http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: BRIJ MOHAN

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX, NEW DELHI

DATE OF JUDGMENT03/08/1979

BENCH: PATHAK, R.S. BENCH: 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

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]

JUDGMENT:      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 ?

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

    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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

         "(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 effected 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

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. N.K.A.               Reference answered in favour of Revenue 205