TMI Blog1983 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial changes in the statute in several respects and these have brought to e forefront a good deal of controversy in regard to the particular provision of law that would be applicable in a particular case. These issues have risen in the context of three major changes regarding the imposition or levy of penalty under the I.T. Act. The first set of changes was heralded by the substitution of the I.T. Act, 1961, in the place of the Indian I.T. Act, 1922. So far as this change was concerned, however, the statute itself made certain provisions in s. 297(2)(f) and (g) to these provisions. Notwithstanding this, there were some conflicts and controversies that were set at rest by the Supreme Court in the case of Jain Brothers v. Union of India [1970] 77 ITR 107. The second set of changes was effected by the Finance Acts of 1964, 1968 and 1975. The Finance Act of 1964 deleted the word " deliberately " in s. 271(1)(c) and also introduced in Explanation casting the onus of proof on the assessee in cases where the difference between the returned income and the assessed income exceeded a particular margin. The Finance Act of 1968 amended the quantum of penalty that was imposable in cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and the power to impose penalty in all cases has been restored to the ITO. This series of amendments has also given rise to a large number of judicial decisions taking different views. We are mentioning these three sets of controversies here because, in our view, the principles applicable to the three sets of controversies are different and in order to make it clear that the judicial decisions relating to the first or the third sets of controversies (which have also been cited before us) are not of much help in deciding the issue in the present reference which relate only to the second aspect which has been referred to earlier. We shall, therefore, in our discussion, confine ourselves to this group of cases in coming to a conclusion on the issues raised before us. Before proceeding further, it may be useful to give a brief narration of the relevant facts. Both the references relate to the assessment year 1967-68, the previous year being the financial year 1966-67. In ITR No. 131 of 1974, the assessee, Shri Joginder Singh, filed a return showing an income of Rs. 8,451. (This figure mentioned in the reassessment order may be a mistake for Rs. 4,481, which figure was also repeat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the penalty related to the assessment year 1967-68, the amendment made to s. 271(1)(c), which was effective from April 1, 1968, could not be applied. In reaching this conclusion, the Tribunal relied on the decision of the Kerala High Court in Hajee K. Assainar v. CIT [1971] 81 ITR 423, and an earlier decision reached by one of the Delhi Benches of the Tribunal. In this view of the matter, the Tribunal, while upholding the penalty, directed that its quantum should be reduced to the minimum under the provisions, as they stood prior to the amendment of 1968. In other words, the Tribunal directed that the penalty amount should be reduced to 20% of the tax attributable to the amount of income concealed. It is against this conclusion of the Tribunal that the Commissioner has come up in reference to this court. The question of law referred to this court is in the following terms: " Whether the Tribunal was right in law in holding that the provisions of section 271(1)(c), before their amendment as and from April 1, 1968, were only applicable in the instant case ? " Turning now to ITR No. 65 of 1975, the facts are somewhat similar. The first return of income of this assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable in respect of the case of the assessee." In his view, the penalty leviable should be the minimum penalty under the law as it stood prior to April 1, 1968. The accountant member concurred with this conclusion, namely, that the penalty should be calculated on the basis of the provisions, as they stood prior to April 1, 1968, but his reason for coming to this conclusion was on the ground that the first return of income had been submitted on September 1, 1967. Thus, both the members, though for different reasons, agreed that the amount of penalty imposed should be reduced and it is against this conclusion that the Commissioner has come up in reference before us. The question of law referred to us in this reference reads as follows : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that minimum penalty under section 271(1)(c) of the Income-tax Act, 1961, would be leviable under the law prior to 1-4-1968 ? " From the above narration of facts, it will be seen that the question to be decided in both the cases is whether the penalty has to be calculated with reference to the provisions of s. 271 (1)(c), as they stood before April 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from April 1, 1968. On appeal, the Appellate Tribunal confirmed the levy of penalty by reference to the amended provision but reduced the amount of penalty on merits. The assessee applied for a reference and a direct reference was made by the Tribunal to the Supreme Court on the question as to whether the Tribunal was, in law, right in sustaining the penalty by applying the provisions of s. 271(1)(c)(iii) of the I.T. Act, 1961, as amended with effect from April 1, 1968. The Supreme Court answered this question in the affirmative and in favour of the Revenue. The court rejected the contention urged on behalf of the assessee that the penalty must be governed by the law pertaining to the assessment year. It observed (p. 4)1 " In our opinion, the assessment of the total income and the computation of tax liability is a proceeding