Penalty jurisdiction under section 28(1)(c) depends on where concealment is discovered; inseverable composite penalty fails entirely.

Penalty under section 28(1)(c) can be imposed only by the authority before which concealment or inaccurate particulars are found in the course of proceedings pending before that authority. Where additional income is discovered only in appellate proceedings before the Appellate Assistant Commissioner, the Income-tax Officer lacks jurisdiction to levy penalty for that amount, and the penalty is valid only in relation to the proceedings before the competent authority. A composite penalty order cannot be split into lawful and unlawful parts where no separate attribution is possible. Accordingly, an inseverable composite penalty covering both categories of income is invalid in its entirety.

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Issues: (i) Whether the Income-tax Officer had jurisdiction to levy penalty under section 28(1)(c) in respect of income discovered only in appellate proceedings before the Appellate Assistant Commissioner; (ii) Whether the penalty order was severable where a composite penalty was imposed taking into account income covered by both lawful and unlawful jurisdiction.

Issue (i): Whether the Income-tax Officer had jurisdiction to levy penalty under section 28(1)(c) in respect of income discovered only in appellate proceedings before the Appellate Assistant Commissioner.

Analysis: Section 28(1)(c) contemplates that the authority imposing penalty must be satisfied, in the course of proceedings pending before that authority, that the assessee has concealed income or furnished inaccurate particulars. The power is distinct for the Income-tax Officer, the Appellate Assistant Commissioner, and the Appellate Tribunal, and can be exercised only in relation to the proceedings before the particular authority. Since the additional income of Rs. 46,601 was discovered by the Appellate Assistant Commissioner in appellate proceedings, any penalty referable to that amount could be imposed only by that authority and not by the Income-tax Officer.

Conclusion: The Income-tax Officer lacked jurisdiction to levy penalty in respect of the income discovered by the Appellate Assistant Commissioner, and the cancellation of the penalty was justified.

Issue (ii): Whether the penalty order was severable where a composite penalty was imposed taking into account income covered by both lawful and unlawful jurisdiction.

Analysis: The penalty imposed was a single composite sum of Rs. 10,000. It was not possible to attribute any specific part of that sum to the income in respect of which the Income-tax Officer had jurisdiction and to separate the remainder attributable to income found only in appellate proceedings. The order therefore could not be split into valid and invalid components.

Conclusion: The penalty order was not severable and was liable to be quashed in entirety.

Final Conclusion: The reference was answered by holding that the penalty imposed by the Income-tax Officer was invalid because it included income discovered only in appellate proceedings and the composite order could not be severed.

Ratio Decidendi: Penalty under section 28(1)(c) can be imposed only by the authority before which the concealment is discovered in the course of proceedings pending before that authority, and a composite penalty order is invalid in its entirety if the valid and invalid components are inseparable.

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