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TMI Blog1988 (2) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... of the statute, as they existed on the date the order levying penalty was passed. The return was filed on 21-8-1975. The order levying penalty was passed by the ITO on 18-3-1980. In between the date of the filing of the return by the assessee and the date of levy of penalty for concealment by the ITO, there had been amendment of the provisions of law dealing with the imposition of penalty. The law was amended by the Taxation Laws (Amendment) Act, 1975 with effect from 1st April 1976. Prior to this amendment, penalty impossible was to be calculated by reference to the amount of income concealed, whereas after the amendment it was to be calculated by reference to the amount of tax sought to be evaded. It is, thus, obvious that as per the amended provisions, lesser penalty was leviable as compared with the penalty that could be levied prior to the amendment. For deciding this matter, we are concerned with sub-clause (iii) of section 271(1). The relevant part of the section, both as it stood before and after the amendment, is as under : Before amendment : "(iii) in the case referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol. It was stated that the loss in the quantity of petrol on account of leakage was made good by fresh purchase of petrol after withdrawing money from cash book. It was stated that the withdrawals from the cash book were utilised for the fresh purchases of petrol. The contention of the assessee hence was that but for these purchases, it would have shown lesser stock-in-trade at the end of the year. The contention of the assessee was that there had been no suppression of assets. It was pointed out that it the cash at hand was shown less on account of the above mentioned withdrawals, it had been counter-balanced by showing stock-in-trade unaffected by the leakage. It was stated that if the leakage had not been made good by fresh purchases, it was obvious that lesser stock-in-trade would have been shown at the end of the year. On the other hand, it was pointed out by the departmental representative that the concealment is of Rs. 13,322 whereas the addition that had been made was only of Rs. 6,400. It has been pointed by him that the total gross profit was of Rs. 45,936 as under : &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intention of suppressing the assets. 3. The Tribunal had confirmed the addition holding as under : "We have considered the rival submissions and the facts on record. It appears to us that the contention of the learned Departmental Representative has merit. The leakage loss would affect vitally the closing stock of petrol. It would never affect the cash balance of the assessee. The entries of cash book extracted by us above clearly show the withdrawal of cash from the cash book. The learned counsel for the assessee has not been able to give any answer as what was done with this cash by the assessee-firm. With the cash having been taken out, the asset side is naturally inflated and as such the true profits of the assessee which are measured by the differences between the net assets of the assessee on the opening day and the net assets of the assessee on the closing day are clearly understated." The profit for the year is determined by comparing the net assets at the end of the year with the net assets at the beginning of the year. The assessee by suppressing its assets at the end of the year, suppressed its profit for the year. The addition of Rs. 6,406 had been sustained in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reached : (a) Though the default occurred in September, 1961, the date relevant for the purpose of initiation proceeding for imposition of penalty is when, following the assessment made, the Income-tax Officer decided to initiate penalty proceedings. (b) The proper provision to apply for dealing with the situation relating to penalty is as provided in section 271(1)(a) of the 1961 Act." On the basis of the above observation, it was contended that it was the law as prevailing on the date the penalty proceedings were initiated, which should govern the levy of penalty. It was pointed out that on this basis, penalty in the present case was required to be levied as per the amended provisions which had come into force on 1-4-1976. 5. In Jain Bros. v. Union of India [1970] 77 ITR 107, the Supreme Court had decided about the vices of section 297(1)(g) of the Income-tax Act. Challenge was on the basis of article 14 of the Constitution. The assessment year involved was 1960-61. A notice under section 22(2) of the Income-tax Act, 1922 was issued on 26-5-1980 requiring the assessee to submit a return of its income for the assessment year 1960-61. The return was not filed by the assessee wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs were not necessarily a continuation of the assessment proceedings. The Supreme Court observed that it was not possible to say that while applying the penalty provisions contained in the Act of 1961 to cases of persons whose assessments were completed after 1-4-1962, any class had been singled out for special treatment. The Supreme Court observed that it was well settled that in a fiscal enactment, the Legislature had a larger discretion in the matter of classification. The Supreme Court did not consider the classification to be unreasonable. For the imposition of penalty, it was not the assessment year or the date of filing of the return that was important but it was the satisfaction of the income-tax authorities that a default had been committed by the assessee which attracted the provisions relating to penalty. The Supreme Court taking into consideration the scheme of the Act, according to which the order imposing penalty could be made only after the completion of the assessment, did not find anything wrong in clause (g) which had provided for the imposition of penalty under the new Act. 6. We do not think that this discussion will throw any light on the question which has ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order on 18-3-1980 could levy penalty in excess of the penalty prescribed under the statute on that date. Supposing the provision authorising the levy of penalty, which was there on the statute, when the act of concealment was performed, was later on removed from the statute, will the ITO still be competent to impose penalty on the ground that when the offence of concealment was committed, the provisions of penalty were there ? We think that it is self-evident that when the provision requiring levy of penalty for concealment does not exist on the statute, the ITO cannot levy any penalty. Acting now, he cannot act on the basis of what the statute had been once upon a time. He derives his authority to levy penalty from the statute. He cannot act in excess of the authority which the statute confers on him. It may be that on the date of the offence, a higher penalty was impossible, but that will certainly be no ground for levying penalty in excess of what the statute presently prescribes on the date the penalty is levied. 