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Issues: Calculation of penalty under the Income-tax Act, 1961 for assessment year 1966-67 based on the provisions in force prior to April 1, 1968.
Analysis: The case involved a reference under s. 256(1) of the Income-tax Act, 1961, by the Income-tax Appellate Tribunal, Patna Bench "B", for an opinion on the correct calculation of penalty under the Act in force prior to April 1, 1968. The assessee, a Hindu Undivided Family (HUF), derived income from various sources, including commission from the Government as its grain stockist. The Income Tax Officer (ITO) assessed the commission received by the assessee as income, which was confirmed by the Appellate Assistant Commissioner (AAC). Subsequently, the Income-tax Appellate Tribunal was approached for the levy of penalty as the amount exceeded Rs. 1,000. The issue in contention was whether the quantum of penalty should be calculated based on the provisions of the Act in force prior to April 1, 1968. The Income-tax Appellate Tribunal held that while the penalty was justified, the quantum was excessive. The Tribunal accepted the assessee's submission that the penalty should be calculated based on the pre-April 1, 1968, provisions of the Act. However, the High Court disagreed with this interpretation, citing established legal precedents and the Explanation to s. 271(1)(c) which applied to cases where returns were filed after April 1, 1968. The High Court emphasized that the Explanation clause to s. 271(1)(c) governed cases where the returned income was less than 80% of the assessed income due to the assessee's gross or wilful neglect. The Court referred to relevant legal decisions, including Brij Mohan v. CIT, and held that the Tribunal erred in applying the law in force prior to April 1, 1968. The Court concluded that the Tribunal was incorrect in law in its calculation of the penalty based on the pre-April 1, 1968, provisions. In the final judgment, the Court decided in favor of the Revenue and against the assessee, ruling that the Tribunal's approach to the penalty calculation was incorrect. The Court also noted that the issue of expenditure incurred by the assessee in earning revenue was not within the scope of the reference. As a result, no costs were awarded in the case.
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