1978 (9) TMI 28 - HC - Income Tax

Summary

Issues:
1. Applicability of Explanation added to s. 271(1)(c) of the Income Tax Act, 1961, with effect from 1st April, 1964, to penalty proceedings for assessment years 1961-62, 1962-63, and 1963-64.
2. Determination of the law applicable to penalty proceedings regarding concealment of income based on the date of default.

Analysis:
1. The consolidated reference for the assessment years 1961-62, 1962-63, and 1963-64 raised the issue of whether the Explanation added to s. 271(1)(c) of the Income Tax Act, 1961, post its amendment on 1st April, 1964, would apply to penalty proceedings, even if the returns for these years were filed before the amendment. The Tribunal held that the pre-amendment version of s. 271(1)(c) was applicable in this case. The Tribunal also found no concealment of income by the assessee in any of the three years in question, leading to the reference at the instance of the Commissioner.

2. The crux of the issue revolved around the determination of the law applicable to penalty proceedings concerning concealment of income based on the date of default. The revenue contended that the law applicable to penalty proceedings should be the one in force at the time of filing the return, which in this case was after the amendment on 1st April, 1964. Citing relevant case law, the revenue argued that the amended provision of s. 271 should apply to anyone filing an incorrect return post the amendment, irrespective of the assessment year to which it pertains. However, the court relied on precedents such as CIT v. Ram Achal Ram Sewak and Addl CIT v. Jiwan Lai Shah, emphasizing that for penalty proceedings, the relevant return is the original one filed before the amendment. As the original returns for all three years were submitted before 1st April, 1964, the subsequent returns filed post-amendment were deemed irrelevant.

In conclusion, the court reframed the question to clarify whether the Explanation to section 271(1)(c) was applicable to the assessment years in question, where the original returns were filed before but subsequent returns were submitted after 1st April, 1964. The court ruled in favor of the assessee, holding that the Explanation was not applicable to the penalty proceedings for the mentioned years.