Undisclosed income linked to an earlier year cannot sustain concealment penalty for a later assessment year.

Penalty for concealment cannot be sustained for an assessment year to which the undisclosed income does not belong. The Bombay HC treated penalty proceedings under section 28(1)(c) of the 1922 Act as penal in nature and held that an assessment finding is only evidentiary, not conclusive, in such proceedings. On the material recorded, the cash credits aggregating to Rs. 24,600 were made in the financial year ending 31 March 1949, so they related to assessment year 1949-50 and not 1950-51. The penalty for alleged non-disclosure in assessment year 1950-51 was therefore held unsustainable, against the Revenue and in favour of the assessee.

---

---

Issues: Whether penalty under section 28(1)(c) of the Indian Income-tax Act, 1922 could be sustained for non-disclosure of cash credits of Rs. 24,600 while assessing income for assessment year 1950-51, when the credits arose in the earlier financial year.

Analysis: The amount of Rs. 24,600 was treated in the assessment and appellate orders as income from undisclosed sources. In penalty proceedings, the assessee was entitled to contend that such income, if any, related to the financial year in which the credits were actually made and not to assessment year 1950-51. Penalty proceedings under section 28(1)(c) are penal in nature, and an assessment finding is only evidence, not conclusive proof. On the material on record, the credits aggregated to Rs. 24,600 were made in the financial year ending 31 March 1949, so the corresponding assessment year was 1949-50, not 1950-51.

Conclusion: The penalty could not be imposed for alleged non-disclosure of that income for assessment year 1950-51, and the answer was against the Revenue and in favour of the assessee.

Ratio Decidendi: Where income from an undisclosed source is referable to an earlier financial year, no penalty for concealment can be sustained for a later assessment year to which that income does not belong, and assessment findings do not bind the authority in penalty proceedings.

---