D.S.Tewatia, J.

1. In this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), the question referred for the opinion of the High Court is :

" Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the provisions of Section 271(1)(iii) of the Act, as existing before its amendment with effect from April 1, 1968, would be applicable to the present case ? "

2. The reference initially was set down for hearing before a Division Bench which, in turn, referred it to a larger Bench and that is how the matter is before us.

3. Before proceeding with the consideration of the question posed, the necessary facts having a bearing upon the said question deserve to be taken notice of.

4. During the course of assessment proceedings for the assessment year 1963-64 of M/s. Ram Singh Harmohan Singh, Arnritsar (hereinafter referred to as "the assessee "), the ITO computed the total income of the assessee by adding thereto the following amounts which his account books showed as cash credits : Rs.

1. Messrs. Amir Chand Moti Ram 42,000

2. Messers B. Mohan Singh and Sons 20,000

3. Interest in the name of Messers. Amir Chand 2,075 Moti Ram

5. On appeal, the AAC reduced the addition in the account of M/s. Amir Chand Moti Ram to a sum of Rs. 17,000 but maintained the addition of Rs. 20,000 in the account of M/s. B. Mohan Singh and Sons and the addition of interest amounting to Rs. 2,075 in the account of M/s. Amir Chand Moti Ram.

6. Construing the said amounts as concealment of income, the ITO issued penalty notice under Section 27I(1)(c) of the Act for concealment of income and since the penalty imposable exceeded Rs. 1,000 the case was referred to the IAC of Income-tax under Section 274(2) of the Act. The IAC, vide his order dated 15th of March, 1971, after allowing the assessee an opportunity of being heard, imposed on him a penalty of Rs. 38,592 in accordance with the provisions of Section 271(1)(c)(iii) of the Act as operative on April 1, 1968, assuming the commission of the offence in question on February 19, 1969, when the return, in response to the notice under Section 148, was filed by the assessee repeating therein the income shown in the original return.

7. On an appeal, the Income-tax Appellate Tribunal held-that no penalty was imposable in respect of the cash credit of Rs. 17,000 in the account of M/s. Amir Chand Moti Ram, the said addition having been deleted by the Appellate Tribunal on an appeal from the order of the AAC. The penalty in respect of the addition of Rs. 20,000 pertaining to the cash credit in the account of Messrs. B. Mohan Singh and Sons was held to be leviable and was, therefore, maintained. Quantum of penalty was computed by it with reference to the penalty provisions of Section 271(1)(c)(iii) of the Act as it existed prior to April 1, 1968, for, according to it, the offence of concealment was committed when the original return of the income had been filed by the assessee and that was on April 21, 1967. In the light of the aforesaid view, the Tribunal fixed the penalty at 30 per cent. of the tax sought to be avoided on the income finally determined in the appeal.

8. The parties are not at variance with each other in regard to the fact that on the day on which the original return was filed by the assessee, i.e., April 21, 1967, the quantum of penalty imposable followed the tax-avoided base, i.e., it had reference to the quantum of tax sought to be avoided by concealing his income and that on the day on which the return in response to a notice under Section 148 of the Act was filed, i.e., 19th February, 1969, the quantum of penalty followed income-avoided base, i.e., the quantum of penalty had to be computed with reference to the quantum of concealed income. The relevant provisions authorising the taxing authorities to impose penalty in regard to the concealed income are in the following terms (prior to April 1, 1968) :

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