Decided on January 11,1963



- (1.) UNDER section 66 (1) of the Indian Income-tax Act, 1922 (Central Act XXI of 1922), the Income-tax Appellate Tribunal, Hyderabad Bench, has referred the following question of law for decision by this court : "quot"Whether, on the facts and in the circumstances of the case, the levy of penalty on the assessee under section 28 (1) (c) of the Income-tax Act, 1922, was legal ?"quot"
(2.) THE Tribunal has made this reference on an application made by Messrs. Muppana Somaraju and Veeraraju of Peddapuram. The relevant facts, as apparent from the agreed statement of the case drawn up by the Tribunal, are as follows : Muppana Somaraju and Veeraraju, with the status of a Hindu undivided joint family, submitted a return of income as assessee for the assessment year 1948-49 for which the accounting year was the calendar year 1947. In the return, the assessee did not disclose as its income, the income derived from two talkies bearing the names of Sri Ramakrishna Touring Talkies and Sri Seetharama Touring Talkies. On the other hand, the assessee made it appear that those two talkies, which had originally belonged to the assessee, had ceased to belong to it as a result of transfer by sale of Sri Ramakrishna Touring Talkies to Srimathi J. Nagamma, who was a daughter of Veeraraju, and the transfer by sale of Sri Seetharama Touring Talkies to Srimathi A. Chinnabhadramma, sister of Veeraraju and Somaraju. The Income-tax Officer rejected the contention of the assessee about the transfers and passed an order dated January 28, 1950, treating those two talkies as belonging to the assessee and including the income of those talkies in the income of the assessee. The assessee appealed to the Appellate Assistant Commissioner and later to the Appellate Tribunal, but in vain. The Appellate Tribunal passed its order on November 3, 1953. The assessee sought a reference to the High Court under section 66 (1) of the Act from the order of the Tribunal, but without success. The assessee filed an application under section 66 (2) before this court which dismissed that application, observing as follows : "quot"The Tribunal gave various reasons in support of their finding that the two ladies were benamidars... In the circumstances of the case, we cannot say that the finding of the Tribunal is vitiated by any error of law."quot" Subsequently, in due course, the Income-tax Officer, in the view that he took that the assessee had concealed the income from the two talkies business, conducted penalty proceedings regarding return for 1948-49 (assessment year). After hearing the assessee, he imposed a penalty of Rs. 13,675 which is an amount equal to the amount of tax in respect of the talkies and which the Income-tax Officer considered to be the amount of tax sought to be evaded. In passing his order under section 28 (1) (c) of the Income-tax Act, the Income-tax Officer rejected the contention raised by Somaraju and Veeraraju (hereinafter referred to in some places in this judgment for convenience as the applicants) that the penalty could not be sustained as being sought to be levied on a defunct entity. That contention was raised on the ground that the assessee (Hindu undivided family) had become disrupted with effect from November 1, 1948, because of a partition. The Income-tax Officer (Sri V. B. Ananda Sharma, Additional Income-tax Officer, Kakinada) passed his order on May 13, 1958. The applicants filed an appeal before the Appellate Assistant Commissioner. The latter rejected the appeal. The applicant filed an appeal before the Appellate Tribunal. The latter also dismissed the Appeal on the ground that the Hindu undivided family continued to exist for the purpose of the Income-tax Act within the meaning of section 25A (3) of that Act and that, therefore, penalty could be lawfully levied on it.
(3.) IN the application under section 66 (1) (R. A. No. 625 of 1960-61) praying for a reference being made to this court, three contentions were raised before the Tribunal by the applicants as follows : (1) The entity on which the penalty was levied having ceased to exist on the date of the levy, the order of penalty was bad in law; (2) Factually, the assessee had not concealed the particulars of its income or deliberately furnished inaccurate particulars of such income so as to attract the provisions of section 28 (1) (c) of the Act; and (3) IN any event, the penalty levied was excessive. The Tribunal held against the applicants on all the three points. The Tribunal came to the conclusion that the concerned findings relating to the contentions Nos. 2 and 3 were pure findings of fact. Accordingly, it held that only one question of law arose in its opinion, formulated it and referred it. That point of law is the one already extracted by us earlier in this order.;

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