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TMI Blog1985 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... in. 3. Subsequently, the ITO found that the assessee was having half share in a house situated at Khatauli. It was sold on19-7-1968for Rs. 15,000. There was capital gain of Rs. 4,400 on the sale of this property. Accordingly, the ITO issued notice under section 147(a)/148 of the Income-tax Act, 1961 ('the Act'). In pursuance of the service of the notice the assessee filed the return on7-1-1980. Even in this return capital gain was not disclosed. The ITO after hearing the assessee added capital gain in the hands of the assessee and reassessment was done accordingly. At the time of completing the reassessment the ITO started penalty proceedings under section 271(1)(c) of the Act. 4. In spite of service of show-cause notice the assessee di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of income takes place on the date on which the act of concealment takes place. The act of concealment takes place when the return is filed. In the present case the original return was filed on15-1-1970. In that return capital gain was not disclosed. No doubt in the return filed in pursuance of service of notice under section 148 also the capital gain was not disclosed but in view of the decision in the case of Joginder Singh there has been concealment of income when return was filed originally. The reassessment order was passed on8-3-1980. At that time initiation of proceedings under section 271(1)(c) was made by the ITO. The moment the ITO passes the order for initiating penalty proceedings, the proceedings stand initiated by the ITO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw on the date of the first return in which the income is concealed that should be held to govern levy of penalty in such cases. We may point out that there may be cases where penalty proceedings are initiated in the course of reassessment proceedings. Here, a first reaction would be that it is the date of the return filed in the course of the reassessment proceedings that would be relevant to determine the law that would govern the penalty proceedings. The issue would have been simple if one could say that a penalty could be imposed in the course of reassessment proceedings only for a concealment or offence committed in the course of such proceedings. But, on this issue, there is a long line of decisions, which have received approval of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying the simple test and necessitated a deeper consideration of the position in the category of cases. 8. Once this principle is recognised, it will be clear that penalty proceedings, even if initiated in the course of reassessment proceedings, should be correlated to the return made in the course of original assessment proceedings and not that filed during the reassessment proceedings. In order to facilitate an easier understanding one may take, as a concrete example, an assessee whose real income is Rs. 50,000 but who conceals a part thereof. The following types of situations could arise for consideration : (a) The assessee returns Rs. 10,000 which is accepted. However, when notice under section 148 is given, he returns an income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings are initiated and the penalty is imposed only in the course of reassessment proceedings, it will be only logical to hold that the penalty is being levied only with reference to the act of concealment in the return filed during the original assessment proceedings which the ITO has power to do. This is because though concealment is detected in the course of reassessment, it has obviously been there--whether discovered or not--even at the time of original assessment. Though the proceedings are separate, the assessment year is one and the assessee's offence of concealment is referable to the extent to which the assessee has avoided payment of tax on the total income as finally determined by returning it at lower figure shown in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section, the amount of income (as determined by the Income-tax officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty. " Section 274 was procedural in nature. Sub-section (2) of section 274 was deleted with effect from1-4-1976. Under the circumstances after that date there remains no provision for making reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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