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TMI Blog1974 (2) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ice filed a revised return and disclosed the same income on which it was originally assessed. A supplementary assessment was made on January 15, 1966, by including the following amounts : Rs. (1) Unexplained investments 50,000 (2) Interest received thereon 2,783 ----------- 52,783 ----------- Thereafter, the Income-tax Officer initiated penalty proceedings under section 271(1)(c), and inasmuch as, in his opinion, the penalty imposable exceeded Rs. 1,000, he referred the matter to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner thereafter issued a notice under section 274(2) of the Act to the assessee requiring it to show cause why penalty should not be imposed. In response to the notice, the assessee contended, inter alia, that : (i) the assumption of jurisdiction by the Inspecting Assistant Commissioner was not valid as he was not satisfied that the assessee had concealed the particulars of his income during the course of the assessment proceedings, which was a condition for initiation of the penalty proceedings under section 271(1)(c) of the Act ; (ii) that the deposits were in the names of members of the assessee Hindu undivided fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h pertains to the domain of procedural law, and inasmuch as penalty proceedings against the assessee were pending, when the Explanation to section 271(1)(c) was introduced by section 40 of the Finance Act, 1964, with effect from April 1, 1964, and as such the penalty proceedings had to be decided by recourse to the Explanation, and the Tribunal has committed an error in not doing so. Section 271(1)(c) of the Income-tax Act, 1961, together with the Explanation may be quoted : " 271. Failure to furnish returns, comply with notices, concealment of income, etc.--(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 deliberately furnished-inaccurate particulars of such income, ............. Explanation.--Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanations referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished inaccurate particulars of such income ........... " It will be noticed that after section 271 was amended by section 40 of the Finance Act, 1964, the word " deliberately " occurring in section 271(1)(c) between the word " or " and the word " furnished " was omitted. Now, so far as section 271(1) is concerned, it is not denied that this sub-clause is not a rule of evidence, but is one of substantive law. Therefore, so far as penalty in respect of the original return is concerned that has got to be adjudged with reference to section 271(1)(c) as it stood before the amendment. The penalty under the unamended sub-clause could have been imposed only in case an assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. It is apparent that the fiction created by the Explanation cannot possibly apply to cases under section 271(1)(c) as it stood before the amendment. The reason is that the fiction that is created by the Explanation extends only to cases where " the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income". and not to cases " where an assessee has concealed the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en furnished. " This sub-clause shows that the amount of penalty is fixed by reference to the amount of income in respect of which concealment has been made or inaccurate particulars have been furnished, and the maximum that may be imposed is a sum which does not exceed twice the amount of income concealed. The question that arises is as to whether in a case where an assessee has concealed the particulars of his income or furnished inaccurate particulars of such income in the original return, and as such he becomes liable to penalty, a second penalty can be imposed for concealment or inaccurate furnishing of particulars of income when he files a return in pursuance of a notice under section 148. The repercussions of the acceptance of the argument raised by counsel for the department may be examined with reference to particular cases. To begin with, we shall take a case where an assessee has concealed the particulars of his income or furnished inaccurate particulars of such income in his original return as also in the return filed in pursuance of a notice under section 148. If the argument of the department is accepted, the assessee would become liable to two penalties, one in res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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