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TMI Blog1981 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The assessee adjusted this amount of Rs. 2,000 by debiting it to its trading account. In the assessment proceedings, the Income-tax Officer found that the assessee had tried to conceal the income of Rs. 2,000 by false entry in the, trading account. The Income-tax Officer made an assessment order on November 26, 1971, under section 1433) of the Income-tax Act, 1961, or, a total income of Rs. 54,993 which included the amount of Rs. 2,000 which was said to have been concealed. Since the Income-tax Officer was of the opinion that the assessee bad concealed the income of Rs. 2,000, he initiated penalty proceedings under section 271(1)(c) by issuing a notice, under section 274(i) of the Act. The explanation given by the assessee before the Income-tax Officer raising a contention that penalty should not be imposed against him was rejected by the Income-tax Officer and he levied a penalty of Rs. 2,000 holding that the assessee had concealed the income of Rs. 2,000. The order of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner and the assessee then filed a second appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal took the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter for the imposition of penalty. " (Underlining is ours) The material provision with regard to the quantum of penalty in section 271(1)(iii) read as follows : " 271 (1). If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that, any person-... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-... (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. " Sub-section (2) of section 274 was as amended by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, and the amended provision read as follows: " Notwithstanding 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be operative, it will be difficult for US to accept the contention that the proceedings for imposition of penalty in the instant case were wholly without jurisdiction as held by the Tribunal. Section 274 expressly refers to the procedure. The liability to penalty is no doubt attracted by virtue of the provisions of section 271(1)(c), but how that liability is to be determined and by whom and what is the procedure to be adopted for the determination of that liability is provided for in section 274. Section 274 is thus clearly a procedural provision. It was not possible for Shri Dewani to point out how in the face of the express procedural provision in section 274(2) as it was operative on the date on which the assessment proceedings were concluded and the fact that the notice in the matter of imposition of penalty was issued on November 26, 1971, the Income-tax Officer was empowered to forward the case to the, Inspecting Assistant Commissioner. There was no provision of law which empowered the, Income-tax Officer to refer the case to the Inspecting Assistant Commissioner unless the amount of the income concealed exceeded Rs. 25,000. It is difficult for us to appreciate the reasoning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the default had been committed before the Amendment Act came into force and the law applicable to the levy of penalty for such defaults was the law as it stood at the time when the default is committed and not as it stood in the financial year for which the assessment was made, nor as it stood on the date when the penalty proceedings were initiated or when the penalty order was imposed. Pointing out that the amendment to the Gift-tax Act was made in April, 1961, and that it was not clear as to whether the amendment was intended to apply to defaults or concealments which had taken place earlier, and that in the absence of clear language, the amendment must be interpreted as applying to future offences, the Division Bench of the Madras High Court observed (at page 552); " In cases relating to concealment of income, the penal provisions that were in force on the date of filing the return, out of which concealment of income arises, can be made applicable." Section 17(1) of the Gift-tax Act is a provision which more or less corresponds to the substantive provision of penalty in section 271(1) of the Income-tax Act, which provides for minimum and maximum penalty. The question refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the provisions relating to penalty are of penal character and their object being to punish the assessee so as to deter him from transgressing the law in future, the quantum of penalty would have to be determined with reference to the law prevailing on the date when the act of concealment was committed and not when the penalty proceedings are initiated or completed. The learned judges, therefore, held that the law in force on December 2, 1970, when the return was filed was the one that would be applicable. It was contended before the Madras High Court on behalf of the Revenue that section 274(2 was a procedural provision and, therefore, the amendment would apply to all cases of infringement, whether committed before or after the amendment. This contention was negatived by the learned judges holding that the provision relates to the jurisdiction of the Income-tax Officer to deal with penalty proceedings, With respect to the learned judges, we are unable to concur with the view taken by them. It is no doubt true that when section 274(2) nominated either the Income-tax Officer or the, Inspecting Assistant Commissioner as authorities who are to deal with the penalty proceedings of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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