Simonds, J. - (1.) THE substantial question raised in this appeal which is brought from the judgment of the Court of the Judicial Commissioner, North-West Frontier Province, is whether an order of the Appellate Assistant Commissioner, Rawalpindi Range, of January 18, 1942, imposing on the appellant a penalty of Rs. 14,000 under Section 28 of the Indian Income-tax Act, 1922, as amended up to the relevant date, is a valid order.
(2.) THE question arises in this way. THE appellant during the years 1937 and 1938 carried on business as a supply contractor at Bannu in the North-West Frontier Province, supplying livestock, wood and vegetables to the military units stationed in Waziristan. On April 13, 1938, a notice was sent to him under Section 22 (2) of the Act requiring him to furnish on or before May 13, 1938, a return for the year 1938/9 of his income for the previous year 1937/8. He did not do so. After two attempts to serve him with notice under Section 22 (4) of the Act to produce accounts or documents had failed, he was served with such a notice returnable on October 18, 1938. On the same day he appeared before the Income-tax Officer and produced a return made out on the usual form. This return showed no income except against item 5, which is headed "business, trade, commerce, manufacture, or dealing in property, shares or securities (details as in Note 5)" Against this item was an entry of Rs. 10,000, which sum was also entered as the total income of the appellant. THE declaration in the return was duly signed by the appellant. The details in Note 5 were not given, a matter which in these proceedings has assumed great importance. On the same day the appellant made a statement to the Income-tax Officer in the vernacular which he duly recorded. This statement according to the translation recorded in the judgment of the Court of the Judicial Commissioner was as follows: I have filled the form. I have given my approximate income. I had my books but they were spoiled in the fire which occurred during the previous year. My Munshi (clerk) has been. ill and was treated for a long time by me. He could not therefore write those books correctly. Enquiry should be made about my status and I should be assessed on the payments made to me by Government.
(3.) THE Income-tax Officer believing the appellant's statement that he had no books to produce made enquiries. He found that the appellant had received payments of Rs. 6,69,929 during the account year 1937/8 and assessed the appellant at a net income of Rs. 1,00,488. THE income-tax and supertax on this net income was Rs, 20,047. An assessment order in this sum was accordingly issued on October, 30, ] 938 : it was expressed ,to be made under Section 23 (3) of the Act. Against this assessment the appellant appealed to the Assistant Commissioner of Income-tax on November 80, 1988. The appeal was directed solely to the amount of the assessment. It was not suggested in the grounds of appeal that the assessment had not been validly made under Section 23 (3) of the Act. In the course, however, of the proceedings before the Assistant Commissioner "it came to notice" (so runs his judgment) "that the assessee had concealed the particulars of his income and had deliberately furnished inaccurate particulars. " Notice was therefore issued to him to show cause why a penalty should not be imposed on him under Section 28 of the Act. It was thereupon urged on his behalf that it was not competent for the Assistant Commissioner to impose a penalty upon him upon the ground that the return made by him was not valid inasmuch as the requirements of Note 5 (b) of the statutory form had not been satisfied. This was the only reason then put forward for saying that the return was not valid.;