# •• • • MANSUKHLAL & BROTHERS, BOMBAY v. COMMISSIOl'iER 011 INCOME-TAX, BOMBAY

- **Citation:** [1969] 1 S.C.R. 970
- **Court:** Supreme Court of India
- **Decided:** 1968-09-03
- **Case number:** Civil Appeal No. 864 of 1966
- **Bench:** V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mansukhlal-brothers-bombay-v-commissiol-ier-011-income-tax-bombay-4544
- **Pages:** 9

## Headnote

Income-tax Act (11 of 1922), s. 28(1) (c)-'Avoi.Jed· and "incmn•! as
returned', 1neani11g of--,Scope of clause.
Under s. 28( l) (c) of the Inaome-tax Act, 1922, if an assessee conceals
particulars of his income, then, in addition to any tax iJayablc by him,
he may be directed to pay, by way of penalty, a sum not exceeding one
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and a half times the amount of the tax which would have been avoided c
if the income as returned by him had been accepted as correct.
For the assessment year 194849, the asscssee showed an income of
Rs. 45,904 in his return.
'fhe Department disalluwcJ c;.,;rtuia deductions
and corrected the figure to Rs. 48.135. It also added two other items;
(i) Rs. 90,000 which was not concealed but which should have been included in the assesscc's return of income, and (ii) R'i. 24,000 v.rhich. "IVas
income concealed by the asscssee. After ascertaining the asse~sce's income
at Rs. 1,62,135 (Rs. 48.135 +Rs. 90.000 -i- Rs. 24.000\, the Department
sought to impose on the assessce a penalty of
Rs.
62,00\J
under s.
28(l)(c), on the hasis that the maximum penalty tha' eould be imposed
is one and a half times the amount of diffe'rencc between the tax on Rs.
1,62,135 (ascertained income) and the tax on Rs. 45,904
!returned
income). The assessce contended that the penalty under the scc'tion was
in the nature of additional tax. that it ~hould be correlated to the tax
evaded and should not he disp·roportiOnate to the incon1c conceJled, which
'"'as only Rs. 24,000 in 1he present case.
The as.)e~sec therefore ur)'.!Cd
that the income as retu"rncd should he taken as R;. 1,3:; 135 (Rs. 48,135+
Rs. 90.000) and that only Rs. 24,000 (the income found to be concealed)
should he taken into account for purposes of penally under the section
and 1hat the maximum penalty that could be impo5'ed on that basis would
be one and a half times the difference between the ta< on Rs. l ,62.135
and the tax on Rs. [.38, 135.
The High Court. on reference. held in favour o: the Deparlment.
In appeal to this (~ourt.
HELD (rejecting the asscssce's contention) :
The observations in
Abraham
v_
/_ T. 0 .. Kottayam
(1961)
41
J.T.R. 425, and Malbary v. C.l.T. Bombay, North. 51 J.T.R. 295. that
the penalty under the section should not be totally ctisp·roportionatc to the
amount concealed or should be correlated to the ~1n1ount of tax. evaded.
should not be divorced from their context
The object of the provision
being to impose penalties for tho! acts of comm1ss1on or omission set out
therein as an effective deterrent against tax:
eva~ion, the object can be
achieved only if the penaltv c.in be imposed irrespective of the amount
concealed. [976 B-D; 978 F-G]
C. /_ T., Burma v. A. A. R. Chrttiar Firm. 1 l.T.R. 285,
A . .4. R.
Chettiar v. C.1.T., Bunna 2 I.T.R. 386 and Kc.lidindi Subharaju Gopalara;u
v. E./.'/' . . Madras, 28 I.T.R. 162 approvl'd.
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MANSUKHLAL V. C.I.T. (Grover, J.)
9 71 •
Lord Howard De Walden v. Inland Rev. Commrs. [1942] 1 K.B. 389
and Inland Rev. Commrs. v. Hinchy [1960] 1 All E.R. 505, referred to.
