1982 (12) TMI 14 - HC - Income Tax

Court rules penalty based on law at filing, not assessment year. Tribunal decision overturned.

Commissioner Of Income-Tax, Bihar Versus Lalji Ram Bhagat

Commissioner Of Income-Tax, Bihar Versus Lalji Ram Bhagat - [1984] 147 ITR 645, 35 CTR 16, 15 TAXMANN 382 Issues:Application for reference under s. 256(1) of the I.T. Act, 1961 regarding the quantum of penalty imposable for the assessment year 1967-68.Analysis:The Income-tax Appellate Tribunal, Patna Bench 'A', referred a question of law regarding the imposition of penalty under s. 271(1)(c) of the Act for the assessment year 1967-68. The assessee had filed a return showing an income of Rs. 2,477, which was later assessed at Rs. 15,525 after adjustments. The main additions were related to cash credit and disallowance of personal home expenses. The Income Tax Officer (ITO) held that the assessee concealed income, leading to penalty imposition by the Income-tax Appellate Commissioner (IAC) under the law in force on April 1, 1968, amounting to Rs. 13,450. The Tribunal, however, held that the penalty should be governed by the law in force on April 1, 1967, as the assessment year was 1967-68.The key question was whether the quantum of penalty for the assessment year 1967-68 should be determined based on the law in force on April 1, 1967, or the amended law effective from April 1, 1968. The court clarified that the penalty provisions must be applied as per the law at the time of the default, i.e., when the untrue return involving income concealment was filed. The court cited various decisions supporting the application of penalty laws based on the date of the infringement. It emphasized that the law in force when the return was filed and the infringement occurred should dictate the penalty amount.The court concluded that the Tribunal erred in holding the penalty quantum should be based on the assessment year rather than the date of the return filing and infringement. Therefore, the court ruled in favor of the Revenue, stating that the penalty should be determined based on the law effective when the return was filed after April 1, 1968. The court held that the Tribunal's decision was legally incorrect, and the penalty imposition should align with the law in force at the time of the infringement.In conclusion, the court answered the reference question in the negative, supporting the Revenue's position, and disagreed with the Tribunal's interpretation of the penalty provisions. No costs were awarded in this case due to its special circumstances.