1972 (4) TMI 34 - HC - Income Tax

Law Applicable - the law as on the first day of the assessment year or the law as on the date of filing the return - Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty of Rs. 10,500 levied under the Explanation to section 271(1)(c) ? held that law as on the date of filing the return has to be applied If there is a false return the penalty provisions become operative, otherwise not, and the question whether the return is false or not falls for determination when the return is filed. In the present case the return was filed on the 9th of April, 1964, when section 271, as it stands amended, was on the statute book and, therefore, effect had to be given to that provision

Issues Involved:

1. Validity of the penalty imposed under Explanation to section 271(1)(c) of the Income-tax Act, 1961.
2. Determination of the applicability of the amended section 271(1)(c) based on the date of filing the return versus the assessment year.
3. Interpretation of "concealment" in the context of filing returns and the imposition of penalties.

Detailed Analysis:

1. Validity of the Penalty Imposed under Explanation to Section 271(1)(c):

The core issue was whether the Tribunal was correct in law in deleting the penalty of Rs. 10,500 levied under the Explanation to section 271(1)(c). The assessee, a commission agent for goats and sheep, filed a return showing an income of Rs. 60,166 for the assessment year 1963-64, which was later computed by the Income-tax Officer at Rs. 1,27,820. The officer added Rs. 41,420 as bad debts and Rs. 18,000 as cash credit from undisclosed sources, leading to penalty proceedings under section 271(1)(c). The Tribunal deleted the penalty, relying on the Delhi Bench's observations that the Explanation, which made filing a return with less than 80% of the assessed income a substantive offence, could not be given retrospective effect.

2. Applicability of the Amended Section 271(1)(c):

The Tribunal held that the applicability of the law should be determined with reference to the state of law in force on the first day of the assessment year, not the date of filing the return. The department argued that since the return was filed after April 1, 1964, the amended section 271(1)(c) should apply. The Court agreed with the department, stating that the concealment occurs when the return is filed, thus the provisions of section 271, as amended by the Finance Act of 1964, apply to returns filed after April 1, 1964.

3. Interpretation of "Concealment" and Imposition of Penalties:

The Court examined whether the concealment took place at the time of filing the return or earlier. It concluded that concealment is determined when the return is filed, as it is only then that the department can assess whether the particulars of income have been concealed. The Court cited several precedents, including Commissioner of Income-tax v. A. Rm. A. L. A. Arunachalam Chettiar and Ayyasami Nadar and Bros. v. Commissioner of Income-tax, supporting the view that concealment is linked to the return filed. The Court also referenced the Supreme Court's decision in Commissioner of Income-tax v. Anwar Ali, which distinguished penalty proceedings from assessment proceedings, emphasizing that penalties serve as a deterrent against default.

Conclusion:

The Court concluded that the Tribunal erred in deleting the penalty, as the return filed on April 9, 1964, was subject to the amended section 271(1)(c). The Court answered the referred question in the negative, favoring the department and against the assessee, without awarding costs due to the penalty already imposed. The decision underscores that the law in force at the time of filing the return governs the imposition of penalties for concealment.

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