( 1 ) IT is well settled that for the purposes of assessment to income tax the law to be applied is the law that is in force in the assessment year; in other words, the Income-tax Act as it stands amended on the first day of April of a financial year will apply to the assessment for that year. This principle enunciated by the Privy Council in Maharajah of Pithapuram v. Commissioner of Income Tax (1945-13 ITR 221) (1) has since been reiterated by the supreme Court in Karimtharuvi Tea Estate Ltd. V. State of Kerala (1966-60 ITR 262) (2) and CIT v. Scindia Steam Navigation Co. Ltd. (1961-42 ITR 589) (3) and. other decisions. The two references presently under consideration raise a similar question regarding the law applicable inregard to the levy of a penalty for concealment under Section 271 (1) (c) of the Income-tax Act, 1961.

( 2 ) SO far as the penalty provisions are concerned, there have been material changes in the statute in several respects and these have brought to the forefront a good deal of controversy in regard to the particular provision of law that would be applicable in a particular case. These issues have arisen in the context of three major changes regarding the imposition of levy of penalty under the Income-tax Act. . The first set of changes was haralded by the substitution of the Income-tax Act, 1961 in the place of Indian Income-tax Act, 1922. So far as this change was concerned, however, the statute itself made certain provisions in Sections 297 (2) (f) and (g) to these provisions. Notwithstanding this, there were some conflicts and controversies that were set at rest by the Supreme Court in the case of Jain Brothers and Others v. UOI 1970-77 ITR 107 (4 ). The second set of changes was effected by the Finance Acts of 1964, 1968 and 1975. The Finance Act of 1964 deleted the word "deliberately" in Section 271 (l) (c ). and also introduced an explanation casting the onus of proof on the assessee in cases where the difference between the returned income and the assessed income exceeded a particular margin. The Finance Act of 1968 amended the quantum of, penalty that was impossible in cases of concealment. Under the pre-1968 provisions the quantum of penally was measured with reference to the tax which was sought to be avoided by means of the concealment that was being penalised, i. e. , by the amount of difference between the tax on assessed income and that on the returned income The penalty varied from 20 percent to 150 percent of the tax sought to be avoided. The new provision as substituted with effect from 1-4-1968 by the Finance Act of 1968 provided for the computation of the penalty at figures varying between 1,00 percent and 200 percent of the amount of income in respect of which there has been concealment. Several cases have arisen in regard to the applicability of these provisions to paritcular cases and it is this aspect of the controversy that arises in these two references as well. The same type of questions will also arise in respect of the amendments made with effect from 1-4-1976 by the Taxation Laws (Amendment) Act, 1975 which restored the original measure and restricted the penalty to between 100 percent to 200 percent of the amount of tax sought to be avoided as defined in the new Explanaion 4. The third major change made in the Act was represented by the amendments to Sections 274 and 275 of the Income-tax Act. Section 274 originally provided that in cases of concealment where the minimum penalty imposable exceeded Rs. 1,000, the penalty was to be imposed by-the Inspecting Assistant Commissioner and Section 275 provided that an order of penalty was to be passed before the expiration of two years from (to put it briefly) the date of completion of the assessment. These provisions were, however, amended by the Taxation Laws (Amendment) Act, 1970 with effect from 1st April, 1971. Section 274 (2) was amended to provide that the Inspecting Assistant Commissioner will be the authori