(2) The word 'avoided' in the section does not mean evaded.
lt
is used in the sense of escapement. The Legislature wanted the incon1e··
tax authorities to determine what would have been the amount of tax
that would have esc!aped assessment had the income as shown in the
return been accepted as correct and one and a half tin1-es that amount
would be the maximum penalty which can be imposed when it was discovered that income had -been concealed.
So
far
as
the
expression
'income as returned' is concerned, it means inconw as shown in the return
filed under s. 2.2. and not the income computed or ascertained by the
income-tax authorities minus the income added on the gTound of concealment.
Therefore, under s. 28 ( 1) ( c), if an item of concealment is
discovered, the maximum penalty which can be imposed is one and a
half times the difference between the tax on the total income as
finally
assessed and the tax on the income as shown i

## Text

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MANSUKHLAL & BROTHERS, BOMBAY
v.
COMMISSIOl'iER 011 INCOME-TAX, BOMBAY
September 3, 1968
[V. RAMASWAMI AND A. N. GROVER, JJ.)
Income-tax Act (11 of 1922), s. 28(1) (c)-'Avoi.Jed· and "incmn•! as
returned', 1neani11g of--,Scope of clause.
Under s. 28( l) (c) of the Inaome-tax Act, 1922, if an assessee conceals
particulars of his income, then, in addition to any tax iJayablc by him,
he may be directed to pay, by way of penalty, a sum not exceeding one
A
B
and a half times the amount of the tax which would have been avoided c
if the income as returned by him had been accepted as correct.
For the assessment year 194849, the asscssee showed an income of
Rs. 45,904 in his return.
'fhe Department disalluwcJ c;.,;rtuia deductions
and corrected the figure to Rs. 48.135. It also added two other items;
(i) Rs. 90,000 which was not concealed but which should have been included in the assesscc's return of income, and (ii) R'i. 24,000 v.rhich. "IVas
income concealed by the asscssee. After ascertaining the asse~sce's income
at Rs. 1,62,135 (Rs. 48.135 +Rs. 90.000 -i- Rs. 24.000\, the Department
sought to impose on the assessce a penalty of
Rs.
62,00\J
under s.
28(l)(c), on the hasis that the maximum penalty tha' eould be imposed
is one and a half times the amount of diffe'rencc between the tax on Rs.
1,62,135 (ascertained income) and the tax on Rs. 45,904
!returned
income). The assessce contended that the penalty under the scc'tion was
in the nature of additional tax. that it ~hould be correlated to the tax
evaded and should not he disp·roportiOnate to the incon1c conceJled, which
'"'as only Rs. 24,000 in 1he present case.
The as.)e~sec therefore ur)'.!Cd
that the income as retu"rncd should he taken as R;. 1,3:; 135 (Rs. 48,135+
Rs. 90.000) and that only Rs. 24,000 (the income found to be concealed)
should he taken into account for purposes of penally under the section
and 1hat the maximum penalty that could be impo5'ed on that basis would
be one and a half times the difference between the ta< on Rs. l ,62.135
and the tax on Rs. [.38, 135.
The High Court. on reference. held in favour o: the Deparlment.
In appeal to this (~ourt.
HELD (rejecting the asscssce's contention) :
The observations in
Abraham
v_
/_ T. 0 .. Kottayam
(1961)
41
J.T.R. 425, and Malbary v. C.l.T. Bombay, North. 51 J.T.R. 295. that
the penalty under the section should not be totally ctisp·roportionatc to the
amount concealed or should be correlated to the ~1n1ount of tax. evaded.
should not be divorced from their context
The object of the provision
being to impose penalties for tho! acts of comm1ss1on or omission set out
therein as an effective deterrent against tax:
eva~ion, the object can be
achieved only if the penaltv c.in be imposed irrespective of the amount
concealed. [976 B-D; 978 F-G]
C. /_ T., Burma v. A. A. R. Chrttiar Firm. 1 l.T.R. 285,
A . .4. R.
Chettiar v. C.1.T., Bunna 2 I.T.R. 386 and Kc.lidindi Subharaju Gopalara;u
v. E./.'/' . . Madras, 28 I.T.R. 162 approvl'd.
