SRINIVASAN J. - The question that stands referred to us is :
'Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in sustaining the penalty of Rs. 20,000 on the Hindu undivided family represented by the present karta in respect of the return made by the previous karta under section 28(1) of the Act ?'
Kumaraswami Gounder was the karta of a Hindu undivided family till his death of 2nd January, 1950. While examining the accounts relevant to the assessment year 1948-49, the Income-tax Officer came across certain unexplained cash credits of Rs. 16,355 in the suspense account, and bank deposits of Rs. 13,468 which found no place in the business books. On the date of this discovery, the previous karta, Kumarswami Gounder, had died and his son, Nataraja Gounder, had become the karta of the assessee, the Hindu undivided family. This Nataraja Gounder was unable to explain the credits in the suspense account and only stated that the amounts should have been given to his late father by some persons who had the separate ledger accounts. In respect of a sum of Rs. 6,000, one of the items of cash credit, it was explained that the same had been received from a sister of this Nataraja. Out of the unexplained deposits in the blank one item covered Rs. 12,000, in respect of which a demand draft had been purchased in favour of Nataraja. It was however subsequently cancelled and the amount recredited in the bank account. Various explanations were given, but they were rejected by the Income-tax Officer, who added the two sums. These additions were sustained in appeals from the assessment.
The Income-tax Officer took proceedings under section 28(1) (c) of the Act. He found that an income of Rs. 72,647 had been deliberately concealed by the assessee. In response to a notice issued, the assessee stated that his father was dealing with the family affairs and that he could give no explanation, as the relevant books were in court. The Income-tax Officer held that this explanation did not meet the charge and imposed a penalty of Rs. 40,000. In the appeal to the Appellate Assistant Commissioner, it was urged on behalf of the assessee, that even if the previous karta of the family, Kumaraswami Gounder, was responsible for deliberate concealment, no penalty could be imposed on the succeeding karta. On merits also, it was contended that no case for the imposition of the penalty was established. The Appellate Assistant Commissioner held that at least in respect of a part of the unexplained credits, the Income-tax Officer was not right in taking the view that there was a deliberate concealment. He thought that the bank deposits stood in a different position. He finally took the view that the amount which could be regarded as income deliberately concealed for the purpose of penalty proceedings was only Rs. 29,803 and fixed the penalty at Rs. 20,000.
A further appeal was carried to the Appellate Tribunal. It would suffice to state that the Appellate Tribunal rejected the plea of Nataraja Gounder that he could not be proceeded against under the penalty provisions and dismissed the appeal.
An application under section 66(1) of the Act having been rejected by the Tribunal, the assessee approached this court under section 66(2) of the Act, and the question set out above was directed to be referred to this court.
The short question that has been argued before us is that on the authority of certain decisions of this court, penalty cannot be imposed on the succeeding karta. We may state that no arguments have been addressed to us on the merits of the case, that is to say, no attempt was made to explain the cash credits and the bank deposits or to establish that there was no deliberate concealment by the bank deposits or to establish that there was no deliberate concealment by the previous karta, who submitted the return. We are accordingly confining ourselves only to the question of law, viz., whether the succeeding karta as representing the assessee, the Hindu undivided family, can be subjected to a penalty under section 28(1) (c) of the Act, in respect of income deliberately concealed by the preceding karta.
The return in this case was made on 1st July, 1949, by Kumaraswami Gounder, the previous karta. He died on the 2nd January, 1950. Section 28 of the Act, in so far as it is relevant for our purpose, reads :
'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.....'
What the section accordingly requires is that any person, obviously meaning an assessee, should have concealed the particulars of his income, and that matter should have become evident in the course of any proceedings under the Act either before the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal. In such an event, such person may be directed to pay a penalty. The expressions 'any person' and 'such person' referred to the same assessable entity. It cannot be denied that, in this case, the Hindu undivided family is the assessee, though under the law a unit of that description had necessarily to be represented by an individual, the karta. Though the return is filed by the karta, he acts on behalf of the Hindu undivided family, and it is the Hindu undivided family that is the person that figures in the assessment proceedings. The return is in reality filed by the assessable entity and the section obviously deals only with the assessable entity. The circumstances that the karta representing the family filed the return does not make the provision applicable individually and personally only to the karta. The expression 'that any person has concealed the particulars of his income' indicates beyond the possibility of any doubt that it is the person whose income is in question that becomes subject to the penal provision. If, therefore, the income in question is that of the Hindu undivided family, it is that unit, that is the person, that is referred to in the section. The circumstance that one person has displaced another as the karta does not affect the liability of the assessable entity whose income is in question.
So much seems to us to be unmistakably clear from the wording of the provision.
