1978 (8) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of Section 271(1)(c) of the I.T. Act, 1961.
2. Determination of the quantum of penalty under the amended provisions of the Finance Act, 1968.

Summary:

Issue 1: Applicability of Section 271(1)(c) of the I.T. Act, 1961
The Tribunal held that the provisions of section 271(1)(c) of the Act read with the Explanation were applicable. The assessee, a registered partnership firm, filed a return on 4th July, 1966, without disclosing any income from the truck business. A revised return filed on 20th February, 1969, disclosed an income of Rs. 2,840 from the truck business. However, the ITO found additional income from the truck business amounting to Rs. 29,039. The IAC imposed a penalty of Rs. 27,000 on the assessee for concealing particulars of income and furnishing inaccurate particulars. The Tribunal agreed with the IAC's findings that the non-disclosure was wilful and not an honest mistake.

Issue 2: Determination of the Quantum of Penalty under the Amended Provisions of the Finance Act, 1968
The Tribunal initially applied the amended law from 1st April, 1968, to determine the quantum of penalty, reducing it from Rs. 27,000 to Rs. 26,203. The assessee's counsel argued that the penalty should be based on the law in force when the first return was filed, not the amended law effective from 1st April, 1968. The court agreed, stating that the penalty is incurred when the return is filed, and the quantum of penalty must depend on the law in force at that time. The court emphasized that the revised return filed on 20th February, 1969, did not affect the penalty already incurred. The revised return was not within the scope of section 139(5) and thus had no legal consequence.

Conclusion
The court concluded that the Tribunal was right in applying section 271(1)(c) but erred in applying the amended clause (iii) of section 271(1) for fixing the quantum of penalty. The penalty should be determined based on the law as it stood when the original return was filed. The court's answer to the referred question was:
"The Tribunal was right in holding that the provisions of section 271(1)(c) were applicable but the Tribunal was not right in holding that clause (iii) of section 271(1) as amended by the Finance Act, 1968 had application for fixing the quantum of penalty."

There was no order as to costs of this reference.