Madhya Pradesh H.C : Whether, on the facts and circumstances of the case, the Tribunal was right in law in deleting the penalty?

Counsel Appeared

B.K. Rawat, for the Revenue : None, for the Assessee

N.D. OJHA, C.J.:

The Tribunal, Jabalpur Bench, Jabalpur, has, on a direction being issued by this Court on an application under s. 256(2) of the IT Act, 1961 (hereinafter referred to as ” the Act “), referred the following question of law to this Court for its opinion : ” Whether, on the facts and circumstances of the case, the Tribunal was right in law in deleting the penalty? “

2. The facts in a nutshell necessary for answering the aforesaid question are that the assessee was the managing director of Sheikh Rasool Motor Transport Co. (P) Ltd., Jabalpur. For the assessment year in question, namely, 1964-65, he filed his return showing a total income of Rs. 3,300. However, an order of assessment was passed computing the total income of the assessee at Rs. 27,503. In this order, a Sum of Rs. 24,203 was added as income from undisclosed sources. A penalty in the sum of Rs. 24,300 was also imposed on the assessee under s. 271(1)(c) of the Act. On an appeal filed by the assessee, however, the Tribunal set aside the order of imposition of penalty.

It has been urged by learned counsel for the applicant, namely, the CIT, Jabalpur, that the Tribunal committed a manifest error of law in taking the view that the burden in the instant case to prove concealment of income or furnishing inaccurate particulars thereof lay on the Department. It has been pointed out by him that in the instant case, only a sum of Rs. 3,300 was shown as total income by the assessee whereas the order of assessment was passed on a total income of Rs. 27,503 and it was found that the assessee had an additional income of Rs. 24,203 from undisclosed sources. According to him, on this finding, the Explanation added to s. 271(1)(c) of the Act w.e.f. April 1, 1964, by the Finance Act, 1964, was clearly attracted and in view of that Explanation, the burden was on the assessee to prove that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, and on his failure to discharge this burden, he will be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of s. 271(1)(c) of the Act. Even though as seen above, the relevant assessment year was 1964-65, the Explanation referred to above inserted in s. 271(1)(c) of the Act w.e.f. April 1, 1964, was clearly attracted inasmuch as the return for the aforesaid assessment year had been filed on March 19, 1969. In Brij Mohan vs. CIT (1979) 12 CTR (SC) 198 : (1979) 120 ITR 1 (SC), the relevant assessment year was 1964-65. The return for the said year, however, was filed on April 24, 1968. In the meantime, s. 271 of the Act was amended by the Finance Act, 1968, whereby cl. (iii) was substituted . The case of the assessee was that since the relevant assessment year was 1964-65, it is the law which was applicable in that year which alone could be applied. This contention was repelled by the Supreme Court and it was held that since a penalty is imposed on account of the commission of a wrongful act, it is plainly the law operating on the date on which the wrongful act is committed which determines the penalty.Consequently, where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant and it was wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past. In this view of the matter, in the instant case, the law ruling on March 19, 1969, when the return was filed and when the act of concealment took place, would be relevant and applicable. We, therefore, find substance in the submission made by learned counsel for the applicant. The Tribunal shall consequently have to decide the appeal afresh in the light of the observations made above.

3. In view of the aforesaid discussion, our answer to the question referred to us is that, on the facts and circumstances of the case, the Tribunal was not right in law in deleting the penalty. In other words, the said question is answered in the negative, in favour of the Department and against the assessee. Since no one appeared on behalf of the assessee, there shall be no order as to costs.

[Citation : 170 ITR 421]