Brij Mohan Vs. Commissioner of Income
Tax, New Delhi [1979] INSC 141 (3 August 1979)
PATHAK, R.S.
PATHAK, R.S.
BHAGWATI, P.N.
CITATION: 1979 AIR 1897 1980 SCR (1) 199 1979
SCC (4) 118
CITATOR INFO :
RF 1992 SC1139 (9)
ACT:
Income Tax Act, 1961, Section 271(1)(c)(iii)
as amended by Finance Act 1968-Scope of.
HEADNOTE:
Section 271(1)(c)(iii) provided that where
the Income Tax officer had reason to believe that the assessee had concealed
particulars of his income or furnished inaccurate particulars of such income he
may impose a penalty of a sum in addition to any tax payable by the assessee
which shall not be less than twenty per cent but which shall not exceed one and
a half times the amount of the tax. The Finance Act 1968, which came into
effect from April 1, 1968, enhanced the penalty to a sum which shall not be
less than 7 but which shall not exceed twice. the amount of income in respect
of which the particulars have been concealed or inaccurate particulars have
been furnished.
The assessee filed a return of his total
income for the assessment year 1964-65 on 24th April, 1968. In the course of
assessment proceedings, the Income Tax officer found that the assessee had
concealed the income earned from one of his two firms. Having regard to the minimum
penalty which he considered was leviable, he referred the case to the
Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner
imposed a penalty in respect of the concealed income in accordance with section
271 (1) (c) (iii) as amended by the Finance Act 1968.
It was argued on behalf of the assessee that
(i) assessment proceeding for the determination of total income and computation
of tax liability must ordinarily he made on the basis of the law prevailing
during the assessment year, and inasmuch an concealment of income is concerned
with the income relevant for assessment during the assessment year any penalty
Imposed in respect of concealment of such income must also be governed by the
law pertaining to that assessment year, (ii) under s. 139 of the Act as it
stood during the assessment year 1964-65, the return of income should have been
filed by the end of September 1964 and as the return although filed on April
24, 1968 was accepted by the Income Tax officer and therefore should be deemed
to have been filed within time i.e. by September 30, 1964 the penalty would be
governed by the section as it originally stood then.
HELD: 1. Clause (iii) substituted in
sub-section (1) of section 271 of the Income Tax Act, 1961 by the Finance Act,
1968, governs the case. Therefore, the penalty imposed on the assessee in the
instant case is covered by that provision [204B]
2. 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 200 to tax. In the case of the
assessment of income and the determination of the consequent tax liability, the
relevant law is the law which rules during the 1 assessment year in respect of
which the total income is assessed and the tax liability determined. The rate
of tax is determined by the relevant Finance Act. In the case of a penalty,
however, it is imposed on account of the commission of a wrongful act.
It is the law operating on the date on which
the wrongful act is committed which determines the penalty. Where penalty is
imposed for concealment of particulars of income, it is the law ruling on the
date when the act of concealment takes place which is relevant. It is wholly
immaterial that the income concealed was to be assessed in relation to an
assessment Year in the past. [202G-H, 203A-C]
3. Under s. 139 of the Act, although the
statute itself prescribes the date by which a return of income must be filed,
power has been conferred on the Income Tax Officer to extend the date of
furnishing the return. A return filed within the extended period is a good
return in the sense that the Income Tax officer is bound to take it into
consideration. But nowhere does s. 139 declare that where a return is filed
within the extended period it will be deemed to have been filed within the
period originally prescribed by the statute. On the contrary, the section
contains a provision for payment of interest where the return filed beyond the
prescribed date even 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. [203 F-H, 204A]
CIVIL APPELLATE JURISDICTION: Tax Reference
Case No. 15 of 1975.
Tax Reference under Section 257 of the Income
Tax Act, 1961 made by the Income Tax Appellate Tribunal Delhi Bench R.A. No.
508 of 1971-72 arising out of I.T.A. No. 3410 of 70-71 for assessment year
1964-65.
S. L. Aneja and K. L. Taneja for the
Appellant.
S. C. Manchanda, G. A. Shah and Miss A.
Subhashini for the Respondent.
The Judgment of the Court was delivered by
PATHAK, J.- Is an assessee, who has concealed the particulars of his income,
liable to penalty under clause (iii) of sub-section (1) of section 271 of the
Income Tax Act, 1961 as it stood on the date of the concealment or as it stand
during the assessment year relevant to the previous year in which the income
was earned ? That is the question in this reference made by the Income Tax
Appellate Tribunal under section 257 of the Income Tax Act.
The assessee is a partner in two firms,
Messrs.
Hindustan Pottery Agency and Messrs. New
Crockery House. He filed a return of his total income for the assessment year
1964-65 on April 201 24, 1968. He disclosed an income of Rs. 460/- from his
share in the profits of Messrs. Hindustan Pottery Agency. He did not disclose
the income from his share in Messrs. New Crockery House. In the course of the
assessment proceedings, the Income Tax officer found that the assessee had
received income from Messrs. New Crockery House also. Because of non-
compliance by the assessee with a notice issued under section 143 (2) of the
Act, the Income Tax officer made a best judgment assessment under Section 144
of the Act on a total income of Rs. 12,118/-. This included a share income of
Rs. 1,462/- from Messrs. Hindustan Pottery Agency and a share income of Rs.
3,456/- from Messrs. New Crockery House.
