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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 ..... s 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 which shall not exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : Rs. High Speed Diesel 23,402 Petrol 15,819 Lubricant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly 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 appeal by the Tribunal. Taking into consideration all these facts, it is held by us that the assessee had concealed its income to the extent of Rs. 6,406 and had thus made itself liable for the imposition of penalty under section 271(1)(c) of the Income-tax Act. 3(a). Now, we will examine the further question as to whether the quantum of penalty is to be determined with reference to the amended provisions of law which came to prevail with effect from 1st April, 1976 or in accordance with the provisions of law prior to the amendment. As stated above, prior to the amendment, penalty was to be calculated with reference to the income concealed, whereas after the amendment penalty was to be calculated with reference to the tax sought to be evaded. Hence, as per the provisions prior to the amendment, a much higher penalty could be imposed. The ITO had levied penalty on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 within the prescribed time. The return was filed on 18-11-1961. The ITO completed the assessment on 23-11-1964. The Income-tax Act, 1922 had been repealed by that time. The new Income-tax Act, 1961 had come into force on 1-4-1962. The return had been filed prior to the coming into force of the new Act. The assessment had been made after the new Act had come into force. As provided by section 297(2)(g) of the Income-tax Act, 1961, the ITO initiated proceedings for the levy of penalty under section 271(1)(a) for the default of not filing the return within the prescribed time. The penalty provisions of the new Act were different from the penalty provisions of the old Act. The Act of 1922 had not prescribed any minimum amount of penalty whereas under the Act of 1961 minimum penalty was prescribed. The assessee challenged the constitutional validity of section 297(2)(g) which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arisen in the appeal before us. Clause (g) of section 297(2) had clearly provided that in case an assessment of an earlier year was completed on or after 1-4-1962, penalty proceedings had to be initiated under the new Act. In the case of Jain Bros., it was only the question of the constitutional validity of this clause that was considered. The question which their Lordships had examined was whether the provision enabling the officer to levy penalty under the new Act, even though the default had occurred under the old Act, was a valid provision or not. They examined the scheme of the Income-tax Act. They found that as per the scheme of the Income-tax Act, penalty was to be imposed only on the completion of the assessment. Taking this into consideration, they came to the conclusion that there was nothing wrong with clause (g) which had provided for the imposition of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 offence of concealment was committed. We are of the view that penalty is required to be imposed in accordance with the provisions on the date of imposition of penalty, regardless of when the offence was committed. According to the departmental representative, penalty should be levied on the basis of the provisions which were in force at the time the offence was committed. According to him, only if the offence had been committed after the amended provision came into force, the penalty was to be levied with reference to the amended provisions. We do not find it possible to accept this contention of the departmental representative. There is no reference to the time of the offence in the penalty provisions. They merely prescribe the amount of penalty to be levied. It is not stated therein that these provisions will apply only to the acts of concealment done after the amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Courts did not approve of the department's imposing higher penalty. They said that only such penalty should be imposed which was impossible in accordance with the provisions existing at the time of concealment. The Courts had no occasion to consider whether, when as per law as on the date of the order lesser penalty was prescribed, could higher penalty be levied ? Hence, it cannot be said that a general principle is established that penalty is to be imposed always in accordance with the law in force at the time of committing of the offence, regardless of whether it leads to the imposition of penalty which is more than what could be levied as per the statute on the date of order. When higher penalty is impossible, the question whether lesser penalty should be imposed can arise. But when lesser penalty is prescribed, the question of imposing higher penalty just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 was in force on 18-3-1980 when the ITO levied penalty. Levying penalty on 18-3-1980, the officer could not levy penalty which was more than the penalty prescribed by the statute on 18-3-1980. It is nowhere stated in the statute that penalty as per the new provisions was to be levied only in respect of the defaults committed after 1-4-1976 and as far as defaults committed prior to that date were concerned, they were to be dealt with in accordance with the old provisions. We are of the view that penalty cannot be imposed in excess of the penalty prescribed under the statute at the time when the order imposing penalty is made. We will hence direct the ITO to compute penalty on the basis of the provisions as had existed at the time of the imposition of penalty. 11. The appeal is partly allowed. Dissending order passed. Per Shri R. Swarup, Judicial Member - I h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the assessment year to which it related. 5. In the case of Jiwan Lal Shah, their Lordships of the Hon'ble Allahabad High Court held that penalty proceedings are not part of assessment proceedings and, therefore, the principle that the law applicable under the Act to a particular assessment year is the law prevailing on the 1st day of April of that year does not apply to penalty 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 of the assessment year to which it relates. 6. In the case of Jyoti Swarup Agarwal, also their Lordships of the Hon'ble Allahabad High Court held that the law which apply to penalty proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances 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 be fair and reasonable to impose minimum penalty. I accordingly sustained the imposition of penalty to the extent of Rs. 6,406. 9. In the result, the appeal is partly allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 We have difference of opinion in the above case and, therefore, proceed to state the point of difference as follows : "Whether, on the facts and in the circumstances of the case, penalty for concealment of income under section 271(1)(c) of the Income-tax Act, 1961 is leviable in accordance with the law as it stood after the amendment of section 271(1)(ii) by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976 or the law applicable on the date of filing of the return, i.e., 21-8-1975 ?" 2. We refer the above matter to the President of Tribunal so that the matter can be decided by referring to one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 leviable with reference to the amended provisions. The assessment was made on 30-1-1978 and the penalty was levied on 18-3-1980. Since both these dates are after amended provision, penalty is leviable only as per the amended provision. He placed reliance on a decision of the Supreme Court (reported in "News from the Supreme Court" in Prabhakar v. CIT [1988] 169 ITR 11). He also referred to a decision in Maya Rani Punj's case. 4. The learned Departmental Representative submitted that the return concealing the income was filed on 21-8-1975 and the law prevailing on that date has to be applied. Hence, the provision prior to the amendment alone is applicable. He placed reliance on a decision of the Hon'ble Supreme Court in the case of Brij Mohan and a few other decisions. 5. I have gone through the orders of the learned Accountant Member and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for decision according to the majority decision. Per Shri R. Swarup, Judicial Member - This appeal by the assessee is directed against the order of the Appellate Assistant Commissioner dated 14-7-1980 relating to the assessment year 1975-76. 2. Briefly stated the facts of the case are that the Income-tax Office has levied penalty of Rs. 8,000 under section 271(1) (c) of the Income-tax Act, 1961, which was upheld by the appellate Assistant Commissioner. 3. The assessee appealed to the Tribunal against the order of the Appellate Assistant Commissioner. The appeal was heard by the Bench (S/Shri Ram Swarup, Judicial Member and R. N. Puri, learned Accountant Member). The learned Accountant Member has held that the assessee has concealed its income to the extent of Rs. 6,406 and so penalty is impassable under section 271(1) (c). To ..... X X X X Extracts X X X X X X X X Extracts X X X X
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