1979 (10) TMI 12 - HC - Income Tax

High Court upholds penalties under Income-tax Act for concealment of income, emphasizing law at time of act.

The High Court upheld the imposition of penalties under section 271(1)(c) of the Income-tax Act, 1961, based on the concealment of income in returns filed ... Penalty Issues:Interpretation of penalty provisions under section 271(1)(c) of the Income-tax Act, 1961 in relation to the timing of the wrongful act of concealing income and the applicability of amendments.Analysis:The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the imposition of penalties under section 271(1)(c) for the assessment years 1963-64, 1964-65, and 1965-66. The assessee had initially filed returns in response to notices under section 148, with subsequent reassessments leading to additions in income. The Income Tax Officer (ITO) imposed penalties exceeding Rs. 1,000 for each year, which were confirmed by the Income-tax Appellate Tribunal (ITAT).The Tribunal, while upholding the default under section 271(1)(c), considered the timing of the returns filed by the assessee in relation to the amendment of the Act effective from April 1, 1968. The Tribunal concluded that the penalty quantum should be based on the law prevailing at the time of the wrongful act, i.e., the concealment of income in the returns filed before April 1, 1968. Therefore, the Tribunal reduced the penalties to 30% of the tax sought to be avoided for each year.The High Court analyzed the legal principles governing penalty imposition, emphasizing that penalties are imposed based on the law in force at the time of the wrongful act. Referring to a previous judgment, the Court clarified that if the concealment of income is attributable to returns filed after April 1, 1968, the penalty provisions amended by the Finance Act, 1968, would apply, irrespective of the assessment year. The Court rejected the assessee's reliance on previous decisions, emphasizing that the default must be linked to the returns filed in response to notices under section 148.Ultimately, the High Court held that the penalties were correctly imposed under section 271(1)(c) as amended by the Finance Act, 1968, based on the concealment of income in the returns filed on April 20, 1968. The Court ruled against the assessee, affirming that the penalties were not imposed retrospectively. The parties were directed to bear their own costs in the reference proceedings.