Case: N.A. Malbari And Bros Vs. Commissioner Of Income-Tax, Bombay

not been levied on the same facts. It observed that the original assessment was solely on the basis of an estimate and the second assessment was after knowledge of the full facts of the concealed income.8. In this Court Mr. Kolah has urged that the second order for penalty was illegal because there was one concealment and in respect of that an order for penalty of Rs. 20,000/- had earlier been made. He contended that there was no jurisdiction to make the second order of penalty while the first order stood and for that reason the second order must be treated as a nullity. He further stated that the fact that the first order was subsequently cancelled by the Tribunal would not set the second order on its feet for it was from the beginning a nullity as having been made when the first order stood.9. We are unable to accept this argument. It may be that in respect of the same concealment two orders of penalty would not stand but t is not a question of jurisdiction. The penalty under the section has to be correlated to the amount of the tax which would have been evaded if the assessee had got away with the concealment. In this case having assessed the income by an estimate, the Income-tax Officer levied a penalty on the basis of that estimate. Later when he ascertained the true facts and realised that a much higher penalty could have been imposed, he was entitled to recall the earlier order and pass another order imposing the higher penalty. If he had omitted to recall the earlier order that would not make the second order invalid. He had full jurisdiction to make the second order and he would not lose that jurisdiction because he had omitted to recall the earlier order, though it may be that the two orders could not be enforced simultaneously or stand together. However, in the present case the earlier order having been cancelled and no objection to the cancellation having been taken, we have only one order and that for the reasons earlier stated is, in our view, a legal order.10. It was also said that when the first order of penalty was passed the Income-tax Officer was in possession of the full facts which would have justified the imposition of the higher penalty. It was pointed out that the first order of penalty was passed on January 22, 1954 while the books disclosing the real state of affairs had been produced before the Income-tax Officer on August 17, 1953. It was contended that if in spite of this he passed the order imposing a lower penalty, he had no right later to change the order. In support of this contention reference was made to C. V. Govindarajulu Iyer v. Commissioner of Income-tax, Madras, 1948-16 ITR 391 : (AIR 1949 Mad 399 ). There it was argued that the original proceeding under S. 23 (3) and a proceeding under S. 34 in respect of the same period were different and in the latter proceeding a penalty could not be imposed for a concealment in respect of the original proceeding. Rajamannar C. J. rejected this contention and held,"that so long as the proceedings under S. 34 relate to the assessment for the same period as the original assessment, the Income-tax Officer will be competent to levy a penalty on any ground open to him under Section 28 (1), even though it relates to the prior proceeding"" He however proceeded to observe."There may be one possible qualification of his power, and that is when the default or the act which is the basis of the imposition of the penalty was within the knowledge of the Officer who passed the final order in the prior proceeding and if that officer had failed to exercise his power under Section 28 during the course of the proceeding before him. Possibly in that case he would have no power."Learned counsel for the appellant relied on this latter observation in support of his contention.We do not think that Rajamannar C. J. wished to state this qualification on the power of the Income-tax Officer as a proposition of law. It was not certainly necessary for the purposes of the case before him. We do not wish to be understood as subscribing to it as at present advised.11. But assume that this statement of the law is correct. It has no application to the present case. What is said is that if the default which entails the penalty was within the knowledge of the authority when it passed the final order in the prior proceeding no penalty could be later imposed. Now Rajamannar C. J. was not dealing with a case in which two penalties had been imposed. The case before him was one in which no return had been filed pursuant to a general notice but subsequently S. 34 proceedings had been started and resulted in an assessment and an order imposing a penalty was thereupon passed. The final order in the prior proceedings referred to by the learned Chief Justice must therefore, be final assessment order in the prior proceedings. Now in the present case the final order in the prior assessment proceedings was made on January 31, 1952 and on that date the Income-tax Officer had no knowledge of the concealment of income of Rs, 1,25,520/-. Therefore it seems to us that the observation of Rajamannar C. J. does not assist Mr. Kolah. We may also observe that the first order of penalty passed on January 22, 1954, was pursuant to a notice issued on January 31, 1952 in respect of which the assessee had offered his explanation on March 11, 1952.That notice was not concerned with any concealment that came to light from the production of the books on August 17, 1953 and, therefore, on this concealment the assessee had never been heard. In assessing a penalty on this notice subsequently acquired knowledge would be irrelevant.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We do not think that Rajamannar C. J. wished to state this qualification on the power of the Income-tax Officer as a proposition of law. It was not certainly necessary for the purposes of the case before him. We do not wish to be understood as subscribing to it as at present advised.11. But assume that this statement of the law is correct. It has no application to the present case. What is said is that if the default which entails the penalty was within the knowledge of the authority when it passed the final order in the prior proceeding no penalty could be later imposed. Now Rajamannar C. J. was not dealing with a case in which two penalties had been imposed. The case before him was one in which no return had been filed pursuant to a general notice but subsequently S. 34 proceedings had been started and resulted in an assessment and an order imposing a penalty was thereupon passed. The final order in the prior proceedings referred to by the learned Chief Justice must therefore, be final assessment order in the prior proceedings. Now in the present case the final order in the prior assessment proceedings was made on January 31, 1952 and on that date the Income-tax Officer had no knowledge of the concealment of income of Rs, 1,25,520/-. Therefore it seems to us that the observation of Rajamannar C. J. does not assist Mr. Kolah. We may also observe that the first order of penalty passed on January 22, 1954, was pursuant to a notice issued on January 31, 1952 in respect of which the assessee had offered his explanation on March 11, 1952.That notice was not concerned with any concealment that came to light from the production of the books on August 17, 1953 and, therefore, on this concealment the assessee had never been heard. In assessing a penalty on this notice subsequently acquired knowledge would be irrelevant.