KERALA HIGH COURT

                                                   Jos Chacko

                                                        Vs.

                                              Income-Tax Officer

                                              O.P. No. 60 of 1956

                                                (M.S. Menon, J.)

                                                   12.03.1957

                                                  JUDGMENT

M.S. Menon, J.

1. Ext. B dated 13-9-1954, an order of the Income-tax Officer Ernakulam Circle, Ernakulam,
under Section 28 (1) (c) of the Indian Incometax Act, 1922, concluded as follows:

        "It is evident therefore that the assessee was guilty of suppression of income. 'thus,
        considering all aspects of the case, a penalty of Rs. 750/- is imposed after obtaining the
        Inspecting Assistant Commissioner's previous sanction. This will be got adjusted from the
        refund of Rs. 6417-10-0 in respect of 52-53 assessment".

2. The petitioner took up the matter in appeal before the Appellate Assistant Commissioner of
Income tax. Trivandrum. Ext. C dated 29-11-1955 is the order in appeal.

        "This is an appeal against the levy of penalty under Section 28 (1) (c) for concealment of
        income by the appellant. The penalty had originally been contested on merits but at the
        hearing 'Mr. Chummar questioned the legal validity of the penalty order itself. He pointed
        out that no hearing had been given to the appellant before the passing of the order and
        that, in any case, no opportunity of being heard had been allowed to the appellant. He
        contends, therefore, that the penalty order is illegal. In support of this contention he
        quotes the recent decision of the Orissa High Court in the case of Srilla Sagarmal.
        Records show a hearing or an opportunity of being heard had not been given to the
        appellant before the passing of the penalty order. The order has been passed merely after
        considering the written explanation offered by the appellant in regard to the alleged
        concealment. In the circumstances, I hold that the penalty order is illegal. The penalty
        levied is accordingly cancelled. It should be refunded if already paid. The appeal
        succeeds".

3. After the appellate order, the Income Tax Officer, Eanakulam Circle, Ernakulam, took up the
matter again and passed Ext. F, an order dated 27-11-1956:

        "This is a case where pcntilty proceedings were initiated u/s 28 (1) (c) for concealment of
        income and deliberately furnishing of inaccurate particulars.
        The assessment for 1952-53 was completed on 31-3-53 on total income of Rs. 37,598/- as
        against Rs. 16,910-7-7 returned by the assessee. A lump sum addition of Rs. 5000/- was
        made to the gross profit to make up the proved deficiency in the same and Rs. 15,000/-
        was added back as unaccounted for investment in building. The Tribunal held that as the
        assessee was able to prove the cost of the building at Rs. 34,000/- and as Rs. 28,209/- had
        already been debited as expenditure for the same, the addition need be limited to the
        difference viz. Rs. 5791 /-and Rs 5000/- has already been added back there is no need for
        a further addition of Rs. 15,000/. In any event there is concealment at least to the tune of
        Rs. 5000/. The assessee was requested to appear in person at my office on 7-11-1950 for a
        hearing, but he did not avail of the opportunity but simply sent a letter wherein he stated
        that as the penalty originally imposed had been cancelled in appeal it is not open to me to
        resurrect the proceedings already closed. The Appellate Assistant Commissioner has in
        his appeal cancelled the penalty on the technical ground that no personal hearing was
        given to the assessee. That does not make the proceedings rightly instituted ab initio
        illegal; as such I am competent to puruse the proceedings and impose penalty afresh after
        giving an opportunity for personal hearing. As deliberate concealment has been
        conclusively established in this case, I impose a penalty of Rs. 750/-u/s 28 (1) (c) of the
        Income-tax Act, with the prior approval of the Inspecting Assistant Commissioner of
        Income-tax, Ernakulam.
        The penalty should be paid on or before 25-12-1956".

4. The question that arises for decision is whether Ext. F can he sustained in view of Ext. C. S. 31
(3) (f) of the Indian Income-tax Act, 1922, provides that the Appellate Assistant Commissioner
may, in the case of an order under Section 28, "confirm or cancel such order or vary it so as
either to enhance or reduce the penalty", and Section 33 (2):

        "The Commissioner may, if he objects to any order passed by an Appellate Assistant
        Commissioner under Section 31 direct the Income-tax Officer to appeal to the Appellate
        Tribunal against such order, and such appeal may be made within sixty days of the date
        on which the order is communicated to the Commissioner by the Appellate Assistant
        Commissioner".

No action has been taken under sub-section (2) of Section 33 and I must bold that the Income-tax
Officer, Ernakulam Circle, Ernakulam, is not entitled to ignore Ext. C and proceed to impose a
penalty as he has done by Ext. F.

5. The petition is allowed. No costs.
Allowed.