TMI Blog1974 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax agreed with the Income-tax Officer that in the circumstances the income had to be assessed on estimate basis but he reduced the estimate of income to Rs. 28,000. Thereafter, the Inspecting Assistant Commissioner of Income-tax, Meerut, continued the penalty proceedings. He found that the return of income was filed on October 13, 1964, and, therefore, the case was governed by the provisions of section 271, as amended by the Finance Act of 1964. He next observed that the total income as returned by the assessee was less than 80 per cent. of the income assessed and the assessee had failed to prove that the disparity in the income returned and assessed was not due to any gross or wilful neglect on his part. He, therefore, imposed the penalty of Rs. 7,000 by his order dated 22nd July, 1967. The assessee appealed against the penalty order to the Income-tax Appellate Tribunal. The Tribunal found that the case was clearly one where, but for the amended provisions of section 271, no penalty could be imposed against the assessee inasmuch as the assessment had been made on the basis of estimate and no concealment of income had been proved. In the opinon of the Tribunal, however, the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income." This provision was amended by the Finance Act of 1964. The word "deliberately" occurring in clause (c) before the words "furnished inaccurate particulars" was omitted and the following Explanation was added at the end of section 271(1)(c) : " Explanation.--Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere their Lordships have also explained their observations in the case of C. A. Abraham . The relevant dictum is to be found in the following passage : " One line of argument which has prevailed particularly with the Allahabad High Court in Lal Chand Gopal Das's case is that there was no essential difference between tax and penalty because the liability for payment of both was imposed as a part of the machinery of assessment and the penalty was merely an additional tax imposed in certain circumstances on account of the assessee's conduct. The justification of this view was founded on certain observations in C. A. Abraham v. Income-tax Officer . It is true that penalty proceedings under section 28 are included in the expression assessment and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considered to be against the public interest. It is significant that in C. A. Abraham' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the assessee has relied upon the decision of the Kerala High Court in the case of Hajee K. Assainar v. Commissioner of Income-tax where it has been held that the amendment in question is not procedural in nature but affects substantive rights, and as such is not retrospective. This controversy, in our opinion, is not really material, because, as has been pointed out above, the principle that the law applicable to assessments is the law prevailing on the 1st day of the assessment year, is not applicable to penalty proceedings, which are not of the nature of assessment proceedings but are of a criminal nature. The amendment, whether substantive or procedural, will apply to all cases where the default or the offence is committed after April, 1964, irrespective of the assessment year to which it relates. The view that we are taking finds full support from a decision of the Punjab High Court in the case of Commissioner of Income-tax v. Bhan Singh Boota Singh and of the Gauhati High Court in the case of Rajputana Stores v. Inspecting Assistant Commissioner of Income-tax . We accordingly answer the first question in the negative, in favour of the department and aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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