8. The language of the state is clear. There is no reference to the time of the commission of offence. Hence, according to us, it is immaterial as to when the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fault, whereas the department had contended that higher penalty as per the provisions existing on the date of the orders was to be levied. The Courts decided that penalty was to be levied in accordance with the provisions existing on the date of the default, which had provided for the lesser penalty. The case, which is now under our consideration, stands on a different footing. Here, the penalty impossible as per the provisions of the statute as on the date of the order is less than the penalty which could be imposed as per the provisions as on the date of the concealment. Hence, the penalty impossible as per the provisions of the statute as on the date of order is less than the penalty which could be imposed as per the provisions as on the date of the concealment. Hence, d the question arising in the present appeal is whether higher penalty could still be levied on the ground that when the offence was committed, such higher penalty could be levied. In all those cases, to which reference has been made by the departmental representative, penalty leviable as per the provisions on the date of the offence was less than the penalty leviable as per the provisions on the date of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect and that if the words of the statute are of sufficient amplitude to cover the infringements that took place before the amendment, their operation cannot be curtailed or restricted so as to apply only to infringements after the amendment on the ground that an amendment is normally prospective. The decision in Lamb's case, Buckman's case and Oliver's case also proceed on the basis that if the language of the statute is clear, it is impossible for anyone to escape from the consequences of the language which has been used." 10. From the above, it seems obvious that if the language of the statute were clear so as to cover the offences prior to the amendment, they would have had no hesitation to hold that even in respect of the offences prior to the amendment, higher penalty was imposable. Hence, according to us, it would not be correct to say that these decisions establish the principle that penalty is always to be levied as per law in operation at the time of the offence. As we have already pointed out above, as per the amended sub-clause (iii), which came on the statute with effect from 1-4-1976, penalty was to be calculated with reference to tax. This was the provision which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gful act was committed, which determines the penalty. When penalty is imposed for the concealment of particulars of income, it is the law ruling at the day on which the act of concealment takes place which is relevant. The Hon'ble Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1 took this view. The various High Courts are unanimous in their view in this regard. I may, however, quote below a few decisions with advantage : 1 CIT v. Data Ram Satpal [1975] 99 ITR 507 (All.). 2 Addl. CIT v. Jiwan Lal Shah [1977] 109 ITR 474 (All.). 3 CIT v. Jyoti Swarup Agarwal [1978] 113 ITR 330 (All.). 4. In the case of Data Ram Satpal the Hon'ble Allahabad High Court held that the law applicable under the Income-tax Act to a particular assessment year is the law prevailing on the first day of April of that year does not apply to penalty proceedings, as penalty proceedings are not part of assessment proceedings. The law which will apply to penalty proceedings will be the law as it stands on the day on which the default is committed. In cases of concealment or of furnishing inaccurate particulars the date of such a default will be the date on which the return is filed, irrespective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court under section 257 and referred the question whether the Tribunal was right in applying the provision of clause (iii) of section 271(1) as amended in 1968. On these facts, the Hon'ble Supreme Court held that a penalty is imposed on account of the commission of a wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. IT is wholly in material that the income concealed was to be assessed in relation to an assessment year in the past. 8. Since in the present case, the assessee filed the return in 21-8-1975 suppressing its assets amounting to Rs. 6,406 in my opinion, default was committed on that date. Respectfully following the aforesaid decisions, I hold that, on the facts and in the circumstances of the present case, the penalty is leviable in accordance with the law applicable on 21-8-1975, i.e., prior to amendment by the Taxation Laws (amendment) Act, 1975, with effect from 1-4-1976, according to which penalty is impassable with the reference to the amount of income concealed. I am, however, of the view that it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment, penalty was to be calculate with reference to the income concealed, whereas after the amendment, penalty was to be calculated with reference to the tax sought to be avoided. He held that it is immaterial as to when the offence of concealment was committed. Penalty is required top be imposed in accordance with the provision on the date of the imposition of penalty regardless of when the offence was committed. Hence, amended provision alone would be applicable. The learned Judicial Member did not agree with this view. He held that the return was filed by the assessee on 21-8-1975 suppressing its income amounting to Rs. 6,406 and the default was committed on that date. Hence, penalty is leviable in accordance with the law applicable on 21-8-1975, i.e., prior to the amendment by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976, according to which penalty is impassable with reference to the amount of income concealed. He, however, held that it would be fair and reasonable to impose minimum penalty. Accordingly, he sustained the imposition of penalty to the extent of Rs. 6,406. 3. The learned counsel for the assessee strongly urged that the penalty is leviabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable with reference to quantum of penalty, was section 271(1)(c)(ii) as it stood after amendment with effect from 1-4-1968. We find from that judgment that the learned counsel for the assessee requested the Hon'ble Bombay High Court to answer the question in favour of the Revenue. It is under those circumstances, it was held that the amendment of section 271(1) (c) which is effective from 1-4-1968 was applicable to that case. In our view the above decision is distinguishable. Following, with respect, the decision of the Supreme Court in the case of Brij Mohan, I hold that the penalty is leviable in accordance with law prior to the amendment of section 271(1) (iii) by the Taxation Laws (Amendment) Act, 1975 which came into effect from 1-4-1976 as the concealment, in this case was made on 21-8-1975 when the return was filed by the assessee. Thus, I agree with the learned Judicial Member in holding that the law prior to the amendment of section 271(1) (iii) is applicable, and penalty is impassable with reference to the said provision prior to the amendment. He is also right in reducing the penalty to the minimum imposable. 6. The matter will now go back before the regular Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X
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