MANSUKHLAL & BROTHERS, BOMBAY versus COMMISSIONER OF INCOME-TAX, BOMBAY

Citation: [1969] 1 S.C.R. 970 · Decided: 03-09-1968 · Supreme Court of India · Bench: V. RAMASWAMI · Disposal: Dismissed

Judgment (excerpt)

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MANSUKHLAL & BROTHERS, BOMBAY 
v. 
COMMISSIOl'iER 011 INCOME-TAX, BOMBAY 
September 3, 1968 
[V. RAMASWAMI AND A. N. GROVER, JJ.) 
Income-tax Act (11 of 1922), s. 28(1) (c)-'Avoi.Jed· and "incmn•! as 
returned', 1neani11g of--,Scope of clause. 
Under s. 28( l) (c) of the Inaome-tax Act, 1922, if an assessee conceals 
particulars of his income, then, in addition to any tax iJayablc by him, 
he may be directed to pay, by way of penalty, a sum not exceeding one 
A 
B 
and a half times the amount of the tax which would have been avoided c 
if the income as returned by him had been accepted as correct. 
For the assessment year 194849, the asscssee showed an income of 
Rs. 45,904 in his return. 
'fhe Department disalluwcJ c;.,;rtuia deductions 
and corrected the figure to Rs. 48.135. It also added two other items; 
(i) Rs. 90,000 which was not concealed but which should have been in-
cluded in the assesscc's return of income, and (ii) R'i. 24,000 v.rhich. "IVas 
income concealed by the asscssee. After ascertaining the asse~sce's income 
at Rs. 1,62,135 (Rs. 48.135 +Rs. 90.000 -i- Rs. 24.000\, the Department 
sought to impose on the assessce a penalty of 
Rs. 
62,00\J 
under s. 
28(l)(c), on the hasis that the maximum penalty tha' eould be imposed 
is one and a half times the amount of diffe'rencc between the tax on Rs. 
1,62,135 (ascertained income) and the tax on Rs. 45,904 
!returned 
income). The assessce contended that the penalty under the scc'tion was 
in the nature of additional tax. that it ~hould be correlated to the tax 
evaded and should not he disp·roportiOnate to the incon1c conceJled, which 
'"'as only Rs. 24,000 in 1he present case. 
The as.)e~sec therefore ur)'.!Cd 
that the income as retu"rncd should he taken as R;. 1,3:; 135 (Rs. 48,135+ 
Rs. 90.000) and that only Rs. 24,000 (the income found to be concealed) 
should he taken into account for purposes of penally under the section 
and 1hat the maximum penalty that could be impo5'ed on that basis would 
be one and a half times the difference between the ta< on Rs. l ,62.135 
and the tax on Rs. [.38, 135. 
The High Court. on reference. held in favour o: the Deparlment. 
In appeal to this (~ourt. 
HELD (rejecting the asscssce's contention) : 
The observations in 
Abraham 
v_ 
/_ T. 0 .. Kottayam 
(1961) 
41 
J.T.R. 425, and Malbary v. C.l.T. Bombay, North. 51 J.T.R. 295. that 
the penalty under the section should not be totally ctisp·roportionatc to the 
amount concealed or should be correlated to the ~1n1ount of tax. evaded. 
should not be divorced from their context 
The object of the provision 
being to impose penalties for tho! acts of comm1ss1on or omission set out 
therein as an effective deterrent against tax: 
eva~ion, the object can be 
achieved only if the penaltv c.in be imposed irrespective of the amount 
concealed. [976 B-D; 978 F-G] 
C. /_ T., Burma v. A. A. R. Chrttiar Firm. 1 l.T.R. 285, 
A . .4. R. 
Chettiar v. C.1.T., Bunna 2 I.T.R. 386 and Kc.lidindi Subharaju Gopalara;u 
v. E./.'/' . . Madras, 28 I.T.R. 162 approvl'd. 
I> 
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F 
G 
II 
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A 
B 
c 
MANSUKHLAL V. C.I.T. (Grover, J.) 
9 71 • 
Lord Howard De Walden v. Inland Rev. Commrs. [1942] 1 K.B. 389 
and Inland Rev. Commrs. v. Hinchy [1960] 1 All E.R. 505, referred to. 
(2) The word 'avoided' in the section does not mean evaded. 
lt 
is used in the sense of escapement. The Legislature wanted the incon1e·· 
tax authorities to determine what would have been the amount of tax 
that would have esc!aped assessment had the income as shown in the 
return been accepted as correct and one and a half tin1-es that amount 
would be the maximum penalty which can be imposed when it was dis-
covered that income had -been concealed. 
So 
far 
as 
the 
expression 
'income as returned' is concerned, it means inconw as shown in the return 
filed under s. 2.2. and not the income computed or ascertained by the 
income-tax authorities minus the income added on the gTound of con-
cealment. 
Therefore, under s. 28 ( 1) ( c), if an item of concealment is 
discovered, the maximum penalty which can be imposed is one and a 
half times the difference between the tax on the total income as 
finally 
assessed and the tax on the income as shown in the afisessee' return, irres-
pective of the amount of concealment. [978 B-F] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 864 of 
1966. 
Appeal by special leave from the judgment and ·order dated 
D 
24th February 1965 of the Bombay High Court in Income-tax

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