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MANSUKHLAL V. C.I.T. (Grover, J.)
9 71 •
Lord Howard De Walden v. Inland Rev. Commrs. [1942] 1 K.B. 389
and Inland Rev. Commrs. v. Hinchy [1960] 1 All E.R. 505, referred to.
(2) The word 'avoided' in the section does not mean evaded.
lt
is used in the sense of escapement. The Legislature wanted the incon1e··
tax authorities to determine what would have been the amount of tax
that would have esc!aped assessment had the income as shown in the
return been accepted as correct and one and a half tin1-es that amount
would be the maximum penalty which can be imposed when it was discovered that income had -been concealed.
So
far
as
the
expression
'income as returned' is concerned, it means inconw as shown in the return
filed under s. 2.2. and not the income computed or ascertained by the
income-tax authorities minus the income added on the gTound of concealment.
Therefore, under s. 28 ( 1) ( c), if an item of concealment is
discovered, the maximum penalty which can be imposed is one and a
half times the difference between the tax on the total income as
finally
assessed and the tax on the income as shown in the afisessee' return, irrespective of the amount of concealment. [978 B-F]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 864 of
1966.
Appeal by special leave from the judgment and ·order dated
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24th February 1965 of the Bombay High Court in Income-tax
Reference No. 3 of 1962.
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D. H. Dwarkadas, Bhuvnesh Kumari and J. B.
Dadachanji,
for the appellant.
Niren De, Solicitor-General, S. K. Aiyar, R. N. Sachthey and
B. D. Sharma, for the respondent.
The Judgment of the Court was delivered by
Grover, J.
This is an appeal by special leave from a judgement of the Bombay High Court in a reference made under s
66(1) of the Income tax Act, 1922, hereinafter called the Act,
answering the following question which had been referred to it
in the negative and against the assessee :
"Whether in· computing for purposes of levy of
penalty under s. 28 ( 1) ( c) the amount of income tax
and super tax which would have been avoided if the
income as returned had been accepted, such 'income as
returned' includes item of income too, which though
not actually returned had been added in the assessment
solely on ground of lack of evidence?"
The assessee is a firm dealing in hessian, twines, gunny bags, etc.,
on wholesale basis. For the assessment year 1948-49 the assessee
had returned income amounting to Rs. 45,904. The Income tax
Officer, however, added two items of Rs. 24,000 and Rs. 90,000
as profits and income from undisclosed sources which had been
concealed by the assessee. A penalty of Rs. 62,000 was imposed
•within the maximum limits provided bys. 28(l)(c) of the Act.
The Appellate Assistant Commissioner in appeal held that ouly
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SUPREME COURT REPORTS
[ 1969]
•
the item of Rs. 24,000 could be treated as concealed income and
the other amount of Rs. 90,000 could not be treated as such for
the purpose of imposing a penalty. In his opinion maximum
penalty payable under s. 281.1) (c) came to Rs. 30,000 and taking into consideration all the circumstances he imposed a p~nalty
of Rs. 20,000 only on the assessee.
In
appeal
the
Appcllat1:
Tribunal agreed with the Appellate Assistant Commissioner that
there was no concealment in the matter in respect of Rs. 90,000
but affirmed the finding of concealment of
the
amount of
Rs. 24,000.
It was held by the tribunal that as ther.e had been
concealment of profit it was wholly immaterial whether one item
or more than one item had been concealed and the quantum had
to he computed under s. 28 ( 1) ( c) not on the basis of tax on the
items proved to have been concealed but on the difference between the tax on the a;sesscc's income as finally assessed and the
tax which would haw been avoided if the return tiled by him had
been accepted as correct.
The tribunal restored the order of the
Income tax p!licer imposing a penalty of Rs. 62,000.
The argument which was addressed before the
High Court
was that on a true interpretation of s. 28 (I) ( c) the penalty could
be only I± times of the tax payable on the concealed income.
