1980 (9) TMI 4 - HC - Income Tax

Court rules on penalty imposition based on return filed in response to notice under Income Tax Act

The High Court of Madhya Pradesh ruled against the assessee in a case concerning penalty imposition for concealed income filed in response to a notice ... Penalty Issues:Interpretation of section 271(1)(c) of the Income Tax Act, 1961 regarding penalty imposition for concealed income filed in response to a notice under section 148 of the Act for the assessment year 1964-65.Analysis:The High Court of Madhya Pradesh was tasked with providing an opinion on the interpretation of section 271(1)(c) of the Income Tax Act, 1961, in a case where penalty proceedings were initiated against an individual for concealing income in a return filed in response to a notice under section 148 of the Act for the assessment year 1964-65. The Tribunal had to determine whether the amended provisions of section 271(1)(c) with effect from April 1, 1968, were applicable in this scenario.The case involved an individual assessee whose assessment for the year 1964-65 was reopened by the Income Tax Officer (ITO) based on the belief that income had escaped assessment. The assessee filed a return in response to the notice under section 148 of the Act on October 30, 1969. Subsequently, the ITO made additions to the income originally assessed and initiated penalty proceedings against the assessee for concealing income in the return filed in response to the notice. The Income-tax Appellate Tribunal upheld the assessee's contention that the amended provisions of section 271(1)(c) were not applicable as the default was attributable to the return filed during the original assessment proceedings.In its analysis, the High Court referred to a previous decision where it was established that the default leading to penalty imposition is determined by the return filed in response to a notice under section 148 of the Act, not the original assessment proceedings. The Court emphasized that the law applicable for imposing a penalty is the one in force at the time of the wrongful act, which, in this case, was the filing of the return in response to the notice under section 148 on October 30, 1969. Therefore, the Tribunal erred in holding that the default was attributable to the original assessment proceedings and that the amended provisions of section 271(1)(c) were not applicable.Conclusively, the High Court ruled against the assessee, stating that the default leading to penalty imposition was based on the return filed in response to the notice under section 148 of the Act, and the amended provisions of section 271(1)(c) were indeed applicable. The Court highlighted that the law in force at the time of the wrongful act determines the penalty to be imposed. As a result, the Tribunal's decision was overturned, and the reference was answered in favor of the Revenue.