1979 (8) TMI 2 - SC - Income Tax

Whether the Tribunal was, in law, right in sustaining the penalty of ₹ 2,955 by applying the provisions of section 271(1)(c)(iii) of the Income- tax Act, 1961, as amended w.e.f. April 1, 1968 - held that cl. (iii) substituted in sub-s. (1) of s. 271 of the I. T. Act, 1961, governs the case before us and, therefore, the penalty imposed on the assessee in the instant case is covered by that provision - We answer the question in the affirmative, in favour of the revenue

Summary

Issues:
Interpretation of penalty provisions under section 271 of the Income-tax Act, 1961 - Application of the law as it stood at the time of concealment or during the relevant assessment year - Conflict of opinion between different High Courts on the issue.

Detailed Analysis:

The case involved the question of whether an assessee, who concealed income, should be penalized under the provisions of section 271 of the Income-tax Act, 1961, as they stood at the time of concealment or during the relevant assessment year. The assessee, a partner in two firms, had not disclosed income from one of the firms in his return. The Income Tax Officer (ITO) made a best judgment assessment, determining concealed income. The penalty proceedings were initiated under the amended provision of section 271(1)(c)(iii) of the Act, post the amendment by the Finance Act, 1968. The Income-tax Appellate Tribunal reduced the penalty but upheld the application of the amended provision, leading to a reference to the Supreme Court.

The Supreme Court analyzed the penalty provisions under section 271 of the Act. It noted that the law governing the assessment of total income and tax liability is different from the law applicable to penalties for concealment of income. The Court emphasized that the penalty is imposed for a wrongful act, and the law in force at the time of the wrongful act determines the penalty. Therefore, the substituted provision of section 271(1)(c)(iii) brought in by the Finance Act, 1968, was held to govern the case of the assessee, as the concealment occurred after its enactment.

Additionally, the Court addressed the contention that the return filed within the extended period should be deemed as filed within the original prescribed time limit. It clarified that the statute does not consider returns filed within the extended period as filed within the original deadline, as evidenced by provisions for interest on late filings. Thus, the Court rejected this argument and affirmed the applicability of the amended penalty provision to the case.

In conclusion, the Supreme Court answered the reference question in the affirmative, in favor of the revenue and against the assessee. The Court held that the penalty imposed on the assessee was covered by the substituted provision of section 271(1)(c)(iii) of the Income-tax Act, 1961, as amended by the Finance Act, 1968. The revenue was awarded costs for the reference proceedings.