BHAGIRATH KANORIA Vs. COMMISSIONER OF INCOME TAX CENTRAL

JUDGEMENT

(1.) For the three assessment years under reference, 1955-56, 1956-57 and 1961-62, the original assessments were made by the Income-tax Officer, under section 23(3) of the Indian Income-tax Act, 1922. Later, the ITO reopened the assessments and brought to tax certain amounts on the ground that the amounts had escaped assessment under the original assessments. The amounts thus brought to tax were Rs. 7,700 for the assessment year 1955-56, Rs. 38,500 for the assessment year 1956-57 and Rs. 7,000 for the assessment year 1961-62. These amounts brought to tax were said to be dividend income of the assessee in respect of 15,400 equity shares of M/s. Jute Carriers (P.) Ltd. standing in the names of 12 persons. As per the settlement with the department in the year 1964-65, the assessee agreed that those 15,400 shares standing in the names of 12 persons might be treated as his shares for the purpose of assessment in its hands of the money invested for the purchase of those shares. The assessee had opposed the reassessments bringing to tax the amounts representing the dividends in respect of the aforementioned 15,400 shares, inter alia, on the ground that the company did not pay the dividend in respect of those shares either to himself or to the 12 persons who were the nominees of the assessee and that the dividend was ultimately forfeited and also on the ground that the dividends were declared prior to the settlement entered into by the assessee with the department. The assessee's objection was overruled and the amounts in question were brought to tax by the reassessment orders. In the course of the reassessment proceedings, the ITO initiated penalty proceedings also against the assessee for the latter's failure to disclose in his returns the dividend income in respect of the 15,400 shares of M/s. Jute Carriers (P.) Ltd. The IAC, to whom the matter was referred by the ITO for further action, overruled the objections of the assessee and passed orders under section 271(1)(c) read with Section 274(2) of the LT. Act, 1961, levying upon the assessee penalties of Rs. 10,000, Rs. 50,000 and Rs. 10,000 for the assessment years 1955-56, 1956-57 and 1961-62, respectively. Aggrieved by the penalty orders, the assessee preferred appeals before the Tribunal. It was contended that the penalty orders were barred inasmuch as these were not passed within the period under section 275 of the LT. Act, 1961, as it stood before its amendment. But it is not disputed that when the amendment came into effect, that is to say, on 1st March, 1971, by virtue of the T.L. (Amendment) Act, 1970, the limitation had not expired and the amendment enlarged the period of limitation. Therefore, the Tribunal overruled this objection. Another contention was that the IAC did not consider about the receipt of the income. There was no question of evidence of non-disclosure of income by the assessee for which penalty could be imposed. The Tribunal, however, for the reasons mentioned in the earlier assessment orders, held, inter alia, as follows :

(2.) Upon this, under section 256(1) of the I.T. Act, 1961, two questions were referred to this court. The said questions are as follows :

(3.) In view of the decision of the Supreme Court in the case of S. C. Pra-shar v. Vasantsen Dwarkadas the first question, referred to this court must be answered in the affirmative and in favour of the revenue.