1979 (10) TMI 57 - HC - Income Tax

Summary

Issues:
Interpretation of provisions of section 271(1)(c) regarding imposition of penalty based on the original return date versus the date of revised return.

Analysis:
The case involved a commission agent and dealer in silver ornaments who filed a return for the assessment year 1967-68 showing an income of Rs. 5,734 on October 3, 1967, and later filed a revised return on May 25, 1970, showing an income of Rs. 3,246. During a search by the Central Excise Department, various goods were recovered, and the assessee initially denied ownership but later surrendered amounts and agreed to additions in subsequent returns. The assessment was completed at Rs. 20,000, and penalty proceedings under section 271(1)(c) were initiated, leading to the imposition of a penalty of Rs. 13,000. The dispute centered around whether the penalty should be imposed based on the law as amended in 1968 or the law prevailing when the original return was filed in 1967.

The High Court referred to previous decisions where it was held that for penalty proceedings, the original return date is crucial. The court cited the case of CIT v. Ram Achal Ram Sewak, emphasizing that penalty determination should align with the law in force when the original return was filed. This principle was reiterated in subsequent cases such as Addl. CIT v. Krishna Subhkaran and Addl. CIT v. Mewa Lal Sankatha Prasad.

The department argued that a revised return supplants the original return, relying on the case of Amjad Ali Nazir Ali v. CIT. However, the court distinguished this argument by stating that a revised return cannot absolve an assessee of concealment if the original return was filed with deliberate concealment. The court highlighted that filing a revised return does not erase the concealment in the original return, as seen in the case of Amjad Ali where concealment persisted through multiple revised returns.

Additionally, the court dismissed the department's reliance on the Orissa High Court's decision in B. N. Sharma v. CIT, which diverged from the consistent view of the Allahabad High Court. The court also clarified that the Supreme Court's decision in N. A. Malbary and Bros. v. CIT did not impact the current case's determination. The court further explained that the extended limitation period under section 153(1)(c) should be calculated based on the actual date of the revised return, not the original return.

Ultimately, the High Court upheld the principle that penalty imposition should align with the law in force when the original return was filed, ruling in favor of the assessee and awarding costs.