Commissioner of Income Tax vs Anant Arjun Madhavi

T.D. Sugla, J.—The Income Tax Appellate Tribunal has referred to this court two questions as questions of law u/s 256(1) of the Income Tax Act, 1961, in this reference. They read thus :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty for concealment could not be levied under amended section 271(1)(c)(iii) of the Income Tax Act, 1961, which came into force with effect from April 1, 1968, though the assessee had filed his return under the reassessment proceedings only on March 18, 1969 ?

(2) Whether the Tribunal was right in law in reducing the penalty u/s 271(1)(c) to the minimum leviable under the law before its amendment with effect from April 1, 1968 ?

It is common ground that the assessee had filed his return for the assessment year 1956-57 on August 15, 1956, declaring a total income of Rs. 5,300. The assessment was completed on February 14, 1957. The total income was computed at Rs. 15,300. Subsequently, the assessment was reopened by issue of a notice u/s 147(a) dated March 8, 1965. In response thereto, the assessee filed a return on March 18, 1969, disclosing an income of Rs. 15,300, that is, the income that was assessed originally. Reassessment was, however, completed on a total income of Rs. 63,000.

The Income Tax Officer initiated penalty proceedings u/s 271(1)(c) and referred the proceedings to the Inspecting Assistant Commissioner, who, after allowing the assessee an opportunity of being heard, imposed penalty of Rs. 40,000. The Inspecting Assistant Commissioner, it may be stated, took the view that the return in response to a notice u/s 148/147(a) having been filed on March 18, 1969, the law that was obtaining on March 18, 1969, was applicable. For this purpose, even though the assessed income was Rs. 63,000 against which the assessee had not filed appeal, the Inspecting Assistant Commissioner computed the concealed income at Rs. 39,915 and imposed the minimum penalty impossible u/s 271(1)(c) as it stood after April 1, 1968.

The Tribunal took the view that the provisions of section 271(1)(c) as obtaining when the assessment was originally completed were applicable and that the minimum penalty imposable was thus not 100% of the amount of concealment. Accordingly, while the Tribunal confirmed the finding of the Inspecting Assistant Commissioner that the assessee had concealed his income, it directed that the quantum of penalty be reduced to the minimum penalty leviable under the law before its amendment in 1968.

Counsel are agreed that the facts and rival contentions in this case are similar to those in the case of Chowgule and Co (Hind) Private Ltd. Vs. Commissioner of Income Tax, . It was held by our court in that case that when the assessee had already committed a default as regards concealment of income and a particular provision of law was applicable to him, it is difficult to hold that by repeating the same default in filling an incorrect return in response to the notice u/s 148 subsequently, he becomes liable to penalty under a provision of law different from the one that obtained on the date when he had first committed that default. In the present case also, the return filed originally on August 15, 1956, was not a correct return. So was the return filed by the assessee on March 18, 1969, in response to the notice u/s 148/147(a). In the circumstances, it has to be held that the assessee was liable to penalty with reference to the default of concealment committed by him on August 15, 1956. That being so, we uphold the order of the Tribunal that the assessee is liable to penalty under the provisions in this regard as they obtained prior to amendment with effect from April 1, 1968. It might, however, be made clear that, for this purpose, the returned income will naturally be taken as the income shown by the assessee in the original return and not the revised return.

Both the questions are answered accordingly, in the affirmative and in favour of the assessee. No order as to costs.