TMI Blog1978 (11) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Punjab National Bank that an amount of Rs. 79,146 in the case relating to the assessment year 1965-66 and Rs. 96,181 in the other case relating to the assessment year 1966-67 had escaped assessment besides bank interest of Rs. 65 in one case and Rs. 285 in the other case which were also not disclosed. Accordingly, a notice under s. 148 of the I.T. Act, 1961 (hereinafter to be called as " the Act " ), was issued. In response to the said notice the assessee filed a return declaring an income of Rs. 11,294 in one case and Rs. 13,176 in the other. The ITO on the basis of this return computed the assessment at a figure of Rs. 12,091 and Rs. 14,145 for the aforesaid two years respectively. The net profit, therefore, calculated, on those figures at the rate of 9% on the escaped income came to Rs. 7,125 in one case and Rs. 8,657 in the other. Thus, the ITO held that the income which was concealed by the assessee from his original return comes to Rs. 7,191 (that is, Rs. 7,125 plus Rs. 66) and in the other comes to Rs. 8,945 (that is, Rs. 8,657 plus Rs. 288). It is in respect of these amounts relating to the assessment years 1965-66 and 1966-67 that penal proceedings were initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Tribunal, the CIT moved the Tribunal under s. 256(1) of the Act for making a reference to the High Court in each of the two cases. Accordingly, the aforesaid question already quoted at the beginning of the judgment has been referred for decision of this court. Mr. B. P. Rajgarhia, learned counsel appearing for the department vehemently contended that the Tribunal was wrong in applying the law as it existed at the time of filing of the original returns by the assessee as the relevant date for application of the law would be the date when the authority concerned was satisfied in the course of the proceedings under the Act that the assessee bad concealed his income and this date would be the date after the law was amended and, therefore, the order of the IAC was correct. Mr. K. N. Jain, learned counsel for the assessee, on the other hand supported the order of the Tribunal and contended that the law applicable would be the law as it existed at the time of filing of the original return by the assessee. According to the learned counsel it is with reference to the said original return that the assessee has committed concealment or default within the meaning of s. 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y increasing the total income in the figure returned. In view of the amendment in s. 23(5) of the Act of 1922, by the Finance Act of 1956, the tax payable by the firm and the amount to be included in the income of each partner was determined and on the same day the ITO issued notice under s. 271 read with s. 274 of the Act of 1961 calling upon the firm to show cause as to why the order imposing penalty should not be passed on account of failure to furnish a return within time. After the reply to the " showcause notice " was filed the ITO by order dated November 19, 1966, imposed a penalty of Rs. 1,03,434 under s. 271(1)(a) of the Act of 1961 for non-compliance of the notice under s. 22(2) of the Act of 1922. The appellant took the matter in appeal before the IAC challenging the imposition of penalty. Although those proceedings were still pending in a writ petition in the High Court challenging, inter alia, the validity and constitutionality of s. 23(5) of the Act of 1922 and s. 297(2)(g) and s. 271(2) of the Act of 1961, respectively, the High Court did not accept any of the contentions of the appellants and the petition was dismissed. In the first part of the judgment, their Lords ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r April 1, 1962, according to cl. (g) under the new Act. Thus, these two clauses make special provisions as to the applicability of the law relating to initiation and imposition of penalty depending upon the date of completion of assessment. On reading Jain Brothers' case [1970] 77 ITR 107 (SC), as a whole it is clear that it was a case squarely covered by s. 297(2)(g). It can also be said without the least hesitation that the paragraph relied on from Jain Brothers' case [1970] 77 ITR 107 (SC) by Mr. Rajgarhia does not lay down the general proposition applicable even to cases not covered by cls. (f) and (g) of s. 297. To read the said decision in that way would amount to misreading the same. That paragraph itself shows that it was a case where assessment was completed after 1st April, 1962, and I have already pointed out that the relevant assessment year was 1960-61. It is well settled that a decision must be read against the background of its essential facts. Thus, the proposition laid down In the said paragraph in Jain Brothers' case [1970] 77 ITR 107 (SC) does not bear on the facts of the present case and, therefore, the contention of Mr. Rajgarhia cannot be accepted. The poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed inaccurate particulars of such income then he has the power to draw a penalty proceeding and impose penalty as mentioned in the aforesaid provisions. If the old law applies then the penalty will be lesser but under the new law the penalty will be much more. The question, therefore, is as to when concealment has been made in the present case under consideration. I have already pointed out above that the original returns in both the cases were filed on March 1, 1967, that is, before the aforesaid amendment. I have already pointed out above while stating the facts of the case that on the date assessment was completed on the basis of the original returns notice under s. 148 was issued to the assessee. It cannot be disputed that it is in relation to these returns that penalty has been imposed. So far as the tax is concerned it also cannot be disputed that the law is that it has to be assessed for an assessment year according to the law as it stands on the 1st day of April of the relevant financial year and any amendment made in the Act after that date would not apply to the assessment of that year even if actually assessment was made after the amendment had come into force. Applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were cited at the Bar. They are Addl. CIT v. Medisetty Ramarao [1977] 108 ITR 318 (AP), Addl. CIT v. Krishna Subh Karan [1977] 108 ITR 271 (All), CIT v. Ramchand Kundanlal Saraf [1975] 98 ITR 474 (MP) and CIT v. Ram Achal Ram Sewak [1977] 106 ITR 144 (All). There are other decisions apart from those mentioned above which are referred to in Medisetty Ramarao's case [1977] 108 ITR 318 (AP). It is, however, necessary here to discuss one decision which was again strongly relied upon by Mr. Rajgarhia in support of his contention. It, is CIT v. K. C. Behera [1976] 103 ITR 479, a Bench decision of the Orissa High Court. It appears that it has struck a different note from the decisions referred to above. On reading this decision it appears that the learned judges have followed the decision in Jain Brothers' case [1970] 77 ITR 107 (SC) and have strongly relied upon a portion of the paragraph, quotation of which, I have already made above while discussing that case at the beginning of the judgment. With reference to that paragraph it has been stated : " the aforesaid observation of their Lordships left absolutely no room for doubt that the penalty proceeding has to be initiated only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and was a decision turning upon the provision of s. 297(2)(g). Therefore, it is difficult for me to follow this decision of the Orissa High Court and I say this with much respect. Reference was also made by Mr. Rajgarhia to an unreported decision of this court in CIT v. Parmanand Advani (Taxation Case No. 133 of 1971, decided on 11th August, 1978) (since reported in[1979] 119 ITR464 (Pat)), in which one of us, S. Sarwar Ali J., was a member, but this case does not help the revenue as it is distinguishable on its own facts. It was a case where, it was in the processing of the revised return, which was filed after the Expln. to s. 271 (1) of the Act was added, that the ITO became satisfied of the concealment. It has further been held that the amendment by which the Expln. to s. 271(1) was introduced only prescribed a rule of evidence relating to the burden of proof and that this provision is purely procedural in nature and, therefore, irrespective of the date on which the offence was committed this provision will be attracted if the proceeding for punishing the offender was pending on the date when it came into force. For the reasons stated above, I hold that the Income-tax Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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