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Issues:
- Whether the penalties imposed under section 271(1)(c) of the Income-tax Act for various assessment years were illegal. - Applicability of penalty provisions under the Income-tax Act, 1961 versus the Indian Income-tax Act, 1922. - Effect of the Supreme Court ruling in Jain Brothers v. Union of India [1970] 77 ITR 107 on penalty imposition. - Interpretation of section 297(2)(g) regarding the applicability of penal provisions based on the date of assessment. Analysis: The High Court of Madras addressed four questions referred under section 256 of the Income-tax Act, pertaining to the legality of penalties imposed under section 271(1)(c) for different assessment years. The assessees, a partnership firm, and an individual partner had concealed income details, leading to penalty proceedings initiated by the Inspecting Assistant Commissioner. The Tribunal initially held that penalties could only be levied under the 1922 Act, not the 1961 Act, and deemed the penalties excessive. However, the Supreme Court's judgment in Jain Brothers v. Union of India clarified that section 271(1)(c) applied even for concealment before 1962-63, aligning with section 297(2)(g) for penalty imposition. The assessees argued that the law applicable at the time of filing returns should govern, citing a Madras High Court judgment. Nonetheless, the High Court determined that the specific reference in section 297(2)(g) tied penal provisions to the assessment date, not return filing date. Consequently, the general principle from the earlier Madras High Court case did not apply, and the Supreme Court's ruling directly supported the revenue's position. Therefore, the High Court answered all questions against the assessees, upholding the legality of the penalties imposed under section 271(1)(c) for the respective assessment years. The revenue was awarded costs, including counsel's fee of Rs. 250.
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