Commissioner Of Income-Tax vs Sabitri Chatterjee

1. This is a reference under Section 256(1) of the I.T. Act, 1961, and it arises out of a penalty proceeding.

2. The assessee is a reputed film star and a stage actress. The assessment year is 1960-61. The previous year is the financial year. By rejecting the explanation offered by the assessee in respect of certain receipts, the ITO brought certain sums to tax as stated in the statement of the case. The said assessment was made on July 9, 1964, in which the ITO has made the following endorsement:

"Issue a notice under Section 274 to the assessee to explain why penalty should not be imposed under Section 271(1)(a) for concealment of the income assessed under other sources, under house property and professional income, concealed earlier."

3. On July 22, 1964, the ITO issued a notice under Section 274 read with Section 271 of the I.T. Act, 1961, and referred the case, under Section 274(2) of the Act, to the IAC on August 12, 1964. The TAG issued the show-cause notice on October 23, 1964, and after hearing the assessee's representative imposed a penalty of Rs. 16,000 on November 5, 1965. The Tribunal has set aside the penalty by holding that the penalty proceeding was not validly initiated and has referred the following question to us :

"Whether, on the facts and in the circumstances of the case, the proceedings for imposition of penalty could be said to have been initiated in the course of the assessment proceedings within the meaning of Section 275 of the I.T. Act, 1961 ?"

4. Mr. Ajit Sengupta, the learned counsel for the revenue, has contended before us that the above question should be answered in the affirmative and in favour of the revenue by following the decision of the Supreme Court in the case of D.M. Manasvi v. CIT [1972] 86 ITR 557.

5. On the other hand it has been contended by Mr. Kalyan Ray, the learned counsel for the assessee, that the above decision of the Supreme Court is against the revenue for, according to him, the ITO was not satisfied in the course of the assessment proceedings that the assessee had concealed her income and accordingly the penalty proceeding was invalid. He has also argued that in view of the expression "appears" used by the ITO in the notice dated July 22, 1964, it should be held that the ITO was not satisfied in the course of the assessment proceedings that the assessee had concealed her income.

6. But we are not impressed by the contentions of Mr. Ray. It has been held in Manasvi's case that before initiating the penalty proceedings the ITO must be satisfied in the course of the assessment proceedings that the assessee had concealed his income and that his satisfaction, in the very nature of things, precedes the issuance of the notice which is a consequence of his said satisfaction.

7. It has been held by the Supreme Court in the case of CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 that the ITO was satisfied in the course of the assessment proceedings that the assessee had concealed its income in view of the endorsement made by the ITO in the assessment order to the effect that action under Section 28 should be taken against the asses-see for concealment of income.

8. The endorsement made by the ITO in the instant case before us clearly indicates that the ITO was satisfied in the course of the assessment proceedings that the assessee had concealed her income and the word "appears" used in the said notice, read in its context, also conclusively shows that the ITO was satisfied in the said assessment proceeding that the assessee had concealed her income.

9. In the premises, we return our answer to the question in the affirmative and in favour of the revenue.

10. There will be no order as to costs.

Dipak Kumar Sen, J.

11. I agree.