It
was urged that the maximum penalty had to he calculated en the
basis of tax avoided i.e. tax which had been evaded bv reason of
concealment and not tax
that
had
escaped
for ·any other
reason because an assessee might take a mistaken view of fact
or Jaw and ho11a fide not include certain items of income in his
return.
The Income tax authorities might take a different view
and add that income but that addition would not attract r,i:nalty.
In the words of the High Court the argument proceeded on these
lines:-
"The additions made by the Income tax authorities
or the tribunal to the income returned by him constituted part of the· 'income as returned' by the asscssce.
In the instant case. the only amount that has been
added on account of concealment is Rs. 24.000.
The
rest of the additions on the ground of disallowance of
certain expenditure and the addition of Rs. 90,000 as
income from undisclosed source are parts of the income
returned by the assessee. The maximum penalty thus,
which could have been imposed in the instant case was
one and half times the tax on the difference between
Rs. 1,62,135 and Rs. 1,38.135 (Rs. 48.135 as computed by the Income tax Officer and Rs. 90,000 added
as income from undisclosed source)."
On behalf of the Revenue the position that was taken up and
has been sought to he supported before us is that s. 28 (I)( c) •
provides that if an item of concealment of income is di>covered
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MANSUKHLAL v. c.I.T. (Grover, l.)
973 •
the maximum penalty which can be imposed is 1 I times the difference between· the tax on the total income as finally assessed and
the tax on the income shown in the assessee's return irrespective
of the amount of concealment. ·On that basis the penalty, le.viable, in the present case, would be 1 t times the amount of tax on
the difference between the tax on Rs. 45,904 (returned income)
and Rs. 1,62,135 (income as assessed by the Income tax Officer.)
The High Court was of the view that the expression "income as
returned" occurring in s. 28 (1) ( c) means income disclosed by
an assessee in the return and not income computed or assessed
by the Income tax authorities minus the income added on the
ground of concealment.
The High Court found no
legislative
intent disclosed in the provisions of s. 28 ( 1 )( c)
which would
link the avoidance of tax to the concealment of income or which
would jus!ify holding that the maximum penalty prescribed in the
section had to be proportionate to the extent of the concealment.
After considering certain 1 decisions the High Court, while appreciating that the penalty imposed appeared to be disproportionately
heavy to the amount concealed, returned the answer against the
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assessee.
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Section 28 ( 1) · to the extent it is material is
reproduced
below:
" ( 1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the
course of any proceedings under this Act, is satisfied
that any person-
( a) has without reasonable cause failed to
furnish
the return of his total income which he was required to furnish by notice given
under subsection (1) or sub-s. (2) of section.22 or section 34 or has without reasonable cause failed
to furnish it within the time allowed and in the
manner required by such notice, or
(b) h~s withou_t reasonable caus~ failed to comply
with a notice under sub-section ( 4) of section
22 or sub-section (2) of section 23, or
( c) has concealed the particulars of his income or
delibi:rately furnished inaccurate particulars of
such mcome, he or it may direct that such person
shall pay by way of penalty, in the case referred
to in clause (a), in addition to the amount of
the ~ncome tax and super tax, if any, payable
~y him, a sum not exceeding one and a half
tunes that amount, and in the cases referred to
in clauses (b)
~nd ( c), in addition to any
tax payable by him, a sum not exceeding one
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• 974
SCPREl\IE COURT REPORTS
(1969) I S.C.R.
and a half times the amount of the income tax
and super tax, if any, which would have been
avoided if the income as
returned
by
such
person had been accepted as
the correct income:
Provided that-"
In C. A. Abraham v. Income tax Officer, Kottayam & Anr. (')
where the real question was whether penalty under s. 28 could be
imposed on a firm after its dissolution, it was said that by s. 28
the liability to pay additional tax which is designated "penalty" is
imposed in view of the dishonest contumacious conduct of the
asscssee.
The penalty is not uniform and its iniposiiion depends
upon the exercise of discretion by the taxing authorities; but it
imposed as a part of the machinery for assessment of tax liability.
