Judgment

PATHAK, J.:- Is an assessee, who has concealed the particulars of his income, liable to penalty under clause (iii) of sub-sec. (1) of S. 271 of the Income-tax Act, 1961 as it stood on the date of the concealment or as it stood during the assessment year relevant to the previous year in which the income was earned?

2. That is the question in this reference made by the Income-tax Appellate Tribunal under S. 257 of the Income-tax Act.

3. The assessee is a partner in two firms, Messrs. New Crockery House. He filed a return of his total income for the assessment year 1964-65 on April 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 proceeding, the Income-tax Officer found that the assesee had received income from Messrs. New Crockery House also. Because of non-compliance by the assessee with a notice issued under S. 143 (2) of the Act, the Income-tax Officer made a best judgment assessment under S. 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/-.

4. The Income-tax Officer instituted penalty proceedings, and applied clause (iii) of sub-sec. (1) of S. 271 of the Act, as it stood 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 penalty in the like sum, in view of the amended clause (iii) of sub-sec. (1) of S. 271 of the Act. The assessee appealed to the Income-tax Appellate Tribunal, and contended that the amended provision could 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. Assainar v. Commr. of Income-tax, Kerala, (1971) 81 ITR 423 and the Punjab and Haryana High Court in Income - tax Reference No. 45 of 1971 decided on April 25, 1972 which had followed Saeed Ahmed v. Inspecting Asstt. Commr. of Income-tax, Lucknow, (1971) 79 ITR 28 decided by the Allahabad High Court. In the circumstances, it made the present reference directly to this Court on the following question of law :-

"Whether the Tribunal was, in law, right in sustaining the penalty of Rs. 2,955/- by applying the provisions of S. 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. Clsuse (c) of sub-sec. (1) of S. 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 cl. (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 correc