G.P. Singh, C.J.
1. This is a reference under Section 256(1) of the I.T. Act, 1961, referring for our answer the following question of law :
'Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the provisions of Section 271(1)(c) of the Act read with the Explanation were applicable and, if so, whether the Tribunal wasright in holding that for fixing the quantum of penalty the provisions as they stood amended by the Finance Act, 1968, had application ?'
2. The assessee is a registered partnership firm deriving income from agency business in cement and truck business. The truck business was a new business in the year of account. The relevant assessment year is 1966-67. The assessee filed a return on 4th July, 1966. In this return, the assessee did not disclose any income from truck business. The assessee filed a revised return on 20th February, 1969, in which an income of Rs. 2,840 was shown to accrue from a truck referred to as Mohd. Hussain Truck. The examination of the assessee's account books by the ITO revealed that in addition to Mohd. Hussain Truck account, the income from this truck was entered in another account in the name of Karam Singh. It was further found that the assessee had another truck referred to as the Leyland truck and that the assessee had made considerable profits from this truck also during the relevant account year. The ITO added three items totalling Rs. 29,039 as income from truck business in place of Rs. 2,840 returned by the assessee in the revised return. Penalty proceedings were also started against the assessee. The IAC held that the assessee had concealed the particulars of its income and had furnished inaccurate particulars and was liable to penalty under Section 271(1)(c) of the Act. On this finding penalty of Rs. 27,000 was imposed on the assessee by the IAC. In appeal, the Tribunal agreed with the findings of the Commissioner that the mistake committed by the assessee in not disclosing the truck income was not an honest mistake and that the non-disclosure was wilful. The Tribunal also examined the question as to whether the law as amended from 1st April, 1968, was applicable regarding the quantum of penalty and it came to the conclusion that the amended law was applicable for the reason that the revised return was filed after the law was amended. The Tribunal reduced the penalty from Rs. 27,000 to Rs. 26,203. The Tribunal, it appears, did not levy any penalty in respect of the income of Rs. 2,840 which was disclosed in the revised return.
3. The learned counsel for the assessee did not, before us, contest the liability of the assessee for penalty under Section 271(1)(c) of the Act. All that he contended was that the assessee incurred the penalty when it filed the first return and that the law applicable on that date should govern the quantum of penalty which could be imposed and not the amended law which came into force from 1st April, 1968, and which was in force on the date when the revised return was filed.
4. Section 271(1), in so far as is relevant, as it stood before 1st April, 1968, read as follows:
' 271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person--......
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,--.........
(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 person had been accepted as the correct income.'
5. By Section 19 of the Finance Act, 1968, which came into force on 1st April, 1968, for Clause (iii) in Section 271(1), the following clause was substituted :
'(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, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished.'
6. A reading of Clause (iii) of Section 271(1) as it stood before and after the amendment will show a far-reaching change as to the quantum of penalty that could be levied under Section 271(1)(c). Before 1st April, 1968, the minimum penalty leviable was twenty per cent. of the tax which would have been avoided if the income as returned had been accepted and the maximum leviable was one hundred fifty per cent. of such tax. From 1st April, 1968, the minimum penalty leviable is a sum equal to the amount of the income in respect of which the particulars are concealed or inaccurate particulars are furnished and the maximum is the double of the amount of such income.
7. The learned counsel for the assessee submitted that the liability for payment of penalty for concealment of income was incurred by the asses-see when the return was filed and the law in force at that point of time must determine the quantum of penalty and not the law in force at the time when the revised return was filed or the assessment was made and, therefore, the I.T. authorities ought to have determined the penalty in accordance with Clause (iii) as it stood before 1st April, 1968. In our opinion, in the facts and circumstances of this case, the submission made by the learned counsel must be accepted.
8. An assessee incurs penalty under Section 271(1)(c) when he conceals the particulars of his income or furnishes inaccurate particulars of his income. Concealment implies 'intentional suppression of truth or fact known, tothe injury or prejudice of another' (Shorter Oxford Dictionary, Vol. 1; p. 360). Further, there can be no concealment until there is a duty to dis-close. So, an assessee conceals particulars of his income when he intentionally suppresses the particulars of his income to the prejudice of the revenue at the stage when there is a duty to disclose. Penalty is also incurred when the assessee furnishes inaccurate particulars of his income. In the context, furnishing of inaccurate, particulars must be of the same nature as concealment of real particulars. The duty to disclose particulars of his income arises at the time when the assessee furnishes the return under Section 139(1) and if the assessee in filing his return conceals the particulars of his income, or furnishes inaccurate particulars in the sense explained above, he incurs the penalty under Section 271(1)(c). The quantum of the penalty must depend upon the law in force when the penalty is incurred. The provision dealing with the quantum of penalty is Clause (iii) of Section 271(1). Clause (iii) as existing on the date on which the return is filed and the penalty is incurred must govern the quantum of the penalty to which the assessee can be made liable. Any subsequent change in law, unless it is retrospective, will not be relevant to determine the quantum.
