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Issues: Whether, for computing the maximum penalty under section 28(1)(c) of the Income-tax Act, 1922, the expression "income as returned" means only the income actually disclosed in the return, and whether the ceiling of penalty is to be worked out with reference to the tax avoided on the returned income as accepted, rather than being confined to the tax referable only to the income found concealed.
Analysis: The penalty provision was held to operate when concealment is established, and the measure of the maximum penalty was construed by its plain language. The words "income as returned" were treated as referring to the income disclosed in the return filed by the assessee, while "avoided" was read in the sense of tax that would have escaped assessment if that return had been accepted as correct. The Court rejected the contention that the penalty must be mathematically linked only to the concealed item or items, and held that the statutory ceiling depends on the difference between the tax on the income returned and the tax on the income finally assessed, not merely on the amount actually concealed.
Conclusion: The question was answered against the assessee and in favour of the Revenue; the maximum penalty under section 28(1)(c) is computed with reference to the tax avoided on the returned income as a whole, once concealment is proved.
Ratio Decidendi: Under section 28(1)(c) of the Income-tax Act, 1922, the ceiling on penalty is calculated by reference to the tax that would have escaped assessment had the returned income been accepted, and not by limiting the computation to the tax attributable only to the particular concealed items.
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