Patna High Court
Commissioner Of Income-Tax vs Lalji Ram Bhagat on 17 December, 1982
Equivalent citations: [1984]147ITR645(PATNA)
JUDGMENT
1. In an application for reference under Section 256(1) of the I.T. Act, 1961 (hereinafter to be referred to as "the Act"), the Income-tax Appellate Tribunal, Patna Bench 'A', has submitted the statement of case and referred the following question of law for the opinion of this court:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the quantum of penalty imposable in this case was to be governed by the law which was in force on the first day of the assessment year and not the amended law which came into effect from April 1, 1968?"
2. The facts are absolutely beyond controversy. Shortly speaking, the statement of the case submitted to this court represents a full statement of facts which are in respect of the assessment year 1967-68. The assessee filed a return showing an income of Rs. 2,477. The assessment was made on an income of Rs. 22,844 but this was ultimately reduced to Rs. 15,525 in appeal. A copy of the assessment order passed by the ITO has been marked annex. A and forms part of the statement of case.
3. The main additions made in this case were in respect of the cash credit of Rs. 4,676 and disallowance of personal home expenses to the extent of Rs. 7,031. In view of the difference between the returned income and the assessed income, the ITO held that the assessee had concealed the particulars of income within the meaning of the Explanation to Section 271(1)(c) of the Act, as it then stood. The IAC imposed the penalty after referring to the fact that the cash credits were not properly explained and also the fact that the assessee had debited the profit and loss account with his personal home expenses. The IAC further held that the assessee had been assessed for the last several years and while filing the return, he had claimed his personal home expenses as a deduction and had not made any adjustment for this purpose. According to the IAC, this was a case of gross neglect on the part of the assessee. He, therefore, held that the penalty was imposable and, as the return of the income had been filed after April 1, 1968, the penalty imposable was to be governed by the Act, as amended, as applicable on April 1, 1968. He, accordingly, imposed a penalty of Rs. 13,450. A copy of the order of the IAC has been annexed as annex. B forming a part of the statement of case.
4. The assessee appealed to the Tribunal. The Tribunal finding the facts against the assessee held that the quantum of penalty imposable was not justified, as the assessment year to which the case related was the year 1967-68. The Tribunal held that, although the penalty was imposable, since it was for the assessment year 1967-68, in respect of this assessment year, the quantum of penalty should have been governed by the law which was in force on April 1, 1967, and not in accordance with the law which came into force from April 1, 1968.
5. The sole question, therefore, that arises for our consideration in this case is as to whether the quantum of penalty imposable for the assessment year 1967-68 would be governed by the law as it stood in force from April 1, 1967, which was the beginning of the assessment year in question or from April 1, 1968, which was the date from which the amended law, namely, Clause (iii) of Section 271(1)(c) which was substituted by the Finance Act, 1968, with effect from April 1, 1968. That being the sole question for consideration in this case, it would bear repetition to say that Clause (iii) substituted the old Clause (iii) by the Finance Act, 1968, with effect from April 1, 1968, and became effective from April 1, 1968. On the admitted facts, although the return for the assessment year 1967-68 was filed after the amendment came into force, namely, after April 1, 1968, the law is well settled by now that Section 271(1)(c) of the Act has to be applied as it stands at the date when the default, which attracts penalty, is committed. To be more illustrative, the crucial date would be as to when the untrue return is filed involving concealment of income. It has been repeatedly held that the original Explanation which was inserted with effect from April 1, 1964, to, Section 271(1)(c) has always been held to apply to a case where a false return of income was filed after April I, 1964, when the amendment came into force. But this is just by way of penalty. There are direct authorities on the point and the consensus of judicial opinion is that the quantum of penalty must be determined by reference to the law as it stood when the infringement took place, namely, as to when the return was actually filed. In the instant case, the return was, admittedly, filed after April 1, 1968, when the amended Clause (iii) came into force and became effective. The Tribunal, therefore, was clearly in error and misdirected itself on a question of law in holding that merely because the concealment was in respect of the assessment year prior to April 1, 1968, the amended law would not govern the quantum of penalty imposable. If decisions be needed in this respect, we may refer to a catena of decisions but, instead of an exhaustive mention of them, we refer only to some of the decisions which are these: The case of K. Ahamad v. CIT [I974] 96 ITR 29 (Ker) [FB], which was a judgment on a review of the Full Bench judgment in the case of CIT v. K. Ahamed [1974] 95 ITR 599 (Ker) [FB], the cases of Rajputana Stores v. IAC of I.T. [1975] 99 ITR 499 (Gauhati), CIT v. Data Ram Satpal [1975J 99 ITR 507 (All) and F. C. Agarwal v. CIT [1976] 102 ITR 408 (Gauhati), are all on the point as to the date from which the penal Clause will apply, which are all against the case of the assessee and the view held by the Tribunal. In so far as direct cases on the question of the quantum of penalty imposable under Clause (iii) of that section are concerned, instead of multiplying the decisions, we may refer only to two decisions in the case of CIT v. Ramchand Kundanlal Saraf [1975] 98 ITR 474 (MP) and CGT v. C. Muthukumaraswamy Mudaliar [1975] 98 ITR 540 (Mad). There is no divergence of judicial opinion on this point. As a matter of fact in one of the cases, a Bench of this Court while dealing with the applicability of the Explanation inserted in the year 1964 to Section 271(1)(c) merely observed that without finally deciding the issue it can be said that it could be invoked at a time when the return was filed, not having regard to the assessment year for which the return had been duly filed, after the amended law came into force and was applicable. That, however, may not be treated as a final decision but the decisions of the courts including that of the Supreme Court in 102 ITR 420 [1979] 120 ITR 1 (SC) (Brij Mohan v. CIT) conclude the matter.
6. At the cost of repetition, we may say that, in the instant case, the return was filed and the infringement of the law was committed when actually the amended law came into force, i.e., during the assessment year 1968-69. Therefore, inevitably, it must be held that the Tribunal has clearly committed an error of law by holding that the quantum of penalty imposable would be governed having regard to the assessment year in question and not the date when the return was filed and actually the infringement took place.
7. We, accordingly, hold that the question referred" to this court must be answered in the negative, in favour of the Revenue and against the assessee and that, on the facts and in the circumstances of this case, the Tribunal was not justified in holding that the quantum of penalty imposable was to be governed by the law which was in force on the 1st day of the assessment year and not the amended law which came into effect from April 1, 1968.
8. In the special circumstances of the case, however, we make no order as to costs.