1. The short point raised in this reference is whether under Section 28, Income-tax Act, a notice is required to be given for purposes of an assessee showing cause why a penalty should not be imposed before the close of the assessment. The relevant facts are shortly as follows. On 23rd January 1941, an assessment was made upon the assessee and at the same time the Income-tax Officer discovered that the assessee had not returned income and had deliberately failed to disclose it. On 25th January notice was served upon the assessee to show cause why a penalty should not be inflicted as provided in Section 28. The notice was returnable for 10th February 1941. It does not appear on what date the assessee showed cause, but undoubtedly he did so and on 2nd May 1941, the maximum penalty was imposed being l1/2 times the amount of the tax which the non-disclosure, had it succeeded, would have avoided. The material provisions of Section 28 are as follows:
Sub-section (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 (o) 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 addition to any tax payable by him, a sum not exceeding 11/2 times the amount of 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.
Subsection (3) '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 given a reasonable opportunity of being heard.
2. The question raised in the present reference is as follows : 'Whether on the facts and in the circumstances of the case the penalty was lawfully imposed.' It was contended on behalf of the assessee that the notice under Sub-section (3) of Section 28, which was given on 25th January 1941, should have been given before the close of the assessment when the income-tax was assessed on 23rd January 1941 and failure to give notice before the conclusion of the assessment is fatal to any proceedings for imposition of a penalty. In the course of argument two decisions of the Lahore High Court were cited. The first is Banarasi Das v. Commissioner of Income-tax, Punjab and N. W. F. P ('36) 23 A. I. R. 1936 Lah. 585. The decision in that ease was that no penalty can be imposed under Section 28 unless a notice is served on the assessee to show cause against the imposition of such a penalty. It would appear that the Commissioner, when the matter reached him, sought to impose a penalty but had not served any notice prior to doing so. The second case from the Lahore Court is A. Vir Bhan Bansi Lal v. Commissioner of Income-tax, Punjab ('38) 25 A. I. R. 1938 Lah. 749 in which it was decided that an Income-tax Officer is empowered to make an order imposing a penalty under Section 28 after the assessment order had been finally made and the tax had been paid. In my view neither of those cases support the contention. A further authority was quoted by learned Counsel for the assessee, Commissioner of Income-tax, Madras v. Abdul Kadir ('28) 15 A.I.R. 1928 Mad. 257. In that case the proceedings with regard to the assessment were under Section 34 and they were held to be irregular. Consequently, there could have been no discovery during the course of the proceedings which would enable a penalty to be imposed, and for that reason it was held by the Madras High Court that no penalty could be inflicted. In the course of the judgment it was observed, at p. 261:
If on the materials with reference to any original assessment itself, it should on revision appear to the Commissioner that there has been any concealment within the meaning of Section 28, then Section 33 would undoubtedly empower him to levy a penalty.
3. If anything, the last mentioned authority is against the contention raised by the assessee. All that Section 28 requires is that there should be a discovery and the person discovering it is satisfied that an assessee has 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 has not been drawn to any other section in the Act by which such requirement is necessary. In my view the matter is concluded by the wording of Sub-section (1) of the section. It states:
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 has concealed income.
4. There is no difference between the procedure which either the Income-tax Officer, the-appellate Assistant Commissioner or the appellate Tribunal should adopt. Matters in connection with an assessment would not be-before either the appellate Assistant Commissioner or the appellate Tribunal before an assessment has been concluded, and consequently any notice under Sub-section (3) which either the appellate Assistant Commissioner or the appellate Tribunal might see fit to give must be given after the conclusion of the assessment. In my view the answer to the question raised in the present reference should, be in the affirmative,
4. 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) (e) 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 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. The assessee must pay the costs of the respondent, which we assess at Rs. 200 plus, the costs of the paper book assessed at Rs. 50.