DWADASH SHERNI P C AND COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us for decision under Secton 66 (1), Income -tax Act, runsas follows :

(2.) THE assessee is a limited company. A notice was served on the assessee under Section 22 (2), Income tax Act, requiring it to file the return for the assessment year 1944 -45, but the assessee failed to make a return. The Income -tax Officer thereupon made a best judgment assessment under Section 23 (4) of the Act. After having made a best judgment assessment, the Income -tax Officer proceeded to impose a penalty. He passed an order imposing a penalty of Rs. 8,943/ - under Section 28 (1) (a) of the Act. The assessee filed an appeal against that order before the Appellate Assistant Commissioner of Income -tax who came to the conclusion that the Income -tax Officer should have, before imposing the penalty, given an opportunity to the assessee to show cause why a penalty should not be imposed. He, therefore, set aside the order of the Income -tax Officer and sent the case back to him for re -imposition of the penalty, if any, after giving the assessee an opportunity to put forward his contentions. There was an appeal filed by the Commissioner of Income -tax before the Income -tax Appellate Tribunal. The Tribunal held that the Appellate Assistant Commissioner of Income -tax was wrong in his view that the assessee must necessarily be given an opportunity to prove that he had no income liable to tax before any penalty under Section 28 (1)(a), Income -tax Act, could be imposed. The Tribunal differed from a decision of a Pull Bench of the Rangoon High Court in - - 'Commr. of Income -tax, Burma v. A. A. R. Chettiar Concern, Maubin', AIR 1933 Rang 30 (PB) (A). In the result, they allowed the appeal, set aside the order of the Appellate Assistant Commissioner of Income -tax and restored the appeal to his file for determining it on its merits according to law. The assessee then applied that a reference be made to this Court.

(3.) THE language of Section 28, Income -tax Act, makes it abundantly clear that, before imposing the penalty, the Income -tax Officer should give the assessee an opportunity to show cause. In the statement of the case, the first two provisos to Section 28(1) have been quoted as follows: