1978 (2) TMI 99 - HC - Income Tax

Summary

Issues:
Penalty imposition under section 271(1)(c) of the Income-tax Act, 1961 for assessment year 1963-64. Applicability of the Explanation to section 271(1) introduced on 1st April, 1964 to penalty proceedings.

Analysis:
The case involved a penalty imposition under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1963-64. The assessee had filed a return showing a total income of Rs. 11,084, but the Income-tax Officer assessed the income at Rs. 1,33,192, leading to penalty proceedings as the returned income was less than 80% of the assessed income. The Inspecting Assistant Commissioner imposed a penalty of Rs. 10,000 after finding that the assessee failed to prove that the discrepancy did not arise from fraud or neglect. The assessee appealed the penalty imposition. The Appellate Assistant Commissioner reduced the assessed income to Rs. 49,712, but the Tribunal upheld the penalty. The main issue was the applicability of the Explanation to section 271(1) introduced on 1st April, 1964, to the penalty proceedings for the assessment year 1963-64.

The Tribunal allowed the assessee's appeal, canceling the penalty, based on the argument that the Explanation added in 1964 did not apply to the assessment year 1963-64. The High Court, however, disagreed with this interpretation. It held that since the return was filed after the introduction of the Explanation, the offense occurred after the Explanation was in effect. The court cited precedents from the Allahabad High Court to support this view, emphasizing that the law applicable is that in force at the time of the offense. Therefore, the penalty proceedings in this case should be governed by the Explanation to section 271(1) of the Income-tax Act, 1961.

In conclusion, the High Court ruled that the penalty proceedings for the assessment year 1963-64 would be governed by the Explanation to section 271(1) of the Income-tax Act, 1961. The Tribunal's decision to not apply the Explanation was deemed unjustified. The judgment was delivered by Sabyasachi Mukharji J., with agreement from Sudhindra Mohan Guha J. No costs were awarded in this matter.