1978 (11) TMI 36 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was justified in reducing the quantum of penalties u/s 271(1)(c) of the Act to 20% of the tax sought to be evaded by applying the law which was in force before 1-4-1968.

Summary:

Issue 1: Justification of Tribunal's Reduction of Penalty:
The High Court of Patna addressed whether the Tribunal was justified in reducing the penalties u/s 271(1)(c) of the Income-tax Act to 20% of the tax sought to be evaded by applying the pre-1-4-1968 law. The relevant assessment years were 1965-66 and 1966-67, with returns filed on March 1, 1967. The Income Tax Officer (ITO) found that significant amounts had escaped assessment and initiated penal proceedings under s. 271(1)(c) for concealment of income.

The Inspecting Assistant Commissioner (IAC) imposed penalties based on the amended law effective from April 1, 1968, which increased the penalty quantum. However, the Tribunal reduced the penalties, applying the law as it stood before the amendment, considering the original returns were filed before April 1, 1968.

The Commissioner of Income Tax (CIT) contested this, arguing that the relevant date for applying the law should be when the authority was satisfied that the assessee had concealed income, which was after the amendment. The assessee's counsel contended that the applicable law should be the one in force at the time of filing the original return.

The High Court examined the Supreme Court decision in Jain Brothers v. Union of India [1970] 77 ITR 107, which emphasized that the crucial date for penalty purposes is the completion of assessment. However, the High Court distinguished this case, noting that the concealment occurred with the original returns filed before the amendment.

The Court concluded that the law as it stood before the amendment should apply, as the concealment was related to the original returns filed before April 1, 1968. The Court also referenced the principle that substantive law, such as penalty provisions, cannot have retrospective effect unless explicitly stated by the Legislature.

Conclusion:
The High Court affirmed the Tribunal's decision to impose a minimum penalty by applying the pre-amendment law, answering the referred question in the affirmative and in favor of the assessee. The assessee was awarded costs, with a hearing fee assessed at Rs. 200.