JUDGMENT
G.K. Misra, C.J.
1. The question referred to this Court by the Tribunal, under Section 256(1) of the Income Tax Act, 1961, runs as follows :
“Whether in the facts and circumstances, penalty under Section 28 (1) (c) of the Income Tax, Act, 1922, has been valid-ly imposed”.
2. The facts out of which this question of law arises may be stated in brief. The assessment year is 1953-54. The assessee was a Hindu Undivided Family of which one Ganapatram was the Karta. During the accounting year, on 20-7-52, the following credit appeared in the cash book of the assessee :
Jankibai, mother of Ganapatram
….
Rs. 10,000/-
Lakshmi Bal, wife of Ganapatram
….
Rs. 4,000/-
Rukmini Bai, widowed daughter-in-law of Ganapatram
….
Rs. 4,000/-
Ginni Bai, wife of grandson of Ganapatram
….
Rs. 2,000/-
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Rs. 20,000/-
The assessee asserted that this sum of Rs. 20,000/- belonged to the four ladies. This contention was rejected all through. A tippa book was produced at a certain stage. It was held to be not genuine. The sum of Rs. 20,000/- was accordingly added to the income of the assessee. Thereafter, the Income-Tax Officer started a proceeding under Section 28 (3) of the Income Tax Act, 1922 and imposed a penalty of Rs. 4000/- under Section 28 (1) (c). The appeals filed by the assessee before the Appellate Assistant Commissioner and the Tribunal failed on merits. The Tribunal, however, reduced the quantum of penalty to Rs. 2000/-.
3. As appears clearly from the order of the Tribunal there was no other evidence before the authorities in the penalty proceedings showing that the assessee concealed this sum of Rs. 20,000/-as being his own income. The entire conclusion is based on the final decision made in the assessment proceeding itself. The point of law that arises is whether penalty can be imposed without further evidence to establish that there was concealment of the income or that the assessee deliberately furnished inaccurate particulars of such income.
4. Section 28 (1) (c) of the Income Tax Act, 1922, runs thus :
“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
* * * * *
(c) has concealed the particulars of Ms income or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty…..”
The rest of the provision need not be quoted. Sub-section (3) of Section 28 lays down that
“no order shall be made under Sub-section (1) or Sub-section (2) unless the asses-see or partner, as the case may be, has been heard, or has been given a reasonable opportunity of being heard”. It would clearly appear from the aforesaid two provisions that the penalty proceeding is altogether a different proceeding and starts after the assessment proceeding is closed. In the penalty proceeding itself the assessee is given a reasonable opportunity of being heard. Sub-section (4) of Section 28 enacts that “no prosecution for an offence under this Act shall be instituted in respect of the same facts on which a penalty has been imposed under this section.”
This sub-section gives a clear indication that penalties are placed on analogous footing with offences.
5. There is a conflict of authorities as to the nature of these penalty proceedings and as to the party on whom the onus lies, to establish the requirements of Section 28 (1) (c) of the Act. The view, of which AIR 1959 Bom 96, I.T. Commissioner, Ahmedabad v. Gokuldas, is the best exponent, is that these penalty proceedings are in the nature of quasi-criminal proceedings and the onus is on the department to establish the necessary ingredients under Section 28 (1) (c). This view prima facie seems to be rational. As has already been observed, a penalty proceeding is different from an assessment proceeding and is not a mere formality. It starts after the assessment proceeding is over and furthermore, reasonable opportunity of being heard is given to the assessee again at the stage of imposition of penalty.
It follows, as a logical corollary, that the conclusion reached in the assessment proceeding would not by itself be enough to hold that the assessee concealed his income or deliberately furnished inaccurate particulars of such income under Section 28 (1) (c). Doubtless the decision in the assessment proceeding can be taken into consideration in the penalty proceeding; but by itself it would not be enough to establish the necessary ingredients. Other evidence de hors the conclusion made in the assessment proceeding would be relevant and admissible, and on the basis of such evidence it is open to the authorities during the penalty proceeding to say that there was concealment. This appears apparent from the provision made in Sub-section (3) that the assessee will be given a reasonable opportunity of being heard.
In this connection, It should be remembered that in Section 3 of the Evidence Act, there are three expressions “prove”, “disprove” and “not proved”. In the assessment proceedings the assessee might have failed to prove his case that the questioned income is not his, but that will not prove the contrary, namely that it has been established by the department that such income is concealed income. Different conclusions emerge when the onus is placed either on the assessee or on the department to establish that the income had been concealed. Failure on the parl of the assessee to prove his own case does not mean that the department succeed in establishing its case that there was concealment of income or furnishing inaccurate particulars of such income. This is the analysis, on the basis of which it was held in the aforesaid Bombay case that the penalty proceeding must be treated as a quasi criminal proceeding and the department must establish the necessary ingredients under Section 28 (1) (c).
6. The Bombay decision has been followed in subsequent cases :
(1967) 64 ITR 388 (AP), Commissioner of Income Tax, E. P. T. A. P. v. Rama-swamy Chetty; (1963) 47 ITR 434 (Ker), Kerala Maney and Co. v. Commissioner of I. T. Kerala; (1967) 65 I. T. R. 95 = (AIR 1968 Cal 345), Commissioner of Income Tax (Central) Calcutta v. Anwar Ali; (1965) 56 I. T. R. 126 (Guj), Commissioner of Income Tax, Gujarat v. L. H. Vora; (1969) 73 I. T. R. 26 (Mad), P.S.S. Bommanna Chettiar v. Commissioner of Income Tax, Madras; AIR 1969 Madh Pra 72, Commissioner of Income Tax, M. F. v. Champalal and AIR 1960 Pat 252, Khemraj Chaggan Lal v. L T. Commissioner, Bihar & Orissa,
7. The contrary view is reflected in (1961) 42 I. T. R. 129 (Pat), Murlidhar Tejpal v. Commissioner of Income Tax, Patna and (1963) 48 I. T. R. 324 (All), Lal Chand Gopal Das v. Commissioner of Income Tax U. P. & V. P. The Allahabad High Court has more or less consistently adhered to this view. It goes by the plain wording of the section.
8. After giving our anxious consideration to the two views, we have no doubts in our mind that the view expressed by the Bombay High Court and consistently followed thereafter by most of the High Courts represents the correct law. In (1963) 48 I. T. R. 324 (All) reference was made to AIR 1961 SC 609, C.A. Abraham v. Income Tax Officer, Kottayam, and it was deduced that the Supreme Court decision supported the theory that penalty proceedings are in the nature of assessment proceedings and are not of a criminal nature. With respect we must say that we are unable to see anything in the Supreme Court decision to support such a conclusion. In the Calcutta and Madras decisions cited above, the aforesaid Supreme Court decision has been distinguished and it was rightly observed that it throws no light on the question at issue.
9. Examined in the light of the aforesaid dictum the Tribunal’s view that the assesses knew his income cannot be supported. In support of this conclusion reliance was placed merely on the decision in the assessment proceeding. The department made no endeavour to prove that there was any concealment. It is one thing to discard the explanation of the assessee in the assessment proceeding; it is altogether a different thing to say that concealment has been established. The Tribunal therefore wrongly held that the assessee was liable to pay penalty.
10. On the aforesaid analysis, we would answer the question by saying that in the facts and circumstances of this case, penalty under Section 28 (1) fc) of the Income Tax Act 1922, has not been validly imposed. The reference is answered accordingly. In the circumstances there will be no order as to costs.
R.N. Misra, J.
11. I agree.