9. It is not possible to accept the view that under Section 271(1)(c) the penalty is incurred at the stage when the ITO or the AAC, as the case may be, 'is satisfied' that the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. Satisfaction of the ITO or the AAC goes to the requirement of proof of the incurring of penalty. It only means that, subject to the Explanation to Section 271(1), an order imposing the penalty will be passed only on proof of the facts and circumstances which show that the assessee has incurred the penalty. The order of the ITO or the AAC only quantifies the penalty that is already incurred. The learned counsel for the department brought to our notice a decision of the Orissa High Court in B.N. Sharma v. CIT : 110ITR538(Orissa) . A Division Bench of the Orissa High Court in this case took the view that the law as existing on the date of satisfaction of the ITO would be the law to apply to penalty proceedings. The learned judges in taking this the view relied upon the observations in the case of Jain Brothers v. Union of India : 77ITR107(SC) that imposition of penalty can take place only after the assessment has been completed, for it is the satisfaction of the I.T. authorities that a default has been committed by the assessee that attracts the provisions relating to penalty. These observations which relate to the stage when a penalty proceeding should be initiated have no relevance to the question as to the substantive law to be applied to a penalty proceeding. It is some default on the part of the assessee which makes him liable for penalty and it is the law in force at the time of default which determines his liability. In Jain Brothers'case : 77ITR107(SC) , their Lordships were concerned with Section 297(2)(g) which specifically provides that in respect of assessment years prior to 1962-63, if the assessment is completed on or after 1st April, 1962, penalty may be levied under the provisions of the 1961 Act. It has rightly been said that Section 297(2)(g) constitutes an exception to the general principle that thg law to be applied is that in force at the date when the default which attracts penalty is committed : [See Kanga & Palkhivala on Income Tax, Vol. I, Seventh Edn., p. 1294], With great respect, we are unable to accept the view taken by the Orissa High Court.
10. The Finance Act, 1968, which by Section 19 'substituted' a new Clause (iii) in Section 271(1) in place of the then existing clause was assented to by the President on 11th May, 1968, but was brought into force from 1st April, 1968. When the legislature 'substituted' a new provision in place of an existing provision, the legal effect is that the existing provision is repealed and the new provision is enacted in its place. Substitution is a combination of the steps of repeal and fresh enactment. [See Firm A.T.B. Mehtab Majid & Co. v. State of Madras : AIR1963SC928 ; State of Maharashtra v. C. P. Manganese Ore Co. Ltd. : 1SCR1002 ]. Repeal by substitution will attract the provisions of Section 6 of the General Clauses Act, 1897. Any right acquired and liability and penalty incurred under the repealed provision is not affected by the repeal unless the repealing Act shows a contrary intention. The Finance Act is retrospective to the extent that though enacted on 11th May, 1968, it was brought into force from 1st April, 1968. It is only to this extent that it shows a contrary intention. Therefore, the new Clause (iii) substituted by the Finance Act will not be applicable for determination of the quantum of penalty incurred prior to 1st April, 1968.
11. The view taken by us is supported by a previous decision of this court in CIT v. Ramchand Kundanlal Saraf : 98ITR474(MP) , where a Division Bench of this court observed that the quantum of penalty must be determined with reference to the law prevailing on the day when the act of concealment was committed and not when penalty proceedings are initiated or the order imposing penalty is passed. The same view has been taken by some other High Courts: [See CGT v. Muthukumaraswamy Mudaliar : 98ITR540(Mad) and Addl. CIT v. Khaja Khutabuddinkhan : 114ITR905(AP) ].
12. On the facts stated by the Tribunal, it is clear that the assessee concealed particulars of its income from truck business when it filed the return on 4th July, 1966. In the return, the assessee did not at all disclose this source of income. The assessee did not offer any reasonable explanation for the non-disclosure. It is clear that the suppression of income from truck business in the return was intentional and amounted to concealment. Theassessee thus incurred the penalty on the date when it filed the return and the quantum of the penalty to which it became liable ought to be determined in accordance with Clause (iii) of Section 271(1) as it then stood. The learned counsel for the department, however, submitted that as the assessee filed a revised return on 20th February, 1969, where also the concealment continued except to the extent of Rs. 2.840, the liability for penalty must be determined according to Clause (iii) as it stood on the date of the revised return. We are unable to accept this submission. The provision dealing with revised return is Section 139(5) which says that if any person having furnished a return discovers any omission or wrong statement therein, he may furnish a revised return at any time before the assessment is made. A revised return can be filed only when the assessee 'discovers any omission or wrong statement' in the return earlier filed by him. The omission or wrong statement in the return which entitles the assessee to file a revised return must be one which is later discovered, i.e., which is unintentional and which occurs because of some mistake of which the assessee is not aware. When the assessee intentionally suppresses his income, i.e., conceals it in the return, there is no scope for filing any revised return, for, in such a case, the omission or wrong statement in the return is known to the assessee from the very beginning and is not later discovered by him. In the instant case, the assessee concealed its income when it filed the return and it thereby incurred the penalty under Section 271(1)(c). The revised return filed by the assessee was not within Section 139(5) and, therefore, of no consequence. The concealment of income, except to the extent of Rs. 2,840, continued even in the so-called revised return. The penalty having already been incurred at the time when the return was filed, the filing of the so-called revised return in which the concealment persisted had not the effect of affecting the extent of liability for the penalty already incurred. The revised return not being under any provision of law did not give rise to any new liability. It had to be simply ignored for purposes of imposing the penalty under Section 271(1)(c). The view taken by us is shared by the Madras and Allahabad High Courts: [See Amjad Ali Nazir Ali v. CIT : 110ITR419(All) and CIT v. J.K.A. Subramania Chettiar : 110ITR602(Mad) ]. The learned counsel for the department submitted that whenever a revised return is filed the earlier return merges in the revised return. For this submission, the learned counsel relied upon Dhampur Sugar Mills Ltd. v. CIT : 90ITR236(All) . But the proposition submitted for acceptance has no application when the revised return, as in the instant case, is not covered by any provision of law and is really not a revised return under the law.
13. For the reasons given above, our answer to the question referred to us is as follows :
'The Tribunal was right in holding that the provisions of Section 271(1)(c) were applicable but the Tribunal was not right in holding that Clause (iii) of Section 271(1) as amended by the Finance Act, 1968, had application for fixing the quantum of penalty.'
14. There will be no order as to costs of this reference.