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Issues Involved:
1. Applicable law for the levy of penalty for concealment u/s 271(1)(c) of the I.T. Act, 1961. 2. Impact of revised returns on penalty provisions. 3. Impact of reassessment proceedings on penalty provisions. Summary: 1. Applicable Law for Penalty u/s 271(1)(c): The court reaffirmed that the law applicable for the assessment of income-tax is the law in force in the assessment year. This principle, established by the Privy Council and reiterated by the Supreme Court, was applied to determine the law applicable for the levy of penalty for concealment u/s 271(1)(c) of the I.T. Act, 1961. The court discussed three major changes in the penalty provisions: the substitution of the I.T. Act, 1961, amendments by the Finance Acts of 1964, 1968, and 1975, and amendments to ss. 274 and 275 of the I.T. Act. The court concluded that the principles applicable to these controversies are different and confined their discussion to the second aspect, which pertains to the amendments made by the Finance Act of 1968. 2. Impact of Revised Returns on Penalty Provisions: The court examined whether the penalty should be computed based on the provisions of s. 271(1)(c) as they stood before or after the amendment effective from April 1, 1968. The court referred to the Supreme Court's decision in Brij Mohan v. CIT, which clarified that the penalty is governed by the law on the date the wrongful act (concealment) is committed. Therefore, the law as it stood on the date of the original return, which contained the concealment, should govern the penalty. The court discussed the complications arising when multiple returns (original and revised) are filed and concluded that the penalty provisions applicable should be those in force at the date of the original return. 3. Impact of Reassessment Proceedings on Penalty Provisions: The court addressed the situation where penalty proceedings are initiated during reassessment proceedings. It held that penalty proceedings can be initiated for concealment detected during reassessment, even if the concealment occurred during the original assessment. The court provided examples to illustrate that the penalty should be based on the original return, even if the concealment is detected later. The court concluded that the substantive penal provisions applicable would be those in force at the date of the original return, not the date of the reassessment return. Conclusion: The court upheld the Tribunal's conclusion that the pre-1968 provisions should govern the imposition of the penalty in both cases, as the original returns were filed before April 1, 1968. The questions referred to the court were answered in the affirmative and in favor of the assessee, with no order as to costs due to the controversial nature of the issue.
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