It is contended, in the present case, by counsel for the appellant
that if imposition of penalty under s. 28 partakes of the character
of additional tax the section ought not to be construed in such a
manner that the penalty can be imposed in an amount
wholly
disproportionate lo the amount concealed. The learned Solicitor
General, on the other hand, maintains that the object of the provisions relating to penalty contained in s. 28 is to provide for an
effective deterrent against tax evasion and that object can
be
achieved only if the penalty can be imposed irrcspecti,·e of the
amount of concealment so far as s. 28 (I) ( c) is concerned. Our
attention has been invited to Lord Howard De Walden v. !11/and
"Revenue Commissioners(2) in which the assessee had transferred
valuable assets to foreign companies.
He did not dispute
that
the transactions were of the kind described in the preamble to
s. 18 of the Finance Act I 936, namely, to avoid income tax by
transfer of income to persons abroad. The Court of Appeal
affinncd the judgment of Macnaghtcn J. that the
asscsscc was
liable to be assessed to income tax and sur tax in respect of the
whole income of the foreign companies.
Dealing with the argument of counsel that the legislature could not have intended to
produce a result according to which an entirely disproportionate
penalty could he imposed on the tax payer. Lord Greene Master
of the Rolls observed at page 397 :
"The section is a penal one, and its consequences,
whatever thev mav be. arc intended to he an effective
deterent which will put a stop to practices which the
Jegislaturc considers to be against the public interest. For
years a battle of manoeuvre has been waged
between
the legislature and those who are minded to throw the
burden of taxation off their own shoulders on to those
of their fellow subjects. In that battle the legislature
(I)
:11 1.T.R. 425.
<2)
[1942] 1 K.B. 389.
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MANSUKHLAL v. c. I. T. (Grover, !.)
9f5
has often been worsted by the skill, determination and
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resourcefulness of its opponents of whom the present
appellant has not been the least successful. It would
not shock us in the least fo find that the legislature has
determined to put an end to the struggle by imposing
the severest of penalties."
·
There are certain decisions of the High Courts which do not
support the contention canvassed by the learned counsel for the
appellant but can be pressed into service on behalf of the respondent. As far back as the year 1933 Page, C.J ., delivering the
judgment of the full bench observed in Commissioner of In~ome
tax, Burma v. A. A. R. Chettiar Firm(') that the maximum
penalty that can be imposed under s. 28 ( 1) is a sum representing
the difference between the tax on the income declared by the
assessee and the tax on the income ascertained under the Act, in
respect of which assessment has been made. This view was upheld by a full bench of five learned judges of the Rangoon High
Court in A .A .R. Chettiar
v.
Commissioner of Income tax,
Burma('). In Kalidindi Subbaraju Gopalaraju & Co. v.
Commissioner of Income tax, Madras( 3 ) a division bench of the
;\,ndhra Pradesh High Court presided over by Subba Rao, C.J.
(as he then was) had to consider a case in which the assessee
had returned an income of Rs. 19,639 but his accounts had been
rejected and a sum of Rs.
35,354 had been added to his income.
On the view that the assessee had concealed only two
items of Rs. 1,000 each which he had received as the sale price
of the goods sold, a penalty of Rs. 4,000 was levied under s. 28 ( 1)
( c). It was held that though there was evidence of concealment
in respect of two items of Rs. 1,000 each, the penalty under the
aforesaid section could be levied on a sum not exceeding l t times
the difference between the amount of the income tax and super
tax, if any, actually imposed and the amount of such tax would
have been payable if the original return had been accepted as
correct.
The only decision of this Court on which reliance was placed
by counsel for the appellant is N. A. Malbary & Bros. v. Commissioner of Income tax, Bombay North(').
In that case penalty
had been imposed on an assessee twice for concealment of income
relating to the assessment year 1951-52. When the assessee had
submitted his original return it had been found that he had concealed certain income and a penalty of Rs. 20,000 was imposed.
Later the Income tax Officer issued a notice under s. 34 and
levied a second penalty of Rs. 68,501 for concealment of income
in the original return. The contention of the assessee was that
the second order imposing penalty was illegal.