Certain other items of income were also
included. On appeal by the assessee, the Appellate Assistant Commissioner
reduced the income from Messrs. New Crockery House to Rs. 2,955/- and taking
into account certain other items determined the figure of concealed income at
Rs. 7,357.
The Income Tax officer instituted penalty
proceedings, and applied clause (iii) of sub-section (1) of section 271 of the
Act, as it stand after amendment by the Finance Act, 1968. Having regard to the
minimum penalty which, in his opinion, was leviable, he referred the case to
the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner
examined the matter, and on the basis that the concealed income was Rs. 7,357/-
he imposed a 13 penalty in the like sum, in view of the amended clause (iii) of
subsection (1) of section 271 of the Act. The assessee appealed to the Income
Tax Appellate Tribunal, and contended that the amended provision could not be
invoked and what came into operation was the law as it stood in the assessment
year 1964-65. The Tribunal rejected the contention. But it reduced the penalty
to Rs. 2,955/- taking the view that the assessee was guilty of concealing the
share income from Messrs. New Crockery House only. The assessee then applied
for a reference. The Tribunal saw a conflict of opinion on the point raised by
the assessee between the Kerala High Court in Hajee K. Asseinar v. Commissioner
of Income-Tax, Kerala and the Punjab and Haryana High Court in Income Tax
Reference No. 45 of 1971 (decided on April, 26, 1972) which had followed Saeed
Ahmed v. Inspecting Assistant Commissioner of Income-tax, Range ll, Lucknow(2)
decided by the Allahabad High Court . In the circumstances, it made the present
reference directly to this Court on the following question of law:
202 "Whether the Tribunal was, in law,
right in sustaining the penalty of Rs. 2,955/- by applying the provisions of
section 271(1)(c) (iii) of the Income Tax Act, 1961 as amended with effect from
1-4-1968 ?" Section 271 of the Income Tax Act provides for penalties in
certain cases. Clause (c) of sub-section (1) of section 271 speaks of a case
where the Income Tax officer is satisfied that a person has concealed the particulars
of his income or furnished inaccurate particulars of such income.
The measure of the penalty is specified in
clause (iii) of the sub-section. During the assessment year 1964- 65, clause
(iii) read "(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." That clause was substituted with effect
from April 1, 1968 by the Finance Act, 1968 by the following:- "(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, but which shall not exceed twice, the amount
of the income in respect of which the particulars have been concealed or
inaccurate particulars have been furnished.' It is evident that the quantum of
tax which is levied under the substituted clause (iii) can be greater than that
imposable in terms of the original clause (iii).
The case of the assessee is that an
assessment proceeding for the determination of the total income and the
computation of the tax liability must ordinarily be made on the basis of the
law prevailing during the assessment year, and inasmuch as concealment of
income is concerned with the income relevant for assessment during the
assessment year any penalty imposed in respect of concealment of such income
must also be governed by the law pertaining to that assessment year. We are
unable to accept the contention. 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.
203 In the case of the assessment of income
and the determination of the consequent tax liability, the relevant law is the law
which rules during the assessment year in respect of which the total income is
assessed and the tax liability determined. The rate of tax is determined by the
relevant Finance Act. In the case of a penalty, however, we must remember that
a penalty is imposed on account of the commission of a wrongful act, and
plainly it is the law operating on the date on which the wrongful act is
committed which determines the penalty. Where penalty is imposed for
concealment of particulars of income, it is the law ruling on the date when the
act of concealment takes place which is relevant. It is wholly immaterial that
the income concealed was to be assessed in relation to an assessment year in
the past.
We do not think that the cases to which the
Tribunal has referred can be said to differ on this.
The concealment of the particulars of his
income was affected by the assessee when he filed a return of total income on
April 24, 196$,. Accordingly, it is the substituted clause (iii), brought in by
the Finance Act.
1968, which governs the case. That clause
came into effect from April 1, 1968.
Another contention raised by the assessee may
be noticed. It is urged that under section 139 of the Income Tax Act, as it
stood during the assessment year 1964-65 the return of income should have been
filed by the end of September, 1964 and inasmuch as the return, although filed
as late as April 24, 1968, was accepted by the Income Tax officer it should be
deemed that the return was treated as filed within time or, in other words, that
the return had been filed by September 3(), 1964. In that event, the submission
continues, the concealment of the particulars of income must be deemed to have
taken place when the original clause (iii) of section (1) of section 271 of the
Act was in operation. This contention is also without force. Under section 139
of the Act, although the statute itself prescribes the date by which a return
of income must be filed, power has been conferred on the Income Tax officer to
extend the date of furnishing the return. A return filed within the extended
period is a good return in the sense that the Income Tax officer is bound to
take it into consideration. But nowhere does section 13 declare that where a
return is filed within the extended period it will be deemed to have been filed
within the period originally prescribed by the statute. On the contrary, the
section contains a provision for payment of interest where the return is filed
beyond the 204 prescribed date even 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.
Accordingly, we are of opinion that clause
(iii) substituted in sub-section (1) of section 271 of the Income Tax Act, 1961
by the Finance Act, 1968, governs the case before us and, therefore, the
penalty imposed on the assessee in the instant case is covered by that
provision.
We answer the question in the affirmative, in
favour of the Revenue and against the assessee. The Revenue is entitled to its
costs of this Reference.
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