Amended penalty law applies to post-amendment notice default, but penalty needs evidence beyond mere conjecture.

An amended penalty provision applies to a default consisting of failure to comply with a lawful notice issued after the amendment came into force, because liability attaches only to the post-amendment non-compliance and not retrospectively to an earlier notice. For penalty for non-production of books, the income-tax authority must have evidence sufficient to reasonably satisfy it that the factual default occurred; penalty cannot rest on conjecture. While a best judgment assessment may be based on estimate, penalty proceedings require a firmer evidentiary foundation, though the sufficiency of proof depends on the facts of each case.

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Issues: (i) Whether the amended penalty provision in Section 28(1)(b) applied to the assessee's failure to comply with the notice issued after the amendment came into force, and (ii) whether, for imposing penalty for non-production of books, the Income-tax Officer needed evidence of a higher or different quality than that required for a best judgment assessment.

Issue (i): Whether the amended penalty provision in Section 28(1)(b) applied to the assessee's failure to comply with the notice issued after the amendment came into force.

Analysis: The relevant default for penalty was the failure to comply with the fresh notice issued on 4 January 1940, when the amendment had already come into force. The earlier notice could not attract the amended provision, but the later notice was issued after the statutory change and the assessment had not yet been completed. Application of the amended provision to that later default was therefore not retrospective in operation, because liability attached only to the post-amendment failure to comply with a lawful notice.

Conclusion: The amended Section 28(1)(b) applied, and penalty could validly be imposed for the default in complying with the notice issued on 4 January 1940.

Issue (ii): Whether, for imposing penalty for non-production of books, the Income-tax Officer needed evidence of a higher or different quality than that required for a best judgment assessment.

Analysis: A best judgment assessment under Section 23(4) rests on estimate because the assessee has withheld proper material, whereas penalty under Section 28 is not to be imposed on mere guesswork. Before penalty can be levied, the officer must possess evidence sufficient to satisfy a reasonably minded person that the alleged second set of books existed. No rigid formula can be laid down, and the sufficiency of proof depends on the facts of each case.

Conclusion: The Tribunal's view that penalty required a more tangible evidentiary foundation than a best judgment assessment was accepted in principle, but the legal test remained one of sufficient evidence to reasonably satisfy the officer of the default.

Final Conclusion: The reference was answered in substance in favour of the Revenue, and the penalty order was upheld insofar as the amended provision applied to the later default.

Ratio Decidendi: A statutory penalty for failure to comply with a lawful notice issued after an amendment takes effect is governed by the amended provision, and such penalty can be imposed only when the authority possesses evidence sufficient to reasonably satisfy it of the factual default; it cannot rest on mere conjecture.

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