TaxTMI 
TaxTMI 
TaxTMI 
1978 (4) TMI 2
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.... Assistant Commissioner of Income-tax. After hearing the assessee, the Inspecting Assistant Commissioner was of the opinion that penalty was leviable in accordance with the provisions of the Act as amended by the Finance Act of 1968 which came into force on April 1, 1968, and levied a penalty of Rs. 6,000 by his order dated November 18, 1971. The assessee took up the matter in appeal before the Income-tax Appellate Tribunal. The Tribunal upheld the plea of the assessee that the penalty leviable in the instant case was the penalty which could have been imposed according to the provisions in force at the commencement of the assessment year and the provisions of the Act as amended by the Finance Act, 1968, were inapplicable to the case. Accordingly, it reduced the quantum of penalty payable by the assessee. At the instance of the Additional Commissioner of Income-tax, the Tribunal has referred the following question of law under section 256(1) of the Act for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the amendment to section 271(1)(c), which is effective from April 1, 1968, is applicable in this case for assessment year 1965-66 by virtue....
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....brief history of the law relating to imposition of penalty in the law of income-tax in India. The relevant part of section 28 of the Indian Income-tax Act, 1922, corresponding to section 271 of the Act, immediately prior to the coming into force of the Act, read as follows : " 28. Penalty for concealment of income or improper distribution of Profits.--(1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person-- ............ (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and half times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and half times the amount of the income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income ...........
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.... the purpose of disposal of these cases, in order to make the picture complete we propose to set out the further amendment made to the above provision of law by the Taxation Laws (Amendment) Act, 1975, which came into force on 1st April, 1976. After the above amendment, sub-clause (iii) reads : " (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income ..........." (The rest of the amendment made to clause (iii) is unnecessary). Section 297(2)(f) and (g) of the Act, however, provided that : " (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred as the repealed Act) ........ (f) any proceeding for the imposition of a penalty in respect of any assessment completed before the 1st day of April, 1962, may be initiated and any such penalty may be imposed as if this Act had not been passed ; (g) any proceeding for the imposition of a penalty in respect of any assessment for the year endi....
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.... of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all." The principle underlying the above observations is best illustrated by the two cases cited before us by the learned counsel : (1) C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425 (SC) and (2) Jain Brothers v. Union of India [1970] 77 ITR 107 (SC). It is contended by the learned counsel for the assessee on the basis of the decision in the case of C. A. Abraham [1961] 41 ITR 425 (SC) that the expression " assessment " found in the Indian Income-tax Act, 1922, and also used in the Act should be considered as including within its scope proceedings relating to penalty also and that since the penalty imposable under the income-tax law is merely an additi....
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....ended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest. It is significant that in C. A. Abraham's case [1961] 41 ITR 425 (SC) this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose. It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings [Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 ; [1972] 83 ITR 26 (SC)]. In England also it has never been doubted that such proceedings are penal in character : Fattorini (Thomas) (Lancashire) Ltd. v. Inland Revenue Commissioners [1943] 11 ITR (Supp) 50 (HL). " Similarly, it has to be borne in mind that the observations made in the case of Jain Brothers v. Union of India [1970] 77 ITR 107 (SC) were made with special reference to the facts of that case. The relevant assessment year in that case was 1960-61 and the power to impose penalty under the Act which came into force on 1st April,....
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....r section 271(1)(c) is the date on which a return in which information regarding his income liable to tax is withheld is filed or the date when inaccurate particulars are given by him and the year of assessment in respect of which the return is filed or inaccurate particulars are furnished would have no relevance. The next question is that if an act which attracts the imposition of penalty under section 271(1)(c) is committed, whether penalty should be imposed in accordance with the law prevailing at the time when such act is committed or in accordance with the law prevailing at the commencement of the assessment year in relation to which the return is filed or inaccurate particulars are furnished or in accordance with the law in force on the date of satisfaction of the assessing authority that the act of concealment has been committed or the date on which the order imposing penalty is passed. The law in force either on the date of satisfaction of the assessing authority that an act of concealment has been committed or on the date on which the order imposing penalty is passed, is irrelevant. The following observations made by the Supreme Court in Jain Brother's case [1970] 77 ITR ....
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....n reading of the amended provisions of section 271, it was clear that anyone who filed an incorrect return after April 1, 1964, was liable to be dealt with according to the amended provisions regardless of the year to which the return related. In that case, the assessment year was 1963-64 and a return was filed on October 13, 1964. It was held that the Explanation which came into force on April 1, 1964, was applicable to the case. The same High Court in Commissioner of Income-tax v. Ram Achal Ram Sewak [1977] 106 ITR 144 (All) held that the crucial date for determining the applicability of the Explanation was the date of filing of the return and as the return had been filed before the Explanation came into force, the case had to be dealt with without reference to the Explanation. The above principle is followed by the High Court of Allahabad in Addl. Commissioner of Income-tax v. Krishna Subh Karan [1977] 108 ITR 271 and in Addl. Commissioner of Income-tax v. Jiwan Lal Shah [1977] 109 ITR 474. In Commissioner of Income-tax v. India Sea Foods [1977] 109 ITR 596, the High Court of Kerala, where the question for consideration was similar to the question before us, held that the Appel....
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....e return is filed; and (2) that the quantum of penalty imposable is governed by the law in force on the date on which the act of concealment takes place. It is also seen in some of the decisions referred to above that the case of C. A. Abraham [1961] 41 ITR 425 (SC) and the case of Jain Bros. [1970] 77 ITR 107 (SC) have been distinguished and are held to be not relevant for the purpose of determining the questions in issue. We have to notice at this stage a decision of the Orissa High Court in Commissioner of Income-tax v. K. C. Behera [1976] 103 ITR 479. The assessment year in that case was 1960-61. The assessee filed his return on August 23, 1965. The Income-tax Officer who made the assessment found that there was an undisclosed income of Rs. 20,000 and initiated penalty proceedings under section 271 (1)(c) of the Act. The question for consideration before the court was whether the Explanation which was added to section 271(1) by the Finance Act, 1964, governed the determination of the liability of the assessee. The High Court of Orissa held, following the decision in the case of Jain Bros. [1970] 77 ITR 107 (SC), that the assessment order had been made on December 20, 1965, and....