1975 Supreme(All) 209

High Court Of Allahabad
R.L.Gulati, M.P.Mehrotra, JJ.
Addl. Commissioner Of Income-Tax - Appellants
Vs.
Jiwan Lal Shah - Respondents
Income-tax Reference 488 of 1973
Decided on: May 22, 1975

The Explanation added to Section 271(1) on April 1, 1964, by the Finance Act of 1964 is a mere rule of evidence. It merely raises a rebuttable presumption but the basic principle laid down in Section 271(1)(c) still remains, namely, that there should have been a concealment of the particulars of the income or an inaccurate furnishing of such particulars.

Headnote:

INCOME TAX - Penalty - Concealment of income - Applicability of amended provisions - Explanation added to Section 271(1) - Interpretation - Whether applicable to assessment years prior to amendment - Whether Explanation creates a rebuttable presumption - Whether mere falsity of explanation sufficient to attract penalty - Jurisdiction to impose penalty - Whether Inspecting Assistant Commissioner has jurisdiction when minimum penalty imposable is less than Rs. 1,000.

Fact of the Case:

The assessee was assessed as an individual for the assessment years 1962-63 to 1967-68. The returned incomes were not accepted and the assessee was assessed on the estimated basis. Subsequently, proceedings were initiated under Section 147 of the Income-tax Act, 1961, for the aforesaid assessment years as certain bank deposits in the joint names of the assessee and his wife as well as in the names of the sons and the minor daughters of the assessee were discovered. The assessee included the interest income from the deposits in the returns filed in response to the notices under Section 148. However, the amounts of deposits were not returned as income in the revised returns. The Income-tax Officer added back the deposits as income for the relevant years. The Appellate Assistant Commissioner accepted some of the deposits and sustained additions in part. The Tribunal gave further relief to the assessee. The Income-tax Officer also initiated proceedings under Section 271(1)(c) and referred the matter to the Inspecting Assistant Commissioner as the minimum penalty imposable exceeded Rs. 1,000 in each assessment year. The Inspecting Assistant Commissioner imposed penalties equal to the amount of income concealed. The assessee preferred appeals to the Tribunal from the orders of the Inspecting Assistant Commissioner. The Tribunal held that the amendment of 1968 would be effective only from the assessment years 1968-69 onwards and that the Explanation added to Section 271(1) by the Finance Act of 1964 would be operative only in respect of the assessment year 1964-65 and onwards. The Tribunal also held that the mere fact that the explanation offered by the assessee in respect of the sources of the bank deposits had not been accepted, was not sufficient to lead to the conclusion that there was concealment of income by the assessee so as to attract the provisions of Section 271(1)(c). The Tribunal further held that the orders of the Inspecting Assistant Commissioner imposing penalty over different years in question, were without jurisdiction and the same were set aside.

Finding of the Court:

1. The Tribunal was not correct in holding that the provisions of Section 271(1) as they stood prior to the amendment by the Finance Act of 1968 should be applied in the present case. 2. The Tribunal was not correct in law in holding that the provisions of Section 271(1)(c) read with the Explanation thereof will not apply to the assessment years 1962-63 and 1963-64 even though the returns of income had been filed, after April 1, 1964. 3. The Tribunal was right in holding that no penalty could be imposed with reference to the cash deposits on the principle of Anwar Ali's case [1970] 76 ITR 696 (SC) even after the amendment of Section 271 in 1964. 4. The Tribunal was justified in holding that the Inspecting Assistant Commissioner had no jurisdiction to impose penalties under Section 271(1)(c) for the assessment years 1962-63, 1963-64, 1965-66, 1966-67 and 1967-68 and in setting aside his orders.

Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the provisions of Section 271(1) as they stood prior to the amendment by the Finance Act of 1968 should be applied in the present case ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the provisions of Section 271(1)(c) read with the Explanation thereof will not apply to the assessment years 1962-63 and 1963-64 even though the returns of income had been filed, after April 1, 1964 ? 3. Whether, on the facts and circumstances of the case, the Tribunal was right is holding that no penalty could be imposed with reference to the cash deposits on the principle of Anwar Ali's case [1970] 76 ITR 696 (SC) even after the amendment of Section 271 in 1964 ? 4. Whether, on the facts and the circumstances of the ease, the Tribunal was justified in holding that the Inspecting Assistant Commissioner had no jurisdiction to impose penalties under Section 271(1)(c) for the assessment years 1962-63, 1963-64, 1965-66, 1966-67 and 1967-68 and in setting aside his orders ?

Ratio Decidendi: 1. Penalty proceedings cannot be equated with assessment proceedings. The law applicable to penalty proceedings will be the law as it stands on the day on which the default is committed. 2. The Explanation added to Section 271(1) on April 1, 1964, by the Finance Act of 1964 is a mere rule of evidence. It merely raises a rebuttable presumption but the basic principle laid down in Section 271(1)(c) still remains, namely, that there should have been a concealment of the particulars of the income or an inaccurate furnishing of such particulars. 3. The mere fact that the explanation given by the assessee in respect of the bank deposits was not accepted does not necessarily lead to the conclusion that the said deposits were concealed incomes or that the assessee furnished inaccurate particulars of his income. 4. When the minimum penalties imposable in respect of various years in question are less than Rs. 1,000 in respect of every one of these years, the Income-tax Officer alone has the jurisdiction to levy the penalties and not the Inspecting Assistant Commissioner.

Final Decision: 1. The Tribunal was not correct in holding that the provisions of Section 271(1) as they stood prior to the amendment by the Finance Act of 1968 should be applied in the present case. 2. The Tribunal was not correct in law in holding that the provisions of Section 271(1)(c) read with the Explanation thereof will not apply to the assessment years 1962-63 and 1963-64 even though the returns of income had been filed, after April 1, 1964. 3. The Tribunal was right in holding that no penalty could be imposed with reference to the cash deposits on the principle of Anwar Ali's case [1970] 76 ITR 696 (SC) even after the amendment of Section 271 in 1964. 4. The Tribunal was justified in holding that the Inspecting Assistant Commissioner had no jurisdiction to impose penalties under Section 271(1)(c) for the assessment years 1962-63, 1963-64, 1965-66, 1966-67 and 1967-68 and in setting aside his orders.