which, for that purpose, is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income. And this is so notwithstanding that the income concealed is the income assessed to tax. In the case of the assessment of income and the determination of the consequent tax liability, the relevant law is the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though within the extended period. That is evidence of the fact that the return filed during the extended period is not regarded by the statute as filed within the time originally prescribed. " It will be observed that the Supreme Court has laid down the principle applicable to such cases in very simple terms. The penalty is levied for an offence committed by the assessee, namely, the conscious omission of certain income from the return. The law relating to penalty will, therefore, be the law as it stands on the date of the commission of the offence for which the penalty is sought to be levied. Since the offence comprises of concealment or omission of income from a return, it is the date of the relevant return that will govern the determination of the issue. In the case before the Supreme Court, there was only one return and, hence, there was no difficulty in holding that the law, as it stood on the date of that return, was applicable on the facts of the case. The two references before us, however, involve a further complication in the facts which create a certain amount of difficulty in straightaway applying the principle laid down by the Supreme Court to the facts of those cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-s. (5) of s. 139 of the Act. It is only in the latter class of these cases that a question of more than one return will arise. Under the scheme of s. 139, the Legislature itself permits an assessee to file a revised return. The clear intendment is that, where a proper revised return is filed, it should take the place of the original return and be treated as the return for the assessment year which is to form the basis for all further proceedings by the ITO. In other words, once a proper revised return is filed, the earlier return has to be treated as having been superseded and, therefore, as non est for all practical purposes. So, it can be suggested, all that is necessary in such cases is to find out whether the second or subsequent return filed by the assessee can be properly called a revised return under s. 139(5). If the answer is in the affirmative, then its effect, under the statute is to virtually supersede the earlier return. It will be the return on the basis of which the officer will have to complete the assessment and, to most intents and purposes, will govern the assessee's liabilities under the statute including the issue of penalty. If, on the other hand, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erly termed a revised return under s. 139(5). Or they have held that a penalty for concealment in a return cannot be avoided merely because a return is filed subsequently disclosing income previously " concealed " (it being immaterial whether such a return could be called a " revised " return within the meaning of s. 139(5) or not) although the filing of such a return and the circumstances in which it is filed are taken into account for deciding whether there was a " concealment " which merits a penalty as well as the quantum of the penalty to be imposed. The following cases may be referred to as illustrative of these principles: Arunachalam Chettiar v. CIT [1931] 6 ITC 58 (Mad), Vadilal Ichhachand v. CIT [1957] 32 ITR 569 (Bom), Dayabhai Girdharbhai v. CIT [1957] 32 ITR 677 (Bom), CIT v. Angara Satyam [1959] 37 ITR 230 (AP), Sivagaminatha Moopanar Sons v. CIT [1964] 52 ITR 591 (Mad), CIT v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad), Agarwal v. CIT [1976] 102 ITR 408 (Gau), Padma Ram Bharali v. CIT [1977] 110 ITR 54 (Gau), Sulemanji Ganibhai v. CIT [1980] 121 ITR 373 (MP) and Kumar Jagadish Chandra Sinha v CIT [1982] 137 ITR 722 (Cal). We think it is unnecessary, for deciding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e solution suggested is illogical and would result in discriminatory treatment of assessees in like situations. It appears to us erroneous in principle to say that the penalty imposable on an assessee, who is found to have concealed an item of income in a return filed by him, should be made to vary and become more or become less because of the accidental circumstance that he has filed a revised return setting right certain omissions or errors or wrong statements in the first return that have no connection or nexus with the items of income concealed by him. To say, for example, that an assessee who returned only a salary income of Rs. 30,000 but concealed his business income in a return filed prior to April 1, 1968, should be called upon to pay a higher penalty merely because he found that the salary income should have been Rs. 38,000 and revised the return in this respect after April 1, 1968, does not seem to make sense particularly because no amount of repentance on his part for the concealment of business income can help him to file a " revised " return showing the business income so as to avoid a penalty in respect of his earlier concealment. Likewise, after the amendment of 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such proceedings. But, on this issue, there is a long line Of decisions, which have received the approval of the Supreme Court in Malbary, and Bros. v. CIT [1964] 51 ITR 295, to the effect that it is open to the ITO, in the course of reassessment proceedings, to initiate penal action for an offence committed at the time of original assessment. This line of decisions is also based on sound logic which can be illustrated by simple example. Suppose an assessee, at the time of original assessment, has concealed an item of income but, when called upon under s. 148, files a return which includes the same, there has clearly been no concealment in the course of the reassessment proceedings. To hold that a penalty in the course of the reassessment proceedings can be levied only in respect of a concealment during such proceedings would lead to the result that the assessee would escape penalty for an admitted act of concealment for the simple reason that at this point of time, no imposition of penalty would be at all possible by reference to the original assessment proceedings as such penalty proceedings should have been commenced before the completion of those assessment proceedings. Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut such proceedings, in cases (a) and (d), clearly relate only to the original proceedings, for there is no concealment at the stage of the reassessment proceedings. In cases (b) and (c), however, there has been concealment at both the stages. Here, though the penalty proceedings are initiated and the penalty is imposed only in the course of the reassessment proceedings, it will be only logical to hold that the penalty is being levied only with reference to the act of concealment in the return filed during the original assessment proceedings which the ITO has power to do. This is because though concealment is detected in the course of the reassessment, it has obviously been there-whether discovered or not-even at the time of the original assessment. Though the proceedings are separate, the assessment year is one and the assessee's offence of concealment is referable to the extent to which the assessee has avoided payment of tax on the total income as finally determined by returning it at the lower figure shown in the first return filed by him. Clearly, in the cases (a) and (d) given above, there is no reason why the assessee should escape penalty for the concealment at the initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 474 (AR), Addl. CIT v. Mewa Lal Sankatha Prasad [1979] 116 ITR 356 (All), CIT v. A. Rahman [1979] 119 ITR 475 (Pat), CWT v. M. V. Rajamma [1979] 120 ITR 132 (Mad), Addl. CIT v. Atma Singh Steel Rolling Mills [1979] 120 ITR 590 (All), CIT v. Rant Singh Har Mohan Singh [1980] 121 ITR 381 (P H) [FB], and CIT v. S.S.K.G. Arthanariswamy Chettiar [1982] 136 ITR 145 (Mad), have decided that in cases of penal action initiated on reassessment under s. 148, the provisions of law as oil the date of the return filed at the time of original assessment would govern even though concealment was there in both sets of returns. This is also the conclusion which we have arrived at. We may, however, mention : (i) An anomaly about double penalty pointed out by the Allahabad High Court in CIT v. Ram Achal Rant Sewak [1977] 106 ITR 144 at 150 as one of the consequences of accepting the Department's contention would not arise in view of the ratio of the Supreme Court in the case of N.A. Malbary, and Bros. v. CIT [1964] 51 ITR 295. (ii) The decision of the Orissa High Court in B.N. Sharma v. CIT [1977] 110 ITR 538, that in such a case the law in force on the date of completion of reassessment will go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the scope of s. 139(5) and a penalty on the basis of the original return was upheld. There are observations in Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236 (All), following its earlier decision in Gopaldas Parshottamdas v. CIT [1941] 9 ITR 130 (All) and in Kumar Jagadish Chandra Sinha v. CIT [1982] 137 ITR 722 (Cal), which suggest that even where an amended return is filed which discloses income concealed in the earlier return, such amended return will be revised return under s. 22(3) of the 1922 Act/139(5) of the 1961 Act and cannot be ignored by the officer in completing the Assessment. We have, however, for reasons earlier discussed, come to a contrary conclusion in regard to this type of cases. In our opinion, the penalty provisions as on the date of the first return filed for the year should govern in such cases and not that on the date of the revised return. In this context, our attention was drawn to the decision in CIT v. Sucha Singh Anand [1984] 149 ITR 143 (Delhi) by a Bench of this court. In that case, the assessee filed a return for assessment year 1963-64 on September 2, 1963, showing an income of Rs. 1,10,711. He revised this return on November 22, 1967, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court also approached the case from another point of view. If the revised return discloses the income concealed, it may not be a revised return and cannot, in any event, obliterate the offence committed earlier. If it revises certain other errors and defects but still conceals certain income, it may be called a revised return which can form the basis of assessment but still cannot be treated as an occasion of a second concealment for reasons already discussed. The decision in Sucha Singh Anand's case [1984] 149 ITR 143 (Delhi) does not, therefore, run counter to the conclusions we have arrived at. For the reasons discussed above, we are of the opinion that, in both the types of cases referred to earlier, the substantive provisions of law relating to a penalty applicable in a particular case would be those in force at the date of the original return from which income has been concealed and that the filing of a subsequent return under s. 139(5) or under s. 148 in which the act of concealment may be " repeated " would not alter the position. In both ITRs Nos. 131 of 1974 and 65 of 1975, such a return was filed before April 1, 1968. We, therefore, uphold the conclusion of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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