Supreme Court of India
BRIJ MOHANversusCOMMISSIONER OF INCOME TAX, NEW DELHI
- Citation
- 1979 INSC 142
- Decided
- 3 August 1979
- Disposal
- Reference answered
- Bench
- P N BHAGWATI
Holding
A penalty for concealment of income is governed by the law in force at the date of concealment, so the Finance Act 1968 amendment to Section 271(1)(c)(iii) applies.
Summary
Brij Mohan, a partner in two firms, filed his 1964-65 income tax return late in April 1968, disclosing income from one firm but concealing income from the other. The Income Tax Officer, upon discovery, imposed a penalty under Section 271(1)(c)(iii) as amended by the Finance Act 1968, which allowed a penalty up to twice the concealed income. The assessee argued that the penalty should be governed by the law in force during the assessment year 1964-65 and that a return filed within the extended period under Section 139 should be treated as timely. The Supreme Court held that a penalty for concealment is determined by the law applicable at the time the concealment occurred, not by the assessment‑year law, and that Section 139 does not deem an extended‑period return to be filed on time. Consequently, the Finance Act 1968 amendment applied and the penalty was upheld. The reference was answered in favour of the Revenue.
Issues considered
- Whether a penalty for concealment of income is governed by the law in force at the time of concealment or by the law applicable during the assessment year of the concealed income.
- Whether a return filed after the statutory due date but within the extension permitted under Section 139 is deemed to have been filed within the original due date for penalty purposes.
Legislation cited
- Finance Act, 1968s. amendment to Section 271(1)(c)(iii)
- Income Tax Act, 1961s. 139, s. 143(2), s. 144, s. 257, s. 271(1)(c)(iii)
Subjects
Income TaxPenaltyConcealment of IncomeSection 271Finance Act 1968Assessment YearSection 139Retrospective Application
Judgment
199
BRIJ MOHAN A
v.
COMMISSIONER OF INCOME TAX, NEW DELHI
• August 3, 1979
• [P. N. BHAGWATI AND R. S. PATHAK, JJ.]
lncon1e Tax Act, 1961, Section 271 (1) (c) (iU) as a1nended -by Finance Act
B
•
',/ .
1968-Scope of.
Section 271(1)(c)(iii) provided that where the Income Tax Officer had
reason to believe that the assessee had concealed particulars of his income or
furnished inaccurate particulars of such income he may impose a penalty of a
sum in addition to any tax payable by the assesSee \Vhich shall not be less than c
twenty per cent but \Vhich shall not exceed. one and a half times the amount of
the tax. The Finance Act 1968, '""hich came into effect from April 1, 1968,
enhanced the penalty- to a sum which shall not be less than, but which shall not
exceed twice, the amount of income in respect of which the particulars have
been concealed ·or inaccurate particulars have been furnished.
The assessee filed a return of his total income for the assessment year 1964·65 D
on 24th April, 1968. In the course of assessment proceedings, the Income Tax
Officer found that the assessee had concealed the income earried from one of his
two firms. Having regard to the minimum penalty which he considered was
leviable. he referred the case to the Inspecting Assistant Commissioner. The
Inspecting Assistant Commis~loner imposed a penalty in respect of the concealed
income in accordance with section 271 (1) (c) (iii) as amended by the Finance Act
1968.
E
It was argued on behalf of the assessee that (i) assessment proceeding for the
detern1ination of total incoiiit and computation of tax liability must ordinarily be
made on the basis of the laW prevailing during the assessment year, and inasmuch
as concealment of income is concerned with the income relevant for assessment
during the assessment year any penalty imposed in respect of concealment of such
income must also be governed by the law pertaining to. that assessment year, (ii) F
under s. 139 of the Act as il stood during the assessment year 1964-65, the return
of income should have been filed by the end of September 1964 and as the return
although filed on April 24, 1968 was accepted by the Income Tax Officer and
·therefore should he deemed to have been filed within time i.e. by September
30; 1964 the penalty would be governed by the section as it originally stood
then. ·
G
• HELD: I. Clause (iii) substituted in sub-section {!) of sectibn 271 of the
• Income Tax Act, 1961 by the Finance Act, 1968, governs the case. Therefore,·
the penalty imposed on the assessee in the instant case is covered by that pro-
vision. [204B]
"
} 2. The a&msment of the total income and the computation of tax liability
is a proceeding which for that purpose, is governed by entirely different consi- D
derations from a proceeding for penalty imposed ior concealment of income.
