (c) of the Income-tax Act has been validly imposed on the assessee?' In its order on appeal the Tribunal observed;
'.....The penalty could be levied on the successor of the karta after the demise of the karta. The Hindu undivided family is a continuing unit and whoever was the karta, it is the family that earns and enjoys the income. The disappearance of one karta and the emergence of another makes in our opinion no difference to the continuity of the family. Therefore the proceedings, in our opinion, were validly taken'.
With reference to the specific -charge of 'concealment' within the meaning of Section 28 (1) (c) of the Act, the Tribunal recorded;
'..... Thus there was on one hand purchases which were proved to be fictitious and on the other unexplained sum of money which can only be regarded as income since there was no other source for the assessee to come in possession ot that sum of. money. Thus, we are convinced that the case attracted penal provisions of the Act.'
The Tribunal, it should be remembered, confirmed the order of the Appellate Assistant Commissioner. The findings of the Appellate Assistant Commissioner were more explicit, and the Tribunal did not dissent from any of these findings.
4. In para. 3 of his order, the Appellate Assistant Commissioner recorded:
''.....In my opinion the appellant cannot be said to be guilty of any act of concealment.'
By the expression 'appellant' the Appellate Assistant. Commissioner apparently meant the mother of the minor co-parceners, who was their guardian and who represented the Hindu undivided family which was the assessee, in the assessment proceedings. The Appellate Assistant Commissioner further recorded:
''In the period in which the income is said to-have been concealed by adopting the devices referred to by the Income-tax Officer the business was being carried on and was in the management of the appellant's deceased husband.....To impute knowledge on her part, of the concealment, if any, practised by her husband would require positive evidence that she was taking an active part in the management of the business along with her husband. There it no such evidence. Her contention that her bona fide belief that the accounts had been correctly maintained by her husband was strengthened by the fact that the auditor, who examined them as well as the Income-tax Officer who acted upon them in the first instance, found no fault with them, has considerable force. It cannot also be said that by filing, a return on the basis of the accounts which she honestly believed to be the correct and true accounts maintained by her husband she committed any act of concealment.'
With reference to the omissions in the accounts maintained by Sabbarayulu Cheltiar the Appellate Assistant Commissioner observed:
'If a karta commits an act of concealment in regard to the income of the family, the family is liable to pay the penalty for it as the income under the assessment is not his personal or individual income but the income of the family and the benefit of the concealment was enjoyed by the family. In this case-there is ample evidence to show that the appellants, husband concealed a good portion of the income of the family and the family has been rightly penalised.'
5. it is with reference to these findings, which were apparently accepted by the Tribunal, that we have to determine the question, whether the requirements of Section 28 (1) (c) were satisfied. The relevant portion of this section runs;
'If the Income-tax Officer..... 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 ..... may direct that such person shall pay by way of penalty.....''
The conceaiment penalised under Section 28 must be concealment of which the assessee is conscious. Further-it must bo a concealment from the assessing authority, for example, the Income-tax Officer., Was such a concealment established in this case is the question.
6. The assessee was no doubt a Hindu undivided family despite the death of Subbarayulu Chettiar. The finding of the Appellate Assistant Commissioner was, in effect, that neither when Radha Rukmani Ammal, representing the assessee, submitted a return on 11-12-1944, nor when she submitted a return on 15-3-49 was she conscious that there had been any concealment of income. There was no finding and there was no material for such a finding that she deliberately furnished inaccurate particulars of the income of the assessee. She was not conscious of any concealment, was virtually the specific finding,
7. The further finding was that Subharayulu Chettiar was guilty of concealment of portions of his income. What, however, the Departmental authorities and the Tribunal apparently overlooked was that it is not any concealment that is enough to bring it within the scope of Section 28 (1) (c). It must be conscious concealment and a concealment from the assessing authorities. Was Subbarayulu Chettiar guilty of such a concealment is the question. No doubt there were fictitious entries in the Recount books he maintained. It is equally true there were omissions in his hooks of account of the sums lodged by him with a bank. But at that stage he maintained the account books for himself. At best it could only amount to propagations made by him to conceal his true income from the Income-tax Officer. It was quite possible that, despite these omissions, he was prepared to disclose his true income, if he had an opportunity to file a return before the Income-tax Officer. Before he had that opportunity he died. He did not therefore himself 'conceal' anything from the assessing authority within the meaning of Section 28 (1) (c), though he provided himself with facilities for concealment which if he had effected that concealment, would have brought him within the scope of Section 28 (1) (c). The preparation to conceal is not concealment within the meaning of Section 28 (1) (c).
8. Thus the position is Subbarayulu Chettiar's acts of commission and omission, as recorded in the books of account he maintained, did not amount to concealment within the meaning of Section 28 (1) (c). Though these were reflected in the returns filed by Radha Rukmani Ammal, that did not amount to concealment either within the meaning of Section 28 (1) (c); The specific finding was that she was at no time conscious of any concealment.
9. The matter may also be put in a slightly different form. No doubt the unit, that was the assessee, remained the same and retained an unbroken continuity, notwithstanding the death of the karta in February 1944. But the question still to be answered is, did this unit ever conceal the particulars of its income or deliberately furnish inaccurate particulars thereof. Notwithstanding the absence of the qualifying word 'deliberately' in the first alternative referring to concealment, undoubtedly the concealment also has to be conscious and so a deliberate act, which is involved on the very expression 'concealed'. That concealment is from the Income-tax Officer, and in the context of this case can only be in the return furnished. Therefore, if the Hindu undivided family, the assessee, is to be charged with concealment; that can he established only, if the person, who submits the return on behalf of that assessee, the Hindu undivided family, does so. In the present case the person, who did so, was Radha Rukmani Animal, and on the finding of the Appellate Assistant Commissioner and the Tribunal, that she had no guilty knowledge, it follows that the Hindu undivided family could not be guilty of concealment as to attract the mischief of Section 28 (1) (c) of the Act.
10. What the position would have been had Subbarayulu Chettiar himself filed 'a return, which either concealed his true income from the assessing authorities, or which contained inaccurate particulars of income deliberately furnished by him, does not arise for consideration. Whether in such circumstances the principle laid down by us in Hariram Sait v. Commissioner of Income-tax, Madras : 28ITR231(Mad) (A) could be extended does not arise for consideration either. It is not therefore necessary for us to determine in these proceedings the limits of the principle laid down in : 28ITR231(Mad) (A), except to observe that in that case the assessee, Hariram Sait, on whom penalty was levied, was assessed not in the status of a Hindu undivided family but in his individual status. We had occasion to explain in our unreported Judgment in W. P. Nos. 743 and 748 of 1955 (Mad) (B), the real nature of the Hindu undivided family as a juristic entity for purposes of assessment under the Income-tax Act. We pointed out that a change in kartaship by death or otherwise did not affect the legal continuity of that juristic entity.
11. Since, in our opinion, the requirements of Section 28 (1) (c) were not satisfied, we have to answer the question referred to us in the negative and in favour of the assessee. The assessee will be entitled to the costs of the reference. Counsel's fee Rs. 250.