N.A. MALBARI AND BROS. vs. COMMISSIONER OF INCOME-TAX, BOMBAY

CIVIL APPEAL No. 878/1962Supreme Court[1964] 5 S.C.R. 56025 November 1963Bench: 3 JudgesAuthor: A.K. SARKAR, M. HIDAYATULLAH, J.C. SHAH9 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the Income-Tax Officer had full jurisdiction to make the second order of penalty. The ITO would not lose jurisdiction simply because he omitted to recall the earlier order, although two orders for the same concealment could not be enforced simultaneously. When the ITO ascertained the true facts and realized a higher penalty was justifiable, he was entitled to recall the earlier order and pass a new one. In this case, the earlier order was cancelled, and no objection was taken, leaving only one legal order. The Court rejected the contention that the ITO lost jurisdiction because he had knowledge of the full facts when passing the first order, distinguishing the cited precedent and noting that the first penalty notice was not concerned with the concealment revealed by the later produced books.

What were the facts?

The assessee, N.A. Malbari and Bros., a firm with a branch in Bangkok, did not include profits from the branch in its returns for assessment years 1949-50 and 1950-51, citing unavailability of accounts. Assessments were made on an estimated profit of 5% on exports. For assessment year 1951-52, the assessee again did not show branch profits. The Income-Tax Officer (ITO) estimated sales at Rs. 7,50,000 and profits at Rs. 37,500, issuing a notice for penalty under Section 28(1)(c) for concealment. Subsequently, the assessee produced branch accounts for 1951-52, revealing a profit of Rs. 1,25,520. The ITO issued a second show-cause notice and imposed a penalty of Rs. 68,501. The Appellate Assistant Commissioner rejected appeals against both penalties. The Tribunal cancelled the first penalty but confirmed the second. The High Court affirmed the legality of the second penalty.

What were the issues?

1. Whether the levy of Rs. 68,501 as penalty for concealment in the original return for the assessment year 1951-52 is legal, considering a prior penalty of Rs. 20,000 was imposed for the same concealment. Assessee's contentions: The second penalty order was illegal because there was only one concealment, and a penalty had already been imposed. The ITO lacked jurisdiction to make a second order while the first stood, rendering the second order a nullity from inception, even if the first was later cancelled. Revenue's contentions: Not explicitly recorded, but implicitly, the revenue contended for the legality of the second penalty order, which the High Court upheld.

Which sections of the Income-tax Act were involved?

Section 28(1)(c),Section 28(3),Section 34,Section 22(4)

AI-generated summary — verify with the full judgment below

560 SUPREME COURT REPORTS (1964] 1963 pute must be governed by Rule S(a)(i) of the respon- dent's Standing Orders.

Workmen of Dewan Tea In the result, we reverse the finding of the Tribunal Estate and Ors. !hat the lay <!ff 4eclared by the .respon~e!lt for 45 days v m 1959 was Justified. That bemg so, 1t 1s unnecessary "''he M · g t to consider the individual cases of the nine respective ,, ana emen · b h h b h · compames, ecause w atever may ave een t elf Gajendragadkar respective financial position, under the relevant Rule J. they could not validly declare a lay off at all, nor could they have declared the lay off in exercise of their alleged common law right. The questions referred to the Tribunal must, therefore, be answered in favour of the appellants. The appeal is accordingly allowed and the appellants' claim for full wages for the 45 days of lay off in respect of the 11 tea gardens is awarded to them. The appellants will be entitled to their costs throughout. 1963 November. 25 Appeal allowed. N.A. MALBARI AND BROS. v. COMMISSIONER OF INCOME-TAX, BOMBAY (A.K. SARKAR, M. HIDAYATULLAH AND J.C. SHAH, JJ.)

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