1985 (4) TMI 52 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was correct in holding that penalty had to be levied with reference to the return filed on December 31, 1965.
2. Determination of the applicable provision of law for fixing the penalty.
3. The relevance of concealment of income in the original return versus the revised return.
4. The applicability of the Supreme Court decision in Malbary & Bros. v. CIT.
5. The possibility of multiple penalties for the same concealment.

Issue-wise Detailed Analysis:

1. Whether the Tribunal was correct in holding that penalty had to be levied with reference to the return filed on December 31, 1965:

The Tribunal held that the penalty proceedings should be completed in accordance with the provisions of Section 271 as it stood at the time when the assessee filed the return under Section 139 on December 31, 1965. The assessee initially filed a return showing an income of Rs. 33,979, which was later assessed at Rs. 49,710. Subsequent investigations revealed additional credits aggregating Rs. 58,000, leading to reassessment proceedings. The Tribunal's decision was based on the principle that the concealment of income or furnishing of inaccurate particulars in the original return under Section 139 completes the offence, and any subsequent returns or reassessments do not constitute fresh causes of action.

2. Determination of the applicable provision of law for fixing the penalty:

The bone of contention was whether the provisions of Section 271(1) of the Act, as it stood prior to its amendment in 1968 or as it stood on January 5, 1970, after the amendment of 1968, would apply. The court noted that under the provision prior to April 1, 1968, the penalty for concealment of income was correlated to the tax payable, whereas the amended provision, effective from April 1, 1968, correlated the penalty to the income concealed. The court concluded that the relevant provision for imposing the penalty is the one that existed at the time the original return was filed, i.e., December 31, 1965.

3. The relevance of concealment of income in the original return versus the revised return:

The court emphasized that the concealment of income or furnishing of inaccurate particulars in the original return filed under Section 139 completes the offence. The subsequent revised return, even if it discloses the previously concealed income, does not constitute a new offence. The purpose of the enquiry under Section 147 is to determine the concealed or escaped income, but the penalty is related to the original concealment.

4. The applicability of the Supreme Court decision in Malbary & Bros. v. CIT:

The Revenue's counsel referred to the Supreme Court decision in Malbary & Bros. v. CIT, which dealt with the imposition of penalties for concealment of income. The court noted that the Supreme Court decision clarified that while two orders of penalty for the same concealment cannot stand simultaneously, the Income Tax Officer (ITO) could recall an earlier penalty order and impose a higher penalty based on new facts. However, this decision did not support the argument that multiple penalties could be imposed for the same concealment.

5. The possibility of multiple penalties for the same concealment:

The court rejected the contention that multiple penalties could be imposed for the same concealment. It held that only one enforceable order of penalty could be imposed for the concealment of income in the original return. The court cited several decisions, including those from the Punjab & Haryana High Court and the Madras High Court, which supported the view that the law applicable for the imposition of penalty is determined with reference to the date of the original return, and no fresh cause of action arises from the filing of a revised return.

Conclusion:

The court answered the reference in the affirmative, in favor of the assessee and against the Revenue. The penalty should be levied with reference to the return filed on December 31, 1965, and the applicable provision of law for fixing the penalty is the one that existed at that time. The judgment emphasized that the concealment of income in the original return completes the offence, and no multiple penalties can be imposed for the same concealment.