JUDGMENT

1. The question propounded is--" Whether the amount of the penalty imposed in this case has been properly computed, having regard to the provisions of Section 28 of the Income Tax Act." The material facts are as follows:

2. For the purpose of assessment of income tax for the year 1930-31 the assessees, who carry on business as money-lenders at Maubin, returned their assessable income at Rs. 6,310. The Income Tax Officer, being satisfied " that the accounts produced did not contain the whole of the assessees money-lending transaction, and that the assessees had other accounts which were not produced " assessed their income at Rs. 75,892 under Section 23 (4) of the Act. The assessment at that figure is now final and conclusive. Thereafter proceedings were taken under Section 28 (1) of the Act for the purpose of imposing a penalty upon the assessees.

3. Section 28 (1)runs as follows:

If the Income Tax Officer, the Assistant Commissioner or the Commissioner, in the course of any proceedings under this Act is satisfied that an assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars of such income, and has thereby returned it below its real amount, he may direct that the assessee shall, in addition to the income tax payable by him, pay by way of penalty a sum not exceeding the amount of the income tax which would have been avoided if the income so returned by the assessee had been accepted as the correct income.

4. Now, under Section 28 (3):

No order shall be made under Sub-section (1) or Sub-section (2), unless the assessee or partner, as the case may be, has been heard, or has been given a reasonable opportunity of being heard.

5. At an enquiry held pursuant to Section 28 (3) the assessees "produced the accounts previously concealed, and the Income Tax Officer found that according to these books the assessees' income was Rs. 37,526," and imposed a penalty of Rs. 7,125-12-0 on the assessees, being " the difference between the tax on the income declared by the assessees and the tax on the income on which the assessment was made." On appeal the Assistant Commissioner gave credit to the assessees in respect of a further sum of Rs. 11,499 and reduced the amount of the penalty to Rs. 6,582-9-0, the penalty imposed " representing the difference between the tax due on the assessed income Rs. 75,892 and the tax due on Rs. 17,809." The order of the Assistant Commissioner was confirmed by the Commissioner. In these circumstances the assessees contend that the maximum penalty which could have been imposed under Section 28 (1) was the difference between the tax on Rs. 6,310 and the tax on Rs. 37,520. Mr. Foucar, on behalf of the assessees, submitted that the question to be decided was the amount of income tax that would have been avoided if the false return had been accepted as a correct return on the date when the false return was made. He contended that as at that time the estimated assessment under Section 23 (4) had not yet been made it followed that the only two figures that could have been taken into consideration were (i) the amount of income set out in the false return and (ii) the amount of the true income as subsequently ascertained in the course of the inquiry pursuant to Section 28 (3). I do not see my way so to read the section. As the Commissioner has pointed out in his order of 17th January, 1934:

When an assessee seeks to evade tax, the amount he tries to evade is the difference between the tax on his returned income and the tax on his real income. Granted. But Section 28 is not concerned with what the assessee tries to do ; it is concerned with what the Income Tax Officer can do when he detects the evasion. And it measures the penalty by the amount of tax that Government would in fact have lost if the return had been accepted.

6. It appears to me, as my brothers pointed out in the course of the argument, that " the amount of income tax which would have been avoided if the incom