1981 (10) TMI 16 - HC - Income Tax

Summary

Issues:
1. Interpretation of Section 271(1)(c) of the Income Tax Act regarding the applicability of penalty rates.
2. Retroactive application of the amended provision of Section 271(1)(c) from April 1, 1968, to an assessment year prior to the amendment.
3. Determining the crucial date for the imposition of penalty under Section 271(1)(c) based on the act of concealment.

Analysis:
The case involved a reference under Section 256(1) of the Income Tax Act, 1961, by the Income-tax Appellate Tribunal, Indore Bench. The assessee, a sandalwood dealer, did not voluntarily file an income tax return for the assessment year 1966-67. After the Income Tax Officer (ITO) issued a notice under Section 148, the assessee filed a return showing an income of Rs. 7,000 based on an estimate. The ITO, however, assessed the income at Rs. 15,000, leading to penalty proceedings under Section 271(1)(c) due to the declared income being less than 80% of the assessed income. The Income-tax Appellate Tribunal held that the amended provision of Section 271(1)(c) from April 1, 1968, could not be applied retrospectively to the income of earlier assessment years, irrespective of the return filing date, citing a decision of the Kerala High Court.

The crucial issue revolved around the interpretation of Section 271(1)(c) and the retroactive application of the amended penalty rates. The Court emphasized that the act of concealment triggering penalty under Section 271(1)(c) is based on the return of income filed by the assessee. Therefore, the date of filing the return is pivotal in determining the applicable law for penalty calculation. The Court rejected the Tribunal's view and held that the amended provision of Section 271(1)(c) from April 1, 1968, should apply even if the return was filed after the amendment, as the act of concealment is the determining factor for penalty imposition.

The Court referred to a previous case, Hajee K. Assainar v. CIT, which was overruled by a larger Bench of the same High Court in CIT v. K. Ahamed. The Court also cited the Madhya Pradesh High Court's decision in Addl. CIT v. Hiralal Munnalal, supporting the retrospective application of the amended provision. Consequently, the Court answered the referred question in the negative, stating that the Tribunal was not justified in holding that the amended Section 271(1)(c) from April 1, 1968, would not be applicable despite the return filing on January 8, 1969. No costs were awarded in the judgment.