This contention
(!) 1 l.T.R. 285.
(J) 28 LT.R. 162.
(2) 2 I.TR. 386.
(4)
51 l.T.R. 295.
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St.:PR~ME CO!JRI REPORTS
[1969] I S.C.R.
•lid not find f.ivour with this Court and it was obserwd that the
penalty under the section had to be correlated to the amot~1u of
tax which would have been evaded if the assessec had got aw1y
with the concealment. The Income tax Ollicer had levied
the
penalty on the first occasion after making an ass~ssment of income
by an estimate.
Later, when he ascertained the true facts
and
realised that a much high"r penalty could be imposed.
he was
entitled to recall the earlier order and pass another order imposin)!
a higher penalty. What has been stressed on behalf of the app.~l
lant, in the present case, is that the penalty has to be correlated
to the amount of tax which would have been evaded if the asscssr~
had ~ot away with the concealment. It must be rememl,crcd that
th.~ question which has came up for consideration before us is
alto2ether different from the one which was determined in
the
case of N. A. M11//Jary & /iro.1. (') :1s is apparent from the f:icls
which have been stated.
It would no: be right to look only at
the aforesaid observations divorced from
the
context.
Indeed
the imposition of penalty on two occasions was upheld on
the
ground that imposition of a much higher penalty was c:dlcd tor
in the circumstances of that case but there was no discmsion of
the actual basis on which penalty had to be calculated or impos.'d
under s. 28(1)(c).
There is a decision of the House of Lords in Inland Revenue
Commi.1·sirmer.1· v. Hinchy (') in which certain observations were
made which arc quite apposite for the
purpose of the presellt
case.
Section 25 ( 3) of the Income tax Act, 1952 I 15 & 16 Geo
6 & l Eliz 2 c. I 0) provides illlcr a/ia that a person who neglects
or refuses to deliver. within the time limited in any notice served
on him, or wilfully makes delay in delivering a true and correct
list, declaration, statement or return which he is required under
the pr.~ceding provisions to deliver shall, if proceeded against. by
action in any court forefcit the sum of £ 20 and treble the tax
which he ought to b" charged unde~ the aforesaid Act. The respondent in that case had returned an income of £ 18 6s. for a
particular assessment year.
It was discovered that he had made
an under statement and an assessment was made on him for £ 14
5s. The· Commissioners of Inland Revenue later on brought an
:iction claiming from him, under s. 25 ( 3 )(a). the fixed penalty
of £ 20 and also "treble the tax which he ought to be charged
under this Act". which sum they computed at £418 14s. 6ct being three times his income tax for the year in question.
Diplock
.T., held that the judgment should be entered for the Crown for a
sum of £ 20 without cost.
Th(! Court of Appeal substituted the
judgment in favour of the Crown for £ 62 I .'is.
The Court of
Appeal thus added to the sum £20 treble the tax on the amount
which would have escaped taxation had a return made by
the
(I) 51 t.T.R. 295.
(21 I 1%0J All FR. 505.
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MANSUKHLAL v. C.l.T. (Grover, J.)
respondent formed the basis of assessment. The House of Lords.
reversed this decision holding that the Crown was entitled to the
full arn01.1nt claimed, namely, £20 and £418 14d. 6?. as _fixed
penalties, because giving the words of s. 25 ( 3 )(a) their ordmary
meaning, the phrase "treble the tax which he ought to be charged"
ment "treble the
whole tax which the
taxpayer ought to be
charged for the relevant year".