Mr. K. Srinivasan, learned counsel for the assessee, relied upon Hariram Sait v. Commissioner of Income-tax, in support of his argument that the succeeding karta cannot be penalised for the acts of his predecessor. In the above decision, one S carried on a business and was assessed in the status of a Hindu undivided family consisting of himself and his minor son, H. S died and the guardians of H submitted the return for an accounting period during which the father had been alive. The Income-tax Officer held that there had been a suppression of income. There was no finding, however, that H himself was in charge of his estate or that his guardians were in any way responsible for any suppression of income. The learned judges held that in order to penalise H, he must have himself concealed his income and that that requirement not having been satisfied, penalty could not be levied on him. At first sight, it would appear as if this decision would apply to the facts of the present case. The learned judges observed :
'In this case, the person charged with and found guilty of having effected the concealment of income was Hariram Sait. The concealment, to bring it within the scope of section 28(1) (c), must be a concealment of Hariram Saits income, and it must also have been a concealment of which Hariram Sait was conscious. The finding of the Income-tax Officer, which was accepted by the Assistant Commissioner and eventually by the Tribunal, was that it was Hariram Saits father, Sokkalal, who was mainly responsible for the suppression of the income... There was no finding either by the taxing authorities or by the Appellate Tribunal that Hariram himself was in charge of his estate or that his guardians were in any way responsible for any concealment or suppression of income. The requirement of section 28(1) (c) being that Hariram to be penalised must have himself concealed his income, and that requirement not having been satisfied, we have to hold that there was no basis at all for the Tribunal to come to the conclusion, that Hariram should be penalised to the extent of Rs. 10,000.'
Relying upon this observation, learned counsel for the assessee urges that the present karta, Nataraja Gounder, was not responsible for the return that was made by his father, the then karta, and if there was any concealment, he, Nataraja Gounder, was not conscious of any such concealment. Without attempting to decide the question, it seems to us implicit that even if this test of consciousness on the part of the succeeding karta is called for, it would appear from the records that at least in respect of a sum of Rs. 12,000 which was the subject-matter of a demand draft, Nataraja could not possibly ignorance. To our minds, however, the observations we have extracted above have been too broadly phrased. It is apparent from these observations that the learned judges took note of the fact that the person who was responsible for the concealment of the income was the karta of the Hindu undivided family, while the person that was proceeded against under section 28(1) (c) was an individual. The identity of the two persons was in law at any rate distinct and that seems to us to be the underlying trend of the observations of the learned judges. Indeed, we find that in a later reference dealt with by the same two learned judges in Radha Rukmani Ammal v. Commissioner of Income-tax, they refer to the above decision and explain it precisely on the grounds that we have set out. They observed :
'Whether in such circumstances the principle laid down by us in Hariram Sait v. Commissioner of Income-tax 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 Hariram Sait v. Commissioner of Income-tax 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.'
The learned judges themselves appear to have thought that whatever principle was laid down in Hariram Saits case must be confined to the facts of that case.
In Radha Rukmani Ammal v. Commissioner of Income-tax, the learned judges again reiterated their view that where the karta of a Hindu undivided family had made some fictitious entries in the account books and also omitted to enter some receipts and had died before making a return of the income, the succeeding karta who made the return of the income as shown in the accounts could not be penalised under section 28(1) (c) unless it can be shown that the succeeding karta was conscious that any entries were fictitious or that any item of income was concealed by his predecessor. In that case, one Subbarayalu Chettiar was the original karta, who had died, leaving two minor sons, and their mother, Radha Rukmani Ammal, as their guardian. It was the guardian who filed the return based on the accounts maintained by her deceased husband. On the discovery that certain items of income had been omitted and other items were fictitious, penalty proceedings were started. But an important feature that was relied upon by the learned judges was that when the preceding karta, Subbarayalu Chettiar, had made certain false entries in his accounts or had omitted certain receipts from the accounts, at the best, he could only be said to have made preparations to conceal his true income. He himself had not submitted any return and it was the guardian of the minors who made the return on the basis of the entries in the accounts. The learned judges observed :
'At best it could only amount to preparations 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).'
It is on that basis that the decision proceeded when the learned judges finally held that, where the mother of the minors filed the return, she could not be said to have concealed any particulars of the income. This case also to our mind proceeded on the facts peculiar thereto. In the present case, however, the predecessor karta had in fact filed a return, consciously and deliberately, concealing his income and had laid himself open to the penal provisions of section 28(1) (c). The succeeding karta only represented the unit, viz., the Hindu undivided family in respect of whose income the preceding karta had filed the offending return. It follows, therefore, that considering the Hindu undivided family as the person contemplated in section 28(1) (c), there is no doubt that all the requirements of section 28(1) (c) are satisfied.
We accordingly answer the question referred to us in the affirmative and against the assessee. The assessee will pay the costs of the department. Counsels fee Rs. 250.