1. This is a reference under Section 256(1) of the I.T. Act, 1961, by the Income-tax Appellate Tribunal, Indore Bench.
2. The assessee is a dealer in sandalwood. For the assessment year 1966-67, he did not file his return of income voluntarily and the ITO issued a notice under Section 148 of the I.T. Act. In response the assessee filed a return on January 8, 1969, showing an income of Rs. 7,000. The income was disclosed on an estimate basis on a turnover of Rs. 2 lakhs. The ITO did not accept the return of income and computed the same at Rs. 15,000. As the declared income was less than 80% of the assessed income, proceedings for levy of penalty under Section 271(1)(c) of the Act were initiated. The penalty proceedings were referred by the ITO to the IAC in accordance with the law then in force. The IAC imposed a penalty of Rs. 8,000, i.e., the amount equal to the concealed income. The penalty was imposed in accordance with the provisions of Section 271(1)(c) as amended with effect from April 1, 1968.
3. An appeal was filed before the Appellate Tribunal and one of the grounds raised by the assessee was that the higher rate of penalty prescribed by the amended section with effect from April 1, 1968, could not be charged in relation to the income for the assessment year 1966-67. This contention prevailed with the Tribunal and it held that the amended provision which came into force on April 1, 1968, was not applicable retrospectively in respect of the income of the earlier assessment years, irrespective of the date of the filing of the return. The Tribunal relied on a decision of the Kerala High Court in the case of Hajee K. Assainar v. CIT : 81ITR423(Ker) . At the instance of the Revenue, the Appellate Tribunal has stated the case and referred the following question for our opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amendment of Section 271(1)(c) w.e.f. April 1, 1968, will not be applicable in spite of the fact that the return which is the basis for levy of penalty under Section 271(1)(c) read with the Explanation thereto was filed on January 8, 1969 ?'
4. Chapter XXI of the IT. Act deals with penalties. Section 271(1) provides for penalties for failure to furnish returns, comply with notices, concealment of income, etc. Clause (a) refers to penalty for not filing a return which an assessee is required to furnish under Section 139 or Section 148 of the Act. Clause (c) refers to penalty for the concealment of the particulars of income or furnishing inaccurate particulars thereof. Clause (iii) provides for quantum of penalty. Before April I, 1968, Clause (iii) of Section 271(1) of the Act provided a lower rate of penalty. With effect from April 1, 1968, this clause was amended and the rate of penalty was substantially enhanced.
5. The statement of facts show that the assessment year for which the return of income was filed was 1966-67, but the return, was filed on January 8, 1969. The assessment year related to the period before the amendment of Section 271(1) w.e.f. April 1, 1968, but the return was filed after the amendment came into force. Section 271(1)(c) imposes penalty for concealment of particulars of the income or furnishing inaccurate particulars thereof. This obviously means that the act of concealment is an overt act and stems from the return of income filed by the assessee. If an assessee does not file a return at all, action is contemplated under Section 271(1)(a) of the Act. But when a return is filed and particulars of income are concealed action is contemplated under Section 271(1)(c). Thus, the very basis for an imposition of the penalty under Section 271(1)(c) of the Act is not the assessment year in respect of which the return of income has been filed but the return itself. There is no question of a retrospective operation of the amended provision at all. The question is, as to when the act of concealment occurred. If an act of concealment is the basis for applying the law, then the date of filing the return will be the crucial date and the law as in force on that date will be applicable for deciding the quantum of penalty.
6. Hajee K. Assainar's case : 81ITR423(Ker) , relied on by the Appellate Tribunal, was overruled by a larger Bench of the same High Court in CIT v. K. Ahamed : 95ITR599(Ker) . Therefore, K. Assainar is no longer good-law. The Madhya Pradesh High Court in Addl. CIT v. Hiralal Munnalal : 124ITR728(MP) , has taken the same view.
7. Accordingly, we answer the question in the negative and hold that the Tribunal was not justified in holding that the amendment of Section 271(1)(c) with effect from April 1, 1968, will not be applicable even though the return was filed on January 8, 1969. There is no order as to costs.