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Issues involved: Interpretation of u/s 271(1)(c) of the Income-tax Act, 1961 regarding retrospective effect of amendment made by the Finance Act, 1968 on penalty computation for assessment years 1960-61 and 1961-62.
Summary: The High Court of Allahabad addressed a reference u/s 256(1) of the Income-tax Act, 1961 regarding the retrospective application of clause (iii) of sub-section (1) of section 271 as amended by the Finance Act, 1968. The case involved assessments for the years 1960-61 and 1961-62, where the assessee filed revised returns in response to notices under section 148 after certain discrepancies were discovered. The Inspecting Assistant Commissioner imposed penalties exceeding Rs. 1,000 for concealment of income, based on the amended penalty provisions. However, the Tribunal held that the penalty should be computed based on the law prevailing during the assessment years in question, not the amended law post-1968. The Tribunal's decision was influenced by the fact that the amendment increased the penalty to the concealed income amount, whereas previously it was fixed at 20% of the tax sought to be avoided. The High Court relied on a previous decision to conclude that penalties should be imposed based on the law in force during the original returns, not the amended law. Therefore, the Court ruled in favor of the assessee, determining that the penalty should be calculated as per the pre-amendment provisions. The department's appeal was dismissed, and the assessee was awarded costs amounting to Rs. 200, including counsel's fee. This judgment clarifies the application of penalty provisions u/s 271(1)(c) of the Income-tax Act, 1961 in cases where revised returns are filed after amendments to the law. The Court emphasized that penalties should be imposed based on the law prevailing during the original assessment years, not the amended provisions introduced subsequently.
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