And this is so not\vithstanding that the income concealed is the income assessed
14-4i5 SCl/79
200 SUPREME COURT REPORTS Ll980J l S.C.R.
to tax. In the case of the assessment of income and the determination of the
consequent tax liability, the relevant law is the law which rules during the
assessment year in respect of \\'hich the total income is assessed and the tax
liability determined. The rate of tax is determined by the relevant Finance
Act. In the case of a penalty, however, it is imposed on account of the com-
mission of a wrongful act. It is the law operating on the date on which the
•
B
wrongful act is committed which determines the penalty. 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. It is wholly
immaterial that the income concealed was to be assessed in relation to au
•.
assessment year in the past. [202G-H, 203A·C] ~-
.' "
3. Under s. 139 of the Act, although the statute itself prescribes the date
by which a retorn of income must be filed, power has been conferred on the
c Income Tax Officer to extend the date of furnishing the return. A return filed
within the extended period is a good return in the sense that the Income Tax
Officer is bound to take it into consideration. But nowhere does s. 139 declare
that where a return is filed within the extended period it will be deemed to
have been filed within the period originally prescribed by the statute. On the
contrary, the section contains a proYision for payment of interest where the
return is filed beyond th~ prescribed date even though within the extended
D period. That is evidence of the fact that the return filed during the .extended
period is not regarded by the statute as filed within the time originally
prescribed. [203 F-H, 204A]
CIVIL APPELLATE JURISDICTION : Tax Reference Case No. 15
of 1975.
E Tax Refernnce under Section 257 of the Income Tax Act, 1961
made by the Income Tax Appellate Tribunal Delhi Bench RA. No.
508 of 1971-72 arising out of I.T.A. No. 3410 of 70-71 for assess-
ment year 1964-65.
S. L. Aneja and K. L. Taneja for the _Appellant.
F S. C. Mancha'nda, G. A. Shah and Miss A. Subhashini for the
Respondent.
The Judgment of the Court was delivered by
PATHAK, J.-Is an assessee, who bas concealed the particulars
of bis income, liable to penalty under clause (iii) of sub-section ·(1)
G of section 271 of the Income Tax Act, 1961 as it stood on the date
of the concealment or as it stood during the assessment year rele-
vant to the previous year in which the income was earned ?
That is the question in this reference made by the Income Tax
Appellate Tribunal under section 257 of the Income Tax Act
The assessee is a partner in two firms, Messrs. Hindustan
H
pOttery Agency and Messrs. New Crockery House. He filed a
return of his total income for the assessment year 1964-65 on April
B.l!J MOHAN V. C'. !. T. (Pathak, !.) . 201
).
24, 1968. He disclosed an income of Rs. 460/- from his share in A
the profits of Messrs. Hindustan Pottery Agency. He did not dis-
' close the income from his share in Messrs. New Crockery House.
.• '
In the course of the assessment proceedings, the Income Tax Officer
found that the assessee had received income from Messrs. New
Crockery House also. Because of non-compliance by the assessee
with a notice issued under section 143 (2) of the Act, the Income .B
Tax Officer made a best judgment assessment unde.r Section 144
, A
of the Act on a total income of Rs. 12,118/-. This included a
". share income of Rs. 1,462/- from Messrs. Hindustan Pottery Agency
and a share income of Rs. 3,456/- from Messrs. New Crockery
House. Certain other items of income were also included. On
appeal by the assessee, the Appellate Assistant [Commissioner re-
c '
duGcd the income from Messrs. New Crockery. House to Rs. 2,955/-
and taking into account certain other items determined the figure of
concealed income at Rs. 7,357.
The Income · Ta)!: Ofil~er instituted penalty proceedings, and D
applied clause (iii) of sub-section (1) of section 271 of the Act,·
as it stood after amendment by the Finance Act, 1968. Having
regard to the minimum penal(y which, in his opinion, was Jeviable,
he referred the case to the Inspecting Assistant Commissioner. The
Inspecting Assistant Commissioner examined the matter, and on the
- basis that the concealed income was Rs. 7,357 I - he imposed a
penalty in the like sum, in view of the amended clause (iii) of sub-
section (1) of section 271 of the Act. The assessee appealed to the
Income Tax Appellate Tribunal, and contended that the amended
provision could not be invoked and what came into operation was
E
the law as it stood in th~ assessment year 1964-65. The Tribunal
rejected the contention. But it reduced the penalty to Rs. 2,955/- F
taking the view that the assessee was guilty of concealing the share
income from Messrs. New Crockery House only. The assessee then
applied for a reference. The Tribunal saw a conflict of opinion on
the point raised by the 'assessee between the Kerala High Court in
Hajee K. Asseinar v. Commissioner of Income-Tax, Kerala(') and
G
the Punjab and Haryana High Court in Income Tax Reference No.
45 of 1971 (decided on April, 26, 1972) which had followed Saeed
• Ahmed v. Inspecting Assistant Commissioner of Income-tax, Range
ll, Lucknow(') decided by the Allahabad High Court . In the cir-
cumstances, it made the present reference directly to this Court on
the following question of Jaw : :B
(I) 811.T.R. 423.
(2) 79 I.T.R. 298.
202 SUPREME COURT REPORTS [J 980] J S.C.R.
"Whether the Tribunal was, in law, right in sustaining
the penalty of Rs. 2,955/- by applying the provisions of
Section 271(1) (c) (iii) of the Income Tax Act, 1961 as
amended with effect from 1-4-1968 ?"
