The concealment of income for the purpose of imposing penalty under Section 271(1)(c) of the Income Tax Act, 1961, occurs when the return is filed, and not prior to it.

1. The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty of Rs. 10,500 levied under the Explanation to Section 271(1)(c) ?"

2. The assessee is Messrs. Bhan Singh Buta Singh of Amritsar. They are commission agents of goats and sheep. In the assessment year 1963-64, the assessee filed a return showing his income as Rs. 60,166. This return was filed on 9th April, 1964. By then Section 271, as amended, was in the field, for this section had been made applicable with effect from 1st April, 1964. The total income of the assessee was computed by the Income-tax Officer at Rs. 1,27,820. The Income-tax Officer added back an amount of Rs. 41,420 which was claimed by the assessee as bad debts for the reason that the assessee had neither adduced any evidence to indicate the nature of the debt nor to establish that the debt had become bad. The Income-tax Officer further added an amount of Rs. 18,000 on account of cash credit in the account of Shri Sujan Singh Sadana as assessees income from undisclosed sources. The Income-tax Officer started penalty proceedings under Section 271(1)(c). Inasmuch as the minimum penalty that was imposable was more than Rs. 1,000 he referred the case to the Inspecting Assistant Commissioner of Income-tax. The assessee preferred an appeal against the assessment to the Appellate Assistant Commissioner. The assessee contested the disallowance of bad debt only to the extent of Rs. 31,350 but without success. Out of the addition of Rs. 18,000, the Appellate Assistant Commissioner sustained the addition of Rs. 15,000. The assessee then preferred an appeal to the Income-tax Appellate Tribunal. The Appellate Tribunal affirmed the decision of the Appellate Assistant Commissioner with regard to the amount of Rs. 41,420 but modified the decision with regard to the addition of Rs. 15,000 on account of cash credits. The Tribunal held that only an addition of Rs. 8,000 was justified. Thus, the total amount that had not been disclosed in the return or, in other words, which had been concealed from assessment amounted to Rs. 49,420. In this view of the matter, the Inspecting Assistant Commissioner imposed a penalty of Rs. 10,500 under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961. An appeal was preferred against this imposition before the Tribunal. The Tribunal, following the observations of the Delhi Bench, in Income-tax Appeal No. 6343 of 1965-66, deleted the imposition of penalty. The observations of the Delhi Bench on which they relied are as follows:

" By virtue of this Explanation, filing of return of income at a figure less than 80% of the assessed income which was not an offence liable to penalty under Section 271(1)(c) has been made a substantive offence and penalty under Section 271(1)(c), therefore, can be imposed. Unless there is an express provision to the contrary such a substantive and far-reaching change in the law cannot be given a retrospective effect."

3. So far as the Tribunal itself is concerned, it observed as follows :

" The argument of the revenue that this Explanation must be held to apply to the facts of the case because the return of income was filed after April 1, 1964, when the Explanation had come into force is untenable inasmuch as the applicability of the provision of any particular law has to be determined with reference to the state of law in force on the 1st day of the assessment year and not with reference to the date on which the return was filed. There is nothing in the Explanation to suggest that the applicability thereof has been made determinable with reference to the date of the filing of the return and not with reference to the assessment involved."

4. At the instance of the department, the Tribunal has referred the question of law as already set out for our opinion.

5. Mr. Awasthy, lea