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Issues: Interpretation of penalty under section 271(1)(c) of the Income-tax Act, 1961 post-amendment.
Analysis: The case involved a penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, amounting to Rs. 14,500. The Appellate Tribunal, applying the principles from Commissioner of Income-tax v. Anwar Ali, found that the revenue failed to establish that the assessee concealed income or furnished inaccurate particulars. Consequently, the Tribunal allowed the appeal and directed a refund of the penalty amount if already recovered. The reference to the High Court arose from this appellate order. The key legal provisions in question were section 28(1)(c) of the Indian Income-tax Act, 1922, and section 271(1)(c) of the Income-tax Act, 1961. Notably, section 271(1)(c) was amended on April 1, 1964, removing the term "deliberately" from the provision and introducing an Explanation regarding the calculation of total income. The Tribunal, in this case, failed to consider the amended law in its decision-making process, relying instead on the precedent set by Anwar Ali's case, which was based on the law prior to the 1964 amendment. The High Court held that the Tribunal's decision was flawed as it did not apply the correct law post-amendment. The Court emphasized that the Tribunal should have assessed the penalty validity based on the amended section 271(1)(c) and the accompanying Explanation. Therefore, the matter was remanded back to the Tribunal with directions to reconsider the penalty imposition in light of the correct legal framework post-April 1, 1964. In conclusion, the High Court answered the referred question by stating that the Appellate Tribunal's cancellation of the penalty was not justified in law. The judgment was a reminder for the Tribunal to apply the correct legal provisions post-amendment and make a fresh determination on the penalty imposition. The decision was unanimous, with both judges concurring on the analysis and outcome.
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