•
r B
Section 271 of the Income Tax Act provides for penalties in
certain cases. Clause (c) of sub-Section (!) of section 271 speaks
of a case where the Income Tax Officer is satisfied that a person
•
has concealed the particulars of his income or furnished inaccurate
particulars of such income. The measure of the penalty is specified
\
... ~
in clause (iii) of the sub-section . During the assessment year 1964-
65, clause (iii) read :
c
"(iii) in the cases referred to in clause (c), in addition
to any tax payable by him, a sum which shall not be less
than twenty per cent but which shall not exceed one and
a half times ·the amount of the tax, if any, which would
have been avoided if the income as returned by such per-
D son had been accepted as the correct income."
That clause was substituted with effect from April 1, 1968 by
the Finance Act, 1968 by the followhlg : -
"(iii) in the cases referred to in clause (c), in addition
to any ta:x: payable by him, a sum which shall not be less
E than, but which shall not exceed twice, the amount of the J.
income in respect of which the particulars have been con-
cealed or ina·ccurate particulars have been furnished."
It is evident that the quantum of tax which is levied under the
substituted clause (iii) can be greater than that imposable in terms
:r of the original clause (iii).
The case of the assessee is that an assessment proceeding for
the determination of the total income and the computation of the
tax liability must ordinarily be made on the basis of the law pre-
vailing during the assessment year, and inasmuch as concealment
of income is concerned with the income relevant for assessment
G during the assessment year any penalty imposed in respect of con-
cealment of such income must also be governed by the law pertain-
ing to that assessment year. We are unable to accept the contention.
In our opinion, the assessment of the total income and the com-
putation of tax liability is a proceeding which, for that purpose, is '
governed by entirely different considerations from a proceeding for {-
e penulty imposed for concealment of income. And this is so notwith-
standing that the income concealed is the mcome assessed to tax.
BRIJ MOHAN V. C. I. T. ( PatMk, J.) 203
Jn the case of the assessment of income and the determination of the
consequent tax liability, the relevant law is the law which rules
• during the assessment year in respect of which the total income is
assessed and the tax liability determined. The rate of tax is deter-
mined by the relevant Finance Act. In the case of a penalty, how-
• ever, we must remember that a penalty is imposed ou account of
B
the commis'sion of a wrongful ;ict, and plainly it is the law operating
'' on the date on which the wrongful act is committed which determines
the penalty. Where penalty is imposed for concealment of parti-
culars of income, it is the Jaw ruling on the date when the act of
concealment takes place which is relevant. It is wholly immaterial
that the income concealed was to be assessed in relation to an assess- c
ment year in the past.
-' We do not think that the caseS to which the Tribunal has re-
ferred can be said to differ on this.
The concealment of the particulars of his income was effected
D
by the assessee when he filed ff return of total income on April 24,
l 968. Accordingly, it is the substituted clause (iii), brought in by
the Finance Act. 1968, which governs the case. That clause came into
effect from April 1, 1968.
Another contention raised by the assessee may be noticed. It is
urged that under section 139 of the fncome Tax Act, as it stood E
.during the assessment year 1964-65 the return of income should
have been filed by the end of September, 1964 and inasmuch as the
return, although filed as late as April 24, 1968, was accepted by the
Income Tax Officer it should be deemed that the return was treated
as filed within time or, in other words, that the return had been F
filed by September 30, 1964. In that event, the submission conti-
nues, the concealment of the particulars of income must be deemed
to have taken place when the original clause (iii) of section (1) of
section 271 of the Act was in operation. This contention is also
• without force. Under section 139 of the Act, although the statute
• itself prescribes the date by which a return of income must be filed, G
power has been conferred on the Income Tax ,Officer to extend the
date of furnishing the return. A return filed within the extended
period is a good return in the sense that the Income Tax Officer is
bound to take it into consideration. But nowhere does section 139
declare that where a return is filed within the extended period it
will be deemed to have been filed within the period originaUy pres- n
cribed by the statute l. On the contrary, the section contains a pro-
vision for payment of interest where the return is filed beyond the
204 SUPREME COURT REPORTS (1980] I S.C.R.
\__,,
•
A prescribed date even though within the extended period. That is
evidence of the fact that the return filed during the extended period
is not regarded by the statute as filed within the time originally pres- •
cribed.
Accordingly, we are of opinion that clause (iii) substituted
B in sulrsection (1) of section 271 of the Income Tax Act,
1961 by the Finance Act, 1968, governs the case before us and, . -~
therefore, the penalty imposed on the assessee in the instant case
is covered by that provision.
We answer the question in the affirmative, in favour of the
c Revenue and against the assessee. The Revenue is entitled to itsl
costs of this Reference.
N.K..A. Reference answered in favour of Revenue.
••
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