JUDGMENT

This is an Income Tax reference u/s 66 (3) of the Act arising out of the assessment o Messrs. Lachhman Das Brijballabh Das for the assessment year 1934-35. The assessees accounting year was the Diwali year from November 1932 to November 1933 and the profits of that period have got to be considered for the purpose of this reference.

It appears that when called upon to submit a return he filed one, but the Income Tax Officer was of the opinion that the return did not furnish true particulars and therefore he went carefully into the regular account books of the assessee and considered certain facts which became evident from a little investigation. He increased the profits of the assessee and being of the opinion that the assessee had concealed the particulars of his income he imposed a penalty u/s 28 of the Act.

There was an appeal to the Assistant Commissioner and that officer, although he reduced the amount of the tax, was also of the opinion that there had been deliberate concealment and therefore a penalty was imposed by him though in a lesser sum.

The assessee then applied to the Commissioner u/s 33 of the Act and there was an application for a reference to this Court u/s 66 (2) of the Act. The learned Commissioner gave some relief u/s 33, but he did not refer the cases to this Court. The tax and the penalty were reduced, but the learned Commissioner was also of the opinion that there had been concealment of the income.

The assessee then applied to this Court u/s 66 (3) of the Act on the 30th of July 1936 and by an order of this Court dated the 28th July 1939 the Commissioner was required by us to state a case and to formulate certain questions of law for our decision. These questions of law are mentioned in the application to us and this Court was of the opinion that question No 1. was not fair and was not couched in happy language, but the other three questions did arise and the learned commissioner was required to refer those question did arise and the learned Commissioner was required to refer those questions of law for our decision. It was further made clear that if any question of law arose out of the first question mentioned in the application of the assessee that question may also be referred to us in a different form, but we made it quite clear that the facts should be found definitely and categorically by the Commissioner.

It is under these circumstance that the present reference has been made to us, and as would have become evident by this time the main question of controversy between the revenue authorities and the assessee was the question of concealment. The first question that has been referred to us is as follows :

"Whether under the circumstances of the case in which the difference between the Income Tax Officer regarding certain income and its consequents non-entry in the return Section 22 (2) depends solely on the method of computation and accounting adopted by either party,, could it be said to be a deliberate concealment of income or particulars of such income and whether provisions of Section 28, Income Tax Act, apply to such a case? "

The assessee has income from interest on securities, property and business in grain, money-lending, cotton and commission agency. In October 1918 he had advanced a loan of Rs. 65,000 to Babulal Lachhman Das, and Hiralal under a usufructuary mortgage in respect of property known as Shankerganj. Shortly after, in December 1918 he advanced another sum of Rs. 40,000 to the same debtors under a simple mortgage and the properties mortgaged were the equity of redemption so far as Shankerganj property was concerned and the village Sahil and a house in Lohar Gali. In 1920 the assessee advanced a sum of Rs. 7,200 to Hirala, one of the previous debtors, under a simple mortgage and the property mortgaged was the share of Hiralal in the three properties mentioned above. In the year 1924 the assessee brought a suit in respect of the simple mortgage of Rs. 40,000 and obtained a decree.