Retrospective penalty provisions do not apply to earlier concealment; later Explanation under income-tax law could not sustain penalty.

Penalty under section 271(1)(c) could not be sustained for concealment relating to assessment year 1958-59 on the basis of the Explanation inserted by the Finance Act, 1964. The Court held that the Explanation had no retrospective effect and applied only to income concealed after it came into force. The timing of the penalty notice did not change the governing law, because liability had to be tested by the law in force when the concealment occurred. The cancellation of penalty was therefore upheld in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 could be imposed for concealment relating to the assessment year 1958-59 on the basis of the Explanation introduced by the Finance Act, 1964.

Analysis: The concealment related to a period long before the amendment. The Explanation inserted by the Finance Act, 1964 was held to have no retrospective effect and to apply only to income concealed after it came into force. The timing of the penalty notice did not alter the governing law, which remained the law in force when the concealment occurred.

Conclusion: Penalty under section 271(1)(c) could not be sustained on the basis of the later Explanation, and the cancellation of penalty was upheld in favour of the assessee.

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