Penalty under amended section 271(1)(c) must be tested on the law in force when the return was filed.

Penalty under section 271(1)(c) had to be examined by reference to the law in force when the return was filed, including the post-amendment wording and the inserted Explanation. The Tribunal erred by applying the earlier Anwar Ali approach without considering the deletion of the word "deliberately" and the amended statutory test, so its penalty finding was vitiated. The matter therefore had to be reconsidered under the amended provision, and the cancellation of the penalty was stated to be unjustified in law, with the answer against the assessee and in favour of the Revenue.

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Issues: Whether the Tribunal was justified in cancelling the penalty and whether the penalty question had to be examined under the amended law in force after 1 April 1964.

Analysis: The accounting period and the filing of the return were after the amendment of section 271(1)(c) and the insertion of the Explanation. The Tribunal applied the pre-amendment rule in Commissioner of Income-tax v. Anwar Ali and did not consider the effect of the deletion of the word "deliberately" or the statutory Explanation. The finding on penalty was therefore reached without applying the correct legal test and stood vitiated. The matter had to go back for determination under the amended provision.

Conclusion: The cancellation of the penalty was not justified in law, and the answer to the referred question was against the assessee and in favour of the Revenue.

Ratio Decidendi: A penalty decision under section 271(1)(c) must be tested on the law in force when the relevant return is filed and assessed, including any statutory amendment and Explanation then applicable; application of an earlier rule without considering the amended provision vitiates the finding.

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