Successor penalty proceedings and concealment proof support penalty where prior hearing existed and explanation was unsupported.

A successor income-tax authority may continue penalty proceedings from the stage reached by the predecessor and impose penalty without a fresh notice or fresh explanation where the assessee had already been heard and did not seek reopening under section 5(7C) of the 1922 Act. For concealment under section 28(1)(c), an unsupported explanation for a cash credit, backed by vague entries and no evidence that the amount belonged to the wife, justified an inference of deliberate suppression. The penalty was therefore upheld as legally sustainable on both the procedural and substantive grounds stated.

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Issues: (i) Whether a successor Income-tax Officer could complete penalty proceedings and impose penalty without issuing a fresh notice or calling for a fresh explanation under section 28(3) read with section 5(7C) of the Indian Income-tax Act, 1922; (ii) Whether the materials on record justified imposition of penalty for concealment of income under section 28(1)(c) of the Indian Income-tax Act, 1922.

Issue (i): Whether a successor Income-tax Officer could complete penalty proceedings and impose penalty without issuing a fresh notice or calling for a fresh explanation under section 28(3) read with section 5(7C) of the Indian Income-tax Act, 1922.

Analysis: Section 28(3) required that the assessee be heard or be given a reasonable opportunity of being heard before penalty was imposed. Section 5(7C) empowered a succeeding income-tax authority to continue proceedings from the stage reached by the predecessor, unless the assessee demanded reopening. The assessee had already received notice and filed an explanation before the predecessor officer, and no demand for reopening was made before the successor. A fresh notice was therefore not necessary, and oral hearing was not the only mode of compliance with section 28(3).

Conclusion: The successor officer had authority to pass the penalty order, and the objection failed against the assessee.

Issue (ii): Whether the materials on record justified imposition of penalty for concealment of income under section 28(1)(c) of the Indian Income-tax Act, 1922.

Analysis: The explanation that the cash credit represented the wife's stridhan was unsupported by evidence. The account books did not even name the lady, the entry description was vague, and no material was produced to establish that the amount belonged to her. On these facts, the authorities had sufficient basis to infer deliberate suppression of income, and the case differed materially from the cited precedent relied upon by the assessee.

Conclusion: The penalty for concealment of income was legally valid, and this issue was decided against the assessee.

Final Conclusion: The reference was answered in favour of the Revenue on both questions, and the penalty order was upheld as valid.

Ratio Decidendi: Where the assessee has already been heard and does not demand reopening under section 5(7C), a successor income-tax authority may continue the proceeding and impose penalty without issuing a fresh notice, and a penalty for concealment is sustainable where the explanation for a cash credit is unsupported by evidence and the surrounding facts justify an inference of deliberate suppression.

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