Judgment

KHANNA, J. :- This judgment would dispose of four civil appeals Nos. 1447 to 1450 of 1969 which have been filed by the assessee by special leave against the judgment of Gujarat High Court whereby that court answered the following two questions in a reference under Section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) in the affirmative and in favour of the department :

"(1) Whether on the facts and in the circumstances of the case, the proceedings for the imposition of penalty were properly commenced in the course of any proceedings under the Act as required by Section 271 of the Income-tax Act, 1961 for the assessment years 1959-60 to 1962-63?

(2) Whether on the facts and in the circumstances of the case, there was any material or evidence before the Tribunal to hold that the assessee had deliberately concealed particulars of his income or deliberately furnished inaccurate particulars of such income as required by S. 271 (1) (c) of the Act for the assessment years 1959-60 to 1962-63?"

2. While answering question No. 1 in the affirmative, the High Court observed that so far as the assessment year 1961-62 was concerned the penalty proceedings were invalid.

3. The assessee is an individual and the matter relates to the assessment years 1959-60, 1960-61, 1961-62 and 1962-63. During the relevant years the assessee derived income from several sources. The assessment for the first year was made under section (3) of the Indian Income-tax Act, 1922. The Income-tax Officer subsequently found that income from the business found that income from the business in the name of M/s. Kohinoor Grain Mills Sales Depot (hereinafter referred to as the Kohinoor Mills) was not included in the return filed by the assessee and he had not shown any connection with or interest in the said business. For the subsequent three years the assessee disclosed 20 per cent as his share of the profits from Kohinoor Mills. The Income-tax Officer was of the opinion that Kohinoor Mills was not a genuine partnership but was the sole proprietorship concern of the assessee and the whole of the income from the concern belonged to the assessee. As the assessment for the first two years had already been completed before the Income-tax Officer got the information regarding the interest in Kohinoor Mills, the Income-tax Officer reopened the assessment for those two years. The income from the Kohinoor Mills was thereafter included in the income of the assessee for the first two years as well as in the assessment relating to the remaining two years. The order of the Income-tax Officer in this respect was upheld by the Appellate Assistant Commissioner as well as by the Income-tax Appellate Tribunal.

4. The non-disclosure of the business profits from Kohinoor Mills was considered by the Income-tax Officer to represent deliberate concealment, and so he initiated penalty proceedings under Section 271 of the Act for the four assessment years in question. As, however, the minimum penalty leviable under Section 271 (1) (c) of the Act exceeded the sum of rupees one thousand, the cases were referred under Section 274 (2) of the Act to the Inspecting Assistant Commissioner.

5. The Inspecting Assistant Commissioner thereupon gave an opportunity to the assessee of being heard and, after hearing him, came to the conclusion that the assessee had concealed his income and deliberately furnished inaccurate particulars thereof for all the four assessment years in question. He accordingly levied penalties of Rs. 21,062, Rs. 1,14,477, Rupees 2,02,584 and Rs. 1,02,584 and Rs. 1,02,731 for the assessment years 1959-60, 1960-61, 1961-62 and 1962-63 respectively. In appeal before the Tribunal it was submitted on behalf of the assessee that there had been no valid levy of the penalties because the penalty proceedings had not been commenced in the course of proceedings under the Act. The Tribudnal rejected this contention and observed that as the Income-tax Officer had give