The underlying thought of the
judgment of the Court of Appeal was that the penalty provisions
produced maximum penalties wholly unrelated to the extent of
the default, so extravagant as to be shocking in a final provision,
·and at least one anomaly which might well be thought to run
quite contrary to ordinary justice. Viscount Kilmuir Lord Chancellor said that he could not accept the argument that in case of
an incorrect return t~ amount of penalty to be levied was only
a sum of £ 20 and treble the tax on the amount which would
have escaped taxation if the incorrect return ·made by the assessee
had formed the basis of assessment. In the opinion of Lord
Chancellor; "so to do would entail the making of an artificial
assessment on the basis of the return, the making of the true assessment and the subtracting of the one from the other". Lord Reid
also examined the contention that the penalty must have been intended to have some relation to the offence and that the tax
which the assessee ought to be charged must be additional tax
which he ought to be charged by reason of the discovery of the
true state of affairs; otherwise the p.enalty could be grossly and
extravagantly disproportionate to the
offence.
He considered
the instance, where a man might be properly chargeable to
£ 5,000 tax on his
actual return and
properly chargeable to
£ 5, 100 tax on the correct return. If the Crown was right the
penalty would be £ 15,320; if the other view was right it would
only be £ 320. Lord Reid, however, found it impossible to hold
that the words "not exceeding £ 20 and treble the tax which he
ought to be charged under this Act" as they appeared in the
earlier taxing statutes, had a limited meaning or that they were
intended to be given a limited meaning in the consolidating Act
of 1952.
.
It only remains to be considered as to wliat is the true import
and meaning of the word "avoided" and the words "income as
returned" in s.
28 ( 1). According to
appellant's submission
"avoided" has to be read with reference to cl. ( c) as meaning
"evaded". It is suggested that this word should be restricted to
mean omission or default on the part of a person and should not
be so. construed as to bring within its ambit mere escapement of
income.
This argument was rejected by the High Cburt which
referred to the meaning given in the Concise Oxford Dictionary
and rightly observed that the use of the word "avoided" has to
be seen in the context in which it appears. When read with the
words "income as returned" the word "avoided" in the view of
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St:PRBIE COl:RT REPORTS
[l 969] i S.C.R.
•the High Court was used in the sense of "c~caped". The submission on behalf of the appellant that avoiding of tax should . be
linked to the concealment of income has hardly any fore.~. Even
with regard to cl. ( b) the same amount of penalty can be impos~d
as in the case of cl.(c). The learned Solicitor General has drawn
our attention to Chapter V-B containing special provisions relating to avoidance of liability to income tax and super tax. Sections
44D and 4.1f use the expressions ··avoiding", "avoid"' and
"avoided'' which cannot ordinarily have only
the
meaning of
·"evade''. "evaded" or"'evasion". In our opinion the High Court
was right in holding that the word "avoided" does
not
mean
"evaded" and that it has been used in the sense of escapement.
To put it differently the legislature wanted the income tax authorities to determine what would have been the amount of tax that
would have escaped assessment had the income as shown in the
return been accepted as correct and I!· times of the said amount
would be the maximum limit within
which penalty can be ;mposed where it was discovered that income had been concealed.
So far as the word "returned" is concerned, it is not possible to
go beyond its plain meaning particularly when
the
expression
"return" is well understood in income tax law.
&ction 22 contains provisions relating to "return of income" and the words
"income as returned" would clearly mean income as disclosed or
shown in the return filed under s. 22. Even in cl. (a) of s. 28 (I)
the word "return" has been used in the same sense and the submission of the counsel for the appellant that other meaning
should be given to it cannot, by any stretch of reasoning,
b~
accepted.
In the above view of the matter it must be held
that the
penalties which have been provided by s. 28 (I) are meant for
the acts of omission or commission which are set out therein and
once an assessee is proved to have been guilty of them the penal
provisions arc attracted and with reference to cl. ( c) irrcsp.~ctivc
cf the amount concealed. Thus the answer returned hv the High
Court to the question referred was correct.
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It has hecn strenuously urged before us that the imposition
of the penalty of Rs. 62,000 in the present case was disproportionately high when compared with the amount of Rs. 20.000 in
respect of which alone concealment had hecn found.
The High
Court shared this view but that is not a matter which can he gone
into in view of the nature of the question which was referred.
The appeal consequently fails and it is dismissed; but in the
A
B
c
D
E
11
G
circumstances the parties arc left to hear their own costs.
II
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V.P.S.
Appeal dismissed.
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