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TMI Blog1978 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... elt satisfied that the assessee had concealed the particulars of certain income derived by it during the previous year in question and, therefore, initiated proceedings under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as " the Act"). Since he was of the opinion that the minimum penalty imposable was more than rupees one thousand, he referred the matter to the Inspecting Assistant Commissioner of Income-tax. After hearing the assessee, the Inspecting Assistant Commissioner was of the opinion that penalty was leviable in accordance with the provisions of the Act as amended by the Finance Act of 1968 which came into force on April 1, 1968, and levied a penalty of Rs. 6,000 by his order dated November 18, 1971. The assessee took up the matter in appeal before the Income-tax Appellate Tribunal. The Tribunal upheld the plea of the assessee that the penalty leviable in the instant case was the penalty which could have been imposed according to the provisions in force at the commencement of the assessment year and the provisions of the Act as amended by the Finance Act, 1968, were inapplicable to the case. Accordingly, it reduced the quantum of penalty payable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the question referred in ITRC No. 31 of 1974 : " Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the amendment to section 271(1)(c) with effect from April 1, 1968, applies to the assessment years 1968-69 onwards and not to earlier assessment years irrespective of the date of filing of the return ? " It is necessary at this stage to give a brief history of the law relating to imposition of penalty in the law of income-tax in India. The relevant part of section 28 of the Indian Income-tax Act, 1922, corresponding to section 271 of the Act, immediately prior to the coming into force of the Act, read as follows : " 28. Penalty for concealment of income or improper distribution of Profits.--(1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person-- ............ (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstituting sub-clause (iii) by the following new sub-clause (iii): " In the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished." Although the amendments made till the year 1968 are sufficient for the purpose of disposal of these cases, in order to make the picture complete we propose to set out the further amendment made to the above provision of law by the Taxation Laws (Amendment) Act, 1975, which came into force on 1st April, 1976. After the above amendment, sub-clause (iii) reads : " (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income ..........." (The rest of the amendment made to clause (iii) is unnecessary). Section 297(2)(f) and (g) of the Act, however, provided that : " (2) Notwithstanding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r it proper to keep before us the warning administered by Lord Halsbury in Quinn v. Leathem [1901] AC 495 at page 506. In that decision, the learned Lord observed : ........... there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all." The principle underlying the above observations is best illustrated by the two cases cited before us by the learned counsel : (1) C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425 (SC) and (2) Jain Brothers v. Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425 (SC). It is true that penalty proceedings under section 28 are included in the expression " assessment " and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest. It is significant that in C. A. Abraham's case [1961] 41 ITR 425 (SC) this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose. It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings [Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 ; [1972] 83 ITR 26 (SC)]. In England also it has never been doubted that such proceedings are penal in charact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdas [1958] 34 ITR 98 (Bom) the gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and, therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assesses." The relevant date for purposes of determining whether a person has committed an act which attracts penalty under section 271(1)(c) is the date on which a return in which information regarding his income liable to tax is withheld is filed or the date when inaccurate particulars are given by him and the year of assessment in respect of which the return is filed or inaccurate particulars are furnished would have no relevance. The next question is that if an act which attracts the imposition of penalty under section 271(1)(c) is committed, whether penalty should be imposed in accordance with the law prevailing at the time when such act is committed or in accordance with the law prevailing at the commencement of the assessment year in relation to which the return is filed or inaccurate particulars are furnished or in accordance with the law in force on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same effect is the view expressed by the Gauhati High Court in F. C. Agarwal v. Commissioner of Income-tax [1976] 102 ITR 408. In Commissioner of Income-tax v. Dataram Satpal [1975] 99 ITR 507, the Allahabad High Court held that in the case of concealment or of furnishing inaccurate particulars, the date of such a default would be the date on which the return was filed irrespective of the assessment year to which it related and on a plain reading of the amended provisions of section 271, it was clear that anyone who filed an incorrect return after April 1, 1964, was liable to be dealt with according to the amended provisions regardless of the year to which the return related. In that case, the assessment year was 1963-64 and a return was filed on October 13, 1964. It was held that the Explanation which came into force on April 1, 1964, was applicable to the case. The same High Court in Commissioner of Income-tax v. Ram Achal Ram Sewak [1977] 106 ITR 144 (All) held that the crucial date for determining the applicability of the Explanation was the date of filing of the return and as the return had been filed before the Explanation came into force, the case had to be dealt with w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, the penalty for such concealment of income would be leviable in accordance with the provisions of section 271 of the Act as they stood prior to the amendment and not after the amendment, even where the penalty proceedings had been initiated after the amendment came into force. Two principles emerge from the foregoing decisions : (1) the act of concealment which attracts provisions of section 271(1)(c) is committed on the date on which the return is filed; and (2) that the quantum of penalty imposable is governed by the law in force on the date on which the act of concealment takes place. It is also seen in some of the decisions referred to above that the case of C. A. Abraham [1961] 41 ITR 425 (SC) and the case of Jain Bros. [1970] 77 ITR 107 (SC) have been distinguished and are held to be not relevant for the purpose of determining the questions in issue. We have to notice at this stage a decision of the Orissa High Court in Commissioner of Income-tax v. K. C. Behera [1976] 103 ITR 479. The assessment year in that case was 1960-61. The assessee filed his return on August 23, 1965. The Income-tax Officer who made the